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CONFESSIONS OF A
MONEY LAUNDERER by Kenneth Rijock
MONEY LAUNDERER by Kenneth Rijock
Financial Crime Consultant, for World-Check
Confessions of a Money Launderer - Part 96
8 March 2010
If you missed my lecture, at the FIBA Anti-Money Laundering Conference, on what it is like to work inside a Ponzi scheme, and then watch it self-destruct all around you, I will lay out here both the tactics of a practising Ponzi schemer, and the red flags (indicia) that such a fraud is occurring under your nose. Remember well that the president of that investment firm, who pled guilty, is now serving a 20-year sentence, the CFO, a female accountant (a single mother) received 5 years, the officer manager, attorney and several sales staff all convicted, and the principals, having already disgorged millions of dollars in illicit profits on the civil side, could eventually be imprisoned for the rest of their lives, when their pending cases are resolved a trial. This alone should confirm that the United States Attorney's office is seeking to send a message to potential Ponzi schemers; don't do it.
What did I observe, but not assimilate until later, were the techniques and strategies employed at the firm, which whilst purportedly providing valid investments to the public, and paying off maturities, was in truth and in fact, a massive Ponzi scheme. (You will find much of the same tactics appear in the recent Fort Lauderdale, Florida case involving attorney Scott Rothstein*.) These are the methods through which a Ponzi scheme can operate, and even thrive, for years, until the economy or some other outside factor brings it down:
- The owners had a well-developed charitable programme. In fact, they even designated one of the owners as a full-time vice president in charge of their extensive charity plan. The result being that the status of the company was enhanced in the community, including in local politics.
- Retaining and utilising the best lawyers that money can buy, including former Assistant United States Attorneys, to deal with regulators at the state and federal level. These professionals, well respected in the legal community, were able to delay legislation, settle disputes with regulators, deal effectively with pending investigations, and keep the Ponzi scheme alive for years after it started to run into trouble. This is not to say that those lawyers were privy to the scam; to the contrary, they were only involved in damage control. it was in-house counsel, and the outside attorneys for whom the company was the primary client, who knew and/or actively assisted, in the fraud. The best evidence of this are their guilty pleas.
- Keeping only an extremely limited number of individuals in the loop about the actual fraud. The owners effectively shut out the other employees from the real truth, and thus the appearance of a legitimate enterprise was preserved, even to the point of having a working compliance department.
- Shut out investor queries and due diligence by hiding behind confidentiality, or privilege, or some other excuse, which will prevent the truth from being discovered.
- Use "creative accounting" to conceal the Ponzi mechanism. The CFO, under the circumstances, must now be either privy to the scam, or paid a sufficient amount that he or she will not raise an objection.
Just how does one spot a Ponzi scheme as a bank client ? Here is what I would look for, based upon what I saw:
- Transfer of funds in-and-out of accounts. (inbound funds from investors wired out same day)
- Multiple banks accounts for the company, in excess of what would be normal and proper in that specific industry.
- Consultants, with their own corporations, being paid for services that are not necessary.
- Fund transfers to other states, or overseas, when the business of the company does not involve such types of transfers.
- Payments to service companies that appear to be excessive, given the industry the customer is in.
- Complaints by investors/clients of the customer, that surface in the public domain and media.
Consult your outside counsel immediately if you have reason to believe that a bank client could possibly be a Ponzi schemer, for the reputation damage and customer fallout to you could be substantial, or you might get sued by victims, alleging that your negligently were banking a criminal.
_______________________________________________________________________________________________________
* Criminal Information
United States vs. Scott Rothstein
http://www.justice.gov/usao/fls/VictimWitness/USvRothstein/2009091131.Information.pdf
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.
Read more in this exciting series
11 April 2010
8 March 2010
8 February 2010
24 January 2010
6 December 2009
27 September 2009
9 August 2009
3 August 2009
30 March 2009
9 March 2009
2 March 2009
22 February 2009
18 February 2009
26 January 2009
18 January 2009
11 January 2009
5 January 2009
29 November 2008
24 November 2008
17 November 2008
8 November 2008
3 November 2008
27 October 2008
20 October 2008
13 October 2008
4 October 2008
28 September 2008
20 September 2008
15 September 2008
15 June 2008
8 June 2008
1 June 2008
26 May 2008
19 May 2008
12 May 2008
4 May 2008
27 April 2008
20 April 2008
13 April 2008
31 March 2008
18 March 2008
4 March 2008
25 February 2008
16 February 2008
10 February 2008
3 February 2008
27 January 2008
20 January 2008
14 January 2008
6 January 2008
16 December 2007
9 December 2007
1 December 2007
25 November 2007
18 November 2007
11 November 2007
3 November 2007
27 October 2007
21 October 2007
14 October 2007
7 October 2007
1 October 2007
23 September 2007
16 September 2007
3 June 2007
27 May 2007
21 May 2007
6 May 2007
30 April 2007
22 April 2007
15 April 2007
8 April 2007
2 April 2007
24 March 2007
19 March 2007
12 March 2007
5 March 2007
25 February 2007
19 February 2007
12 February 2007
4 February 2007
28 January 2007
22 January 2007
15 January 2007
7 January 2007
2 January 2007
16 December 2006
10 December 2006
3 December 2006
27 November 2006
19 November 2006
11 November 2006
5 November 2006
29 October 2006
22 October 2006
16 October 2006
9 October 2006
2 October 2006
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