Russia-Linked Money-Laundering Probe Looks at $150 Billion in Transactions

By Bradley Hope, Drew Hinshaw, and Patricia Knowsmann

Denmark’s largest bank is investigating whether companies with ties to Russia used it to launder money, examining $150 billion in transactions that flowed through a tiny branch in Estonia, according to people familiar with the matter.

The $150 billion figure, covering a period between 2007 and 2015, has been presented to the bank’s board of directors and would equal to more than a year’s worth of the corporate profits for the entire country of Russia at the time. The flows would have stayed in the branch for only a short time before leaving Estonia, according to a person familiar with the investigation, so they might not show up in deposit statistics, which reflect the balance at the end of month and not from day to day.

“Any conclusions should be drawn on the basis of verified facts and not fragmented pieces of information taken out of context,” Danske Bank Chairman Ole Andersen said in a statement. “As we have previously communicated, it is clear that the issues related to the portfolio were bigger than we had previously anticipated.” The bank says the results of its probe are being finalized.

Shares in the bank fell as much as 7% on Friday after The Wall Street Journal reported on the size of the amounts involved.

The U.S. has paid close attention to the ways Russia’s wealthy have taken money out of the country, according to U.S. officials, especially since sanctions imposed during the invasion of Crimea in 2014. Sanctions were strengthened following determinations of Russian meddling in the 2016 U.S. presidential election and again earlier this year.

Washington has watched illicit money flows channeled through European-regulated banks to the West. In February, the Treasury Department declared Latvia’s ABLV bank an “institutionalized money laundering” operation where weapons dealers and corrupt politicians from former Soviet Union countries sent their money into Europe. ABLV denied knowingly laundering money and later collapsed.

In 2017, Deutsche Bank agreed to pay nearly $630 million to settle investigations by U.K. and New York regulators into Russian equity trades that transferred $10 billion out of that country in violation of anti-money-laundering laws.

Since last year, NATO has positioned troops in three former Soviet Union republics—Estonia and its neighbors Latvia and Lithuania, all bordering Russia. In return, the U.S. has asked those governments to crack down on illicit Russian money flowing into the West through their banks, according to U.S. officials. That understanding was hammered out after Russia’s 2014 annexation of Crimea.

Danske’s Estonian branch is the subject of criminal investigations in Denmark and Estonia, prosecutors in the countries said. The Danish Financial Supervisory Authority reprimanded the bank for weak controls in May and ordered Danske to hold about $800 million more in capital, but didn’t issue a fine.

Shell companies, including many registered in the U.K., controlled most of the accounts in question, and many of the accounts had links to people in Russia and former Soviet Union countries, people familiar with the matter said. The U.K.’s Financial Conduct Authority isn’t probing the bank, according to a person familiar with the matter.

Danske Bank’s Estonian office in Tallinn.
Danske Bank’s Estonian office in Tallinn. PHOTO:INTS KALNINS/REUTERS

Estonia, a former Soviet Republic of 1.3 million people, became a European Union member in 2004 and joined the euro in 2011. Like its Baltic neighbor Latvia, it quickly became a way station for funds from other former Soviet states. The $150 billion figure is a substantial sum considering Estonia’s entire banking system reports total deposits of €17 billion ($19 billion).

At Danske, clients would typically move funds among several companies with accounts at its Estonia branch before transferring the money to accounts in banks in Turkey, Hong Kong, Latvia, the U.K. and other countries, one of the people familiar with the investigation said.

Danske’s management dragged its feet dealing with the issue, according to a report filed by Danish regulators this year, ignoring complaints from internal whistleblowers and correspondent banks, which made international payments and transfers on its behalf.

Estonian regulators complained to Danish counterparts as early as 2012 and compiled a 200-page report in 2014 detailing the local branch’s extensive failures to ask even basic questions about the source of its clients’ income.

“There were many red flags,” said Kilvar Kessler, chairman of the management board of Estonia’s banking supervisor, the Finantsinspektsioon.

It was only after another bank refused to deal with Danske’s Estonian unit that the bank shut down “nonresident” Estonian accounts in 2015.

Danske Chief Executive Thomas Borgen was in charge of international banking—including in Estonia—during part of the period under investigation. He was promoted to run the bank in 2013. He declined to comment.

Denmark’s Berlingske newspaper earlier reported around $8 billion of illicit money went through the Estonian branch. The Financial Times reported this month that some $30 billion flowed through the Estonian branch in the year 2013. In both instances, Danske said it needed time to look into the reports.

Danske’s investigation is overseen by the bank’s legal counsel and assisted by forensic accountants at PricewaterhouseCoopers LLP and consultants at Ernst & Young LLP. Both firms didn’t immediately respond to requests for comment. Promontory Financial Group, a unit of International Business Machines Corp. , and Palantir Technologies Inc. are also helping in the probe and declined to comment.

Such large sums were able to slip by European regulators’ watch for years largely because of a series of design flaws in the Continent’s anti-money-laundering systems, said James Oates, the founder of Cicero Capital, a financial adviser in the Estonian capital of Tallinn.

“Everybody was looking the other way because they thought they were covered, and it turns out they weren’t,” said Mr. Oates.

Danske Bank’s Estonia branch isn’t directly supervised by the European Central Bank, which in any case lacks the authority to investigate money-laundering cases. Estonian authorities, meanwhile, say that because Danske operated as a branch—and not a subsidiary with a legal entity based in Estonia—they had limited authority and incomplete information.

Parent bank Danske said in a September 2017 statement that the Estonia branch “operated very much as an independent unit, with its own systems, procedures and culture regarding anti-money-laundering measures.”

Canada a hotbed for money laundering: Report

Canada is being taken advantage by criminal organizations who launder dirty money from drug trafficking, smuggling, corruption and fraud, according to a report by the C.D. Howe Institute.

And the feds have failed to enact the proper legislation to stop it, the Canadian research institute says.

Money laundering in Canada is estimate to be between $5 billion and $100 billion, Denis Meunier writes in the study. Taxes evaded on these illicit funds become a burden for those honest, hardworking individuals who pay their taxes as they have to cover the bulk of government costs, it states. Canada is a hotbed for this illegal activity because of a lack of transparency in beneficial corporate ownership, Meunier explains.

Simply put, a beneficial owner is someone who owns 25% or more of a company or corporation. Other countries, especially in Europe, require corporations to have publicly accessible registries for beneficial ownership. But here, these registries aren’t public and the onus is on the financial service provider, such as a bank, to verify the accuracy of the information of the beneficial owners and directors.

However, the study states, they generally rely on customers for this information. This is a lower bar than is required for buying a car or getting a library card which often require photo identification, proof of address, email and phone number.

Canada is ranked 21st worst in the Tax Justice Network’s 2018 Financial Secrecy Index of 112 jurisdictions, the study notes.

“There is a clear link between money laundering and hidden beneficial ownership,” Meunier writes. “The abuse of corporate vehicles and camouflaged beneficial ownership is a recognized means of laundering money — and a worldwide problem.”

It points to a World Bank study that in 85% of 150 grand corruption cases (more than US$1 million) reviewed, companies were used to launder money.

“In more than half of these cases, corrupt officials used nominees, shell corporations and trusts to disguise their beneficial ownership and the proceeds of their crimes,” it states.

The report recommends the feds create a central, publicly accessible beneficial ownership registry and make corporations and trusts to “truthfully and fully disclose” information for that database.

Former Lower Southampton public safety director pleads guilty in $400,000 money-laundering scheme

By Erin McCarthy

Former Lower Southampton Public Safety Director Robert Hoopes pleaded guilty Wednesday to taking part in a money-laundering scheme with a Bucks County judge and a constable, calling it “the first thing that I truly regret that I ever did in my life.”

Judge Gene E.K. Pratter asked him: Why decide to enter the plea now?

“Because I did it,” Hoopes said. “I did the things that are in [the indictment]. … It  was the stupidest thing I’ve ever done in my life.”

“Right after my arrest,” he added, “I was ready to admit my guilt.”

A superseding indictment later painted an even more corrupt picture. Between 2014 and 2016, authorities say, Hoopes, Waltman, and Rafferty shook down several businessmen, with Hoopes often serving as the front man in negotiations.

A former police officer and attorney, Hoopes had been in charge of Lower Southampton’s police department, rescue squad, and two fire departments for less than a year when he was charged and subsequently fired by the township.

Hoopes said he has since separated from his wife, who now lives in California, and retired from his law practice. He lives alone in his family’s Doylestown home, he said, and has struggled with alcohol and post-traumatic stress disorder, which he developed serving in Vietnam.

He stressed to Pratter that he “never had a blemish” on his records as a police officer or lawyer and that he regretted his actions.

But “I’m not worried about myself,” he said. “I’m worried about my family.”

Three of Hoopes’ five daughters attended the hearing and wiped away tears as they sat behind him in court.

Hoopes previously had pleaded not guilty. With Hoopes’ change of plea Wednesday, Waltman, 60, of Lower Southampton, remains the only defendant in the case who has not entered a guilty plea. Waltman awaits trial, scheduled for later this fall, on charges related to the scheme. Rafferty, 63, of Lower Southampton, pleaded guilty in the spring.

At the end of Wednesday’s proceeding, Pratter asked Hoopes whether he ever socializes with anyone allegedly involved in the scheme.

“No, I’ve never seen them or talked to them” since charges were filed, Hoopes said.

Manafort Seeks to Move Money-Laundering Trial From D.C. to Roanoke

By Daniel Flatley, Greg Farrell, and Andrew Harris

Paul Manafort asked a Washington federal judge to move his September trial on money-laundering and illegal lobbying charges to Roanoke, Virginia, arguing that the pool of potential Washington jurors would be biased against him.

Recent news coverage of his conviction on bank- and tax- fraud charges in Alexandria, Virginia, and his time working for the 2016 campaign of President Donald Trump make it impossible to get a fair trial in the nation’s capital, his attorneys said in a Wednesday court filing.

“Nowhere in the country is the bias against Mr. Manafort more apparent than here in the Washington, D.C., metropolitan area,” the attorneys said. They cited heavy news coverage of their client’s conviction on Aug. 21 at a federal courthouse in nearby Alexandria, and District of Columbia voters’ propensity for supporting Democratic Party candidates.

Manafort has a history of working for Republican Party figures, most recently serving as Trump’s campaign chairman. Manafort is the only target of Special Counsel Robert Mueller’s investigation to stand trial and be convicted by a jury.

U.S. District Court Judge Amy Berman Jackson had given defense lawyers until the end of the day Wednesday to file their change of venue request but told attorney Richard Westling that it would be hard to find a place in the country where news of Manafort’s legal entanglements hasn’t been heard.

“Where do you want to go?” she asked Westling at a Tuesday hearing.

“I don’t know that I have the answer to that yet,” Westling responded. “It may be that there is no place.”

Jackson said the “overwhelming majority” of publicity for Manafort’s first trial was national, not local and assured the attorney that, “This jurisdiction has had very high-profile cases before.”

Acknowledging his bid was a long shot, Westling said it was important for the motion to be made in the event of an appeal.

“The nation’s attention remains fixed on Mr. Manafort,” the defense team said in the filing. Manafort, they said, “has become an unwilling player in the larger drama between Mr. Mueller and President Trump.”

World Away

Roanoke is 230 miles (370 kilometers) southwest of Washington, and politically a world away, according to the defense. While Washington’s metro area is the sixth biggest TV market in the U.S., Roanoke ranks No. 70, according to Nielsen data.

“This may be the rare case where a juror’s predisposition may directly tie to their vote in the last presidential election,” Manafort’s lawyers said, adding “it’s not a stretch” to assume that DC voters who backed Democrat Hillary Clinton in the 2016 election “would be predisposed against Mr. Manafort, or that voters who supported President Trump would be less inclined toward the Special Counsel.”

Almost 91 out of every 100 Washington voters cast their ballots for Clinton, according to Manafort’s team, while fewer than 5 percent voted for Trump. Roanoke is more balanced, they said.

Jackson said she would close jury selection, which could take as long as two days, to the public because of the size of the courtroom and the “awkward and unpleasant” process of having attorneys and jurors come up to the bench for individual questioning.

She also said she would remove a question about whether jurors voted in the 2016 election from the jury questionnaire.

Manafort’s Alexandria jury deadlocked in 10 of 18 counts, prompting U.S. District Judge T.S. Ellis III to declare a mistrial on those unresolved allegations. Prosecutors have until the end of the day Wednesday to decide whether they want them retried.

Manafort had also sought to have the Alexandria trial moved to Roanoke. Ellis denied that request.

The case is U.S. v. Manafort, 17-cr-201, U.S. District Court, District of Columbia (Washington).

U.S. Probing Whether Malaysian Fugitive Laundered Funds to Pay Chris Christie and Trump Lawyer

By Bradley Hope, Tom Wright, and Rebecca Davis O’ Brien

The U.S. Justice Department is investigating whether a fugitive Malaysian financier laundered tens of millions of dollars through two associates and used the funds to pay a U.S. legal team that includes former New Jersey Gov. Chris Christie and a lawyer who represents President Trump, according to people familiar with the matter.

Jho Low, the Malaysian businessman, has been described in U.S. court filings as playing a central role in the alleged embezzlement of $4.5 billion from a Malaysian fund called 1Malaysia Development Bhd.

Malaysian authorities this week separately charged Mr. Low with money laundering in the case, which investigators suspect may be one of the biggest financial frauds in history. He has been moving around Hong Kong, Macau and mainland China in recent months, according to people with knowledge of his whereabouts.

Mr. Low was close to former Malaysian Prime Minister Najib Rajak, who unexpectedly lost an election in May and was arrested last monthin Kuala Lumpur. Mr. Najib has pleaded not guilty to charges of money laundering and criminal breach of trust in connection with the 1MDB scandal.

The Justice Department, in July 2016 and last year, filed civil lawsuits in federal court in California seeking to recover assets from Mr. Low and others including mansions, artwork and a yacht allegedly bought with 1MDB funds. It is now pursuing a criminal investigation in which Mr. Low, who has U.S. assets, is a target, these people said.

Former New Jersey Gov. Chris Christie is part of Mr. Low’s U.S. legal team.
Former New Jersey Gov. Chris Christie is part of Mr. Low’s U.S. legal team. PHOTO: JULIO CORTEZ/ASSOCIATED PRESS

Since 2016, Mr. Low’s access to the global financial system has been sharply curtailed by banks wary of handling allegedly tainted funds, according to the people familiar with the matter. That has made it difficult for him to pay directly for a range of outlays, from lifestyle expenses to legal and advisory services, according to these people.

There is no indication that any of the people who ultimately received payments were aware the funds could have originated from money Mr. Low allegedly siphoned off from 1MDB. The Justice Department is investigating Mr. Low’s potential use of two intermediaries to facilitate the payments through the international financial system, people familiar with the matter say. A Justice Department spokeswoman declined to comment.

Representatives for Mr. Low didn’t respond to a request for comment. He has previously denied wrongdoing.

The team of lawyers and consultants working for Mr. Low includes Mr. Christie, who briefly headed Mr. Trump’s presidential transition team; Mr. Trump’s longtime lawyer Marc Kasowitz ; Bobby Burchfield, a lawyer who has served as the Trump Organization’s outside ethics adviser; and Ed Rogers, a Washington lobbyist with close ties to the Republican Party.

Mr. Christie is representing Mr. Low in the asset-forfeiture cases in California, a spokesman for the former governor said. “There has been no communication by Governor Christie with any other area of government on Mr. Low’s behalf,” the spokesman said, adding there has been “no inquiry made to him by the Department of Justice with regard to any other investigation regarding funding or otherwise.”

A spokesman for Kasowitz Benson Torres, Mr. Kasowitz’s New York law firm, confirmed the firm represents Mr. Low in Justice Department matters. “Here, as with all of our clients, our job as attorneys is to represent and vindicate our clients’ interests; and here, as with all of our non-pro-bono clients, we are paid for the legal services we provide,” the spokesman said in a statement.

Mr. Burchfield said, in an emailed statement, that Mr. Low retained his Atlanta-based firm, King & Spalding, to “advise him on the ongoing investigations,” adding that the law firm “performed appropriate due diligence on sources of payment.”

“Further, neither I nor King & Spalding has had contacts with any governmental entity, directly or indirectly, on behalf of Mr. Low, nor has King & Spalding received any inquiries from the Department of Justice regarding this engagement,” Mr. Burchfield said.

Mr. Rogers declined to comment.

The Justice Department is looking into whether a Thai businessman, Phengphian Laogumnerd, and American former rap artist Pras Michel, a founding member of the Fugees hip-hop group, played roles in helping Mr. Low make payments, the people familiar with the matter said.

For at least a year, these people say, Mr. Low has relied on Mr. Phengphian to pay accommodation expenses in Hong Kong and Macau, legal and advisory bills and to keep Mr. Low’s $250-million yacht, Equanimity, fully staffed and maintained until it was seized earlier this month. Justice Department investigators are examining records and money flows related to a series of companies controlled by Mr. Phengphian in Hong Kong and in offshore havens such as the British Virgin Islands to determine whether Mr. Low’s money was involved, the people said.

The Thai businessman also handled payments of tens of millions of dollars to Mr. Low’s lead law firm and advisers, New York-based Kobre & Kim LLP, and British reputation law firm Schillings International LLP, according to the people familiar with the investigation.

“We do not comment on any specific financial arrangements with our clients due to the commercial confidentiality and privileged nature of such information,” said Robin Rathmell, who has identified himself as Mr. Low’s global counsel at Kobre & Kim. Partners at Schillings didn’t respond to a request for comment.

A representative for Mr. Phengphian said his client “is an independently wealthy businessman. The source of his income is nothing to do with—and he has not received any money from—Mr. Low.”

The representative added: “What he chooses to do with his own funds is his business alone. The Department of Justice has never contacted him about anything, neither have they ever asked him about the source of his funds.”

Mr. Michel was responsible for bringing on another consultant to work on Mr. Low’s behalf: Republican fundraiser and venture-capital executive Elliott Broidy, who was vice chairman of the Trump campaign’s joint fund with the Republican Party during the 2016 presidential campaign. The route of any payments to Mr. Broidy also are part of the Justice Department probe, the people said.

Mr. Broidy’s lawyer has previously said Mr. Broidy and his wife were hired by Mr. Michel “to provide strategic advice as part of a broader team to Mr. Low.”

A lawyer for Mr. Michel said: “I do not know what, if anything, the Department of Justice is currently reviewing, but I am confident that Mr. Michel has not done anything improper.”

The public-integrity section of the Justice Department is separately investigating some of the lobbying work on behalf of Mr. Low, including whether Mr. Broidy attempted to sell his influence in the Trump administration to Mr. Low, who in turn was allegedly acting as an agent of the Malaysian and Chinese governments, people familiar with the investigations said.

A lawyer for Mr. Broidy said: “Elliott Broidy has never agreed to work for, been retained by nor been compensated by any foreign government for any interaction with the United States Government, ever.”

Mr. Low has been seeking to influence the administration to drop its investigations into him and 1MDB, according to people familiar with Mr. Low’s dealings and the Justice Department investigations. The Justice Department investigations overlap and involve some of the same investigators, the people familiar with them said. The Washington Post first reported on the public-integrity investigation.

Dog Trainer Accused of Tax Fraud, Money Laundering

By Guillermo Contreras

Federal agents have arrested a principal operator of a canine-training operation after he was indicted Wednesday by a grand jury on charges related to fraud and money laundering.

Bradley Croft, 46, who has said he was a founder of Universal K9, was arrested moments ago the San Antonio Express-News confirmed. A reporter observed as a federal grand jury returned several indictments by 3 p.m. that included one against Croft.

Agents with the FBI, and the IRS’ Criminal Investigation division raided Universal K9 at 15329 Tradesman, near Loop 1604, which is billed as a nonprofit, on Aug. 8. Of 31 dogs found on the site, 26 were taken into custody by the city’s Animal Care Services.

Councilman Manny Pelaez, who represents the district that includes the site of Universal K9, said in an online post on Aug. 8 that “the IRS and the FBI just shut down an operation that was preying on veterans and not doing right by dogs. That’s a good thing worthy of mention and support.”

San Antonio Police Department officers assisted. The Express-News confirmed that the Department of Veterans Affairs also was involved in the investigation.

“Universal K9 specifically outreaches to veterans and offers a two-week K9 Handlers course or a ten-week trainers course in which any veteran may utilize his or her GI Bill to cover 100% of course costs, including the canine,” Universal K9 said in a lawsuit it filed recently against former students.

It costs $12,500 for a 10-month course, according to exhibits included in the lawsuit.

Universal K9 is also listed as a nonprofit foundation that donates dogs to police departments nationwide and has been featured on local and national media, including CBS News and the Express-News.

Croft is expected to make his initial court appearance on Thursday.

Venezuela’s Maduro under investigation in $1.2 billion U.S. money-laundering case

By Jay Weaver

Venezuelan President Nicolás Maduro is under investigation as part of a U.S. probe into a massive scheme that authorities say has pilfered more than $1 billion from the state-owned oil company, PDVSA, the Miami Herald has learned.

Maduro has not been named or charged in a criminal complaint filed in Miami federal court this week that detailed the international money-laundering conspiracy. But sources familiar with the investigation say he and other government officials and associates — including his three stepsons — are being investigated for any links to a network that prosecutors believe has plundered Venezuela’s national oil company and funneled vast amounts of cash into European and U.S. banks as well as South Florida real estate and other assets.

“Everything runs through him,” said one person familiar with the investigation, describing Maduro as a principal suspect of the U.S. investigation.

Even if Maduro, who became president after Hugo Chávez’s death in 2013, is ultimately charged, it’s unlikely he would be brought to the U.S. for prosecution. But the probe could add to the political challenges already facing the embattled president. Maduro has been the focus of months of protests over his country’s failing economy. The once oil-rich nation has been wracked by hyperinflation, widespread hunger and violence. Thousands of Venezuelans have fled the country.

Though Maduro is not mentioned by name in the criminal complaint filed by the U.S. Attorney’s Office on Wednesday, there are references to him as “Venezuelan Official 2” and to his stepsons, according to multiple sources familiar with the probe. His stepsons — Yosser Gavidia Flores, Walter Gavidia Flores and Yoswal Gavidia Flores — though also unnamed are described by the sources as receiving an estimated $200 million in funds stolen from the nation’s national oil company, Petroleos de Venezuela, S.A., or PDVSA, that were wired to a European bank in late 2014 and early 2015.

The deposits for his three stepsons — the grown children of Maduro’s wife, Celia Flores, from previous relationships — were among 10 wire transfers totaling about $600 million, according to a Homeland Security Investigations criminal complaint.

The affidavit says the wire transfers were made from PDVSA, with about $265 million going to accounts linked to the complaint’s lead defendant, Francisco Convit Guruceaga, a Venezuelan billionaire businessman. He and other members of the wealthy class are often referred to as the “boliburgués,” an elite politically connected group in Venezuela. An unnamed conspirator also received some of the money, according to the affidavit filed by Assistant U.S. Attorney Francisco Maderal.

Roughly $200 million went to the “chamos” — Spanish for stepsons — of Venezuelan Official 2. Sources say that Venezuelan Official 2 is Maduro.

Court documents say another $80 million went to “Conspirator 7.” Sources familiar with the affidavit told the Miami Herald that Conspirator 7 is Raúl Gorrín, owner of the Globovision television network in Venezuela. Gorrín, who has close ties to Maduro and the late president Chávez, has been sharply criticized for turning a pro-opposition news network into one more friendly to the president.

In late 2017, Gorrín tried to broker an exit strategy with the Trump administration for Venezuela’s beleaguered government, according to various Washington sources, by peddling the idea that Maduro and other key government leaders might be willing to negotiate a transition in Venezuela in exchange for amnesty. He also retained Ballard Partners — the firm of President Donald Trump’s former Florida lobbyist — ostensibly to help his Venezuelan TV network company expand into U.S. markets.

Gorrín’s lawyer in Miami, Howard Srebnick, denied any wrongdoing by his client, who has not been charged in the criminal complaint. “Mr. Gorrín is a successful media mogul who has not been involved in any money laundering,” Srebnick told the Miami Herald in a text message.

The eight defendants named in the complaint are accused of embezzling funds from Venezuela’s vast oil income and exploiting its foreign-currency exchange system to amass illegal fortunes in the United States and other countries. To leverage their profits, the defendants took advantage of their access to the Venezuelan government’s foreign-currency exchange system, which offers a far more favorable rate than the everyday market. It was used to convert bolivars to dollars and euros as the defendants stole from the country’s oil riches for overseas investments in Florida, Europe and other parts of the world.

The Venezuelan information ministry in Caracas could not be reached by phone.

Among the defendants is a German national arrested Tuesday at Miami International Airport who manages “banking” activities for numerous Venezuelan officials — Matthias Krull, 44, a Panamanian resident who worked as a banker in Switzerland. His defense attorney, Oscar S. Rodriguez, declined to comment on Friday. Krull is being held at the Miami Federal Detention Center.

Another defendant, Gustavo Adolfo Hernandez Frieri, 45, a Colombian-born naturalized U.S. citizen, was arrested in Italy on Wednesday and is expected to be extradited.

Hernandez is accused of using his Miami financial firm, Global Securities Advisors, and another firm, Global Strategic Investments, to launder money with false mutual-fund investments. A Homeland Security investigator says in the affidavit that the two brokerage companies, which are listed as having offices at 701 Brickell Ave., are “affiliated” and were used by Hernandez for meetings with members of the money-laundering network.

Representatives of Global Strategic Investments insist Hernandez has had no involvement in the firm, which is headed by Hernandez’s brother, Cesar.

The alleged money-laundering conspiracy began in December 2014 with a currency-exchange scheme to embezzle $600 million from PDVSA obtained through bribes and fraud, the complaint says. The defendants used an associate, who would later become a confidential source for the feds, to launder a portion of the PDVSA funds. By May of 2015, the conspiracy had doubled to $1.2 billion embezzled from Venezuela’s national oil company.

In early 2016, the associate approached Homeland Security investigators in Miami about cooperating and becoming a confidential source, the complaint says. The source agreed to wear a recording device to launder $78 million in PDVSA funds that he had received from a loan contract with the national oil company.

The federal probe, called Operation Money Flight, was launched with the initial focus on the defendants’ efforts to launder a portion of the $78 million. That investigation uncovered the broader money laundering, according to the affidavit.


Luxury Miami condo linked to alleged billion-dollar money laundering scheme

 By Brian Bandell

“Bitcoin Maven” Theresa Lynn Tetley Sentenced To 12 Months Jail For Money Laundering

By Yuri Besmanoff

Theresa Lynn Tetley, the so-called “Bitcoin Maven,” who admitted to running a Bitcoin-for-cash exchange business without a license, as well as laundering Bitcoin purchased from the proceeds of drug trafficking, was last week sentenced to 12 months and one day in federal prison and also fined $20,000.

The Downfall Of The Bitcoin Maven

She reveled in being known as the “Bitcoin Maven,” a moniker she gave herself because of her deep knowledge of cryptocurrency. That knowledge enabled her to make a substantial amount of money in a shorts space of time.

However, this week, Theresa Lynn Tetley, aged 50, of Southern California, who in a former, less complicated life had been a stockbroker and real estate investor, pleaded guilty to one count of money laundering and one count of operating a money transmitting business without a license, and was sentenced to 12 months in prison by US District Judge Manuel L. Real.

The official charge was conducting an illegal business and engaging in unlawful monetary transactions involving Bitcoins. Tetley was also ordered to forfeit some 40 Bitcoin, worth around $250,000, to forfeit $292,264.00 in cash, as well as 25 assorted gold bars (worth around $12,500) that were deemed to be the proceeds of her illegal activities.

Between $6-$9.5 Million In Illegal Transactions

The court heard how Tetley ran a Bitcoin-for-cash exchange platform without first registering with the Financial Crimes Enforcement Network (FinCEN). She had also failed to implement anti-money-laundering mechanisms such as customer due diligence, and had failed to report certain transactions required for these types of businesses.

Tetley advertised on the website, and took part in illegal transactions that totaled between $6-$9.5 million. Her customers were almost all from the United States. Ironically, clients that used her exchange received no special favors, as Tetley actually charged higher rates for Bitcoin transactions than legal exchange platforms do.

Laundered Drug Money Earned On The Dark Web

The most serious offence – at least in the eyes of the public – was that Tetley knowingly laundered funds from an individual suspected of receiving Bitcoin as payment for selling drugs on the “Dark Web.” During the investigation, an undercover agent representing himself as a drug trafficker successfully swapped Bitcoin for cash using Tetley’s exchange platform.

According to sentencing documents, the prosecution had successfully argued that:

“In light of the growth of the dark web and the use of digital currency, unlicensed exchangers provide an avenue of laundering for those who use digital currency for illicit purposes. Tetley’s business fueled a black-market financial system that purposely and deliberately existed outside of the regulated bank industry.”

The case against Tetley was the first of its kind in the annals of the Central District of California.

Iran’s top leader opposes joining anti-money-laundering body

Associated Press

TEHRAN, Iran — Iran’s Supreme Leader Ayatollah Ali Khamenei has publically opposed joining a global anti-money laundering convention.

Referring to recent debates in country’s parliament on joining the Financial Action Task Force, Khamenei told lawmakers Wednesday: “It is not necessary to join conventions whose depths we are unaware of.”

Khamenei, who has final say on all state matters, said the parliament should instead prepare its own bills against money laundering and terrorism, accusing the convention of merely “securing the interests” of big powers.

Earlier last week the parliament suspended debate on joining FATF for two months out of fear that membership could thwart helping Iran’s allies abroad, including Lebanon’s Hezbollah and Palestinian Hamas. Both are considered terrorist organizations by the United States.

FATF was established by a G-7 Summit in Paris in 1989.

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