MONEY LAUNDERER by Kenneth Rijock
How did I become a compliance officer? Totally by accident; I regularly criticised the profession in my writing, for failing to understand, and appreciate, the skills possessed by financial criminals. Due to an unusual chain of events, I was about to find out what it is like to discharge those important responsibilities on a day-to-day basis. By way of background, a friend of mine is a banking attorney in Miami, with one of America's major law firms. He had left the firm to become a compliance officer with a major banking client of the firm. When their international banking division moved away from Miami sometime later, he returned to the law firm in a prominent role in their global banking division. He frequently lectured on important issues, and at times, we jointly covered AML/BSA topics before local banking groups. One evening, he approached me with a problem; he was scheduled to give a money laundering lecture the next morning before a conference on Miami Beach, and the topic was "Hedge Fund Money Laundering." His firm had called him to immediately travel to Argentina on urgent business, and he asked me to take the lecture. By now, I am sure you know that I love to lecture on money laundering tactics and trade-craft, and I readily accepted. The attendees at my lecture included the compliance officer and the CFO of a Florida investment firm. I actually knew the compliance officer, a Peruvian-American who was the daughter of a Key Biscayne neighbour, who was formerly with the US State Department, and now a trusted financial adviser to Latin American investors. (More about the CFO later).
- The company, which grossed $250m each year, had a new client, who was interested in investing $15m with the firm. The client was represented by an experienced financial professional who was with a Swiss financial services firm.
- The company's law firm had performed due diligence upon the client, and found him to be acceptable after enquiry.
- However, the company's owner, given the circumstances of the transaction, wanted a second opinion, and I was called in to perform enhanced due diligence.
- Why all the concern? It seems that the client was a Russian national, who presented a Gibraltar company, which was an obvious shell, with no other business or assets other than the $15m investment capital.
I undertook to investigate the client, and was given a very short deadline, due to the fact that client's financial adviser was very much in a hurry to conclude the transaction, and was pressuring the compliance officer for her approval. (That's a Red Flag, impatience on the part of the investor). The sales people involved were also pushing compliance to approve the transaction and the client.
Here's what I found:
- The Gibraltar company was owned by a Netherlands Antilles company, that was owned by the client. (Why?)
- The client was a Russian national who was a former small-time thug who very quickly became the owner of a number of Russian television stations. (How?)
- The client actually was wanted on a felony warrant in Russia, and he currently resided in the Republic of Georgia. He was a native Georgian, and close to its government. (was he a PEP?)
- The client was reputed to be associated with Russian Organised Crime.
- The client's financial adviser was linked to the Bank of New York scandal (more organised crime?).
- There was absolutely no information on Source of Funds. (one person fronting for another?)
- The crowning jewel was the fact that the client had waited at the bottom of the steps below a private jet, when one of Russia's oligarchs had come to visit. The client was obviously either his subordinate, or fronting for him. Either way, this client was an unacceptable risk.
I was summoned to a meeting with the company's lawyer, compliance officer, and the partner in the law firm who had approved the client. Was it embarrassing for the lawyer? You bet it was. Obviously, they had not gone to enhanced due diligence. I presented everyone with copies of all my results, and the company owner wasted no time asking the lawyer how I had found all this negative information, when his firm had not.
Needless to say, a few days later, I was called back to the owner's office, and, notwithstanding my criminal record, was offered a position as in-house compliance consultant, working four hours a day. I was soon to find out I was to spend my entire working days there, beginning at seven A.M.
Next Week: Nose to the grindstone, catching the bad guys.
The facts and opinions stated in this article are those of the author and not those of World-Check. World-Check does not warrant the accuracy of any facts and opinions stated in this article, does not endorse them, and accepts no responsibility for them.
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