Attorneys for Russian national charged in money laundering, murder-for-hire plot want him released due to health concerns

By Natalie Matthews

Attorneys for a wealthy Raleigh man at the center of an international money laundering and murder-for-hire case want him freed for health reasons and say he is not a threat, according to newly released documents.

Leonid Teyf, a Russian national with connections to the Putin administration, is due in court on Tuesday for a detention appeal hearing.

Teyf and associates allegedly scammed more than $150 million in kickbacks on Russian government contracts, according to the charges against him.

In newly filed documents opposing Teyf’s motion for release, the attorneys for the federal government say Teyf not only tried to murder his wife’s suspected lover (his housekeeper’s son), but also discussed killing her.

Teyf allegedly bribed an undercover Department of Homeland Security official to try to have the young man deported, authorities said. When that took too long, he paid another federal agent to kill the man, even supplying him with an illegal gun, authorities said.

Federal officials raided Teyfs’ north Raleigh mansion in December. They also raided a condo Leonid Teyf owned in the Glenwood South area, where they found a safe, several assault weapons and a lot of ammunition.

The government believes that Teyf is a flight risk and said he has multiple apartments, a compound in Russia and a home in Switzerland.

Since December 2010, the Teyfs opened at least 70 financial accounts at four different banks, and wire transfers show money coming into the couple’s bank accounts from countries known to launder money, including Belize, the British Virgin Islands, Panama and the Seychelles. Investigators said the Teyfs bought hundreds of thousands of dollars’ worth of luxury cars and more than $2.5 million worth of art.

Teyf, his wife Tatyana, and four others are charged in the case involving murder for hire, bribery, money laundering and violation of immigration laws.

Federal attorneys promise to release more information at Tuesday’s court hearing.

Leonid Teyf remains in jail without bond.  Tatyana Teyf was released from jail without bond last month.

The Red Pill Realities of Anti Money Laundering

By Shirish Netke

Money laundered through the banking system is estimated to be over 2 trillion dollars a year. A recent study by BAFT (Bankers Association of Finance and Trade) estimates that 1% of the proceeds from financial crimes are intercepted. Meanwhile, nine out of ten suspicious activities flagged by AML software in banks are false alarms.

Let’s put these numbers in perspective. 99% of laundered money is not caught. 90% of the resources spent catching suspicious actors are wasted. 100 % of US banks have known this for years.

The bottom line is that 70 billion dollars are spent every year in compliance costs by banks to intercept less than 25 billion in illicit funds.

How did we get here? Modern technology, specifically data analytics, is well-suited to address this problem. Why hasn’t this problem been solved?

Let’s look at what happened over the last few decades.

Most banks use process automation software for Anti-Money Laundering. This software was designed many years ago based on abstracting human tasks and automating them to be more efficient. This seemed like a very good idea at that time when AML/BSA/CFT compliance was a matter of running through a checklist.

This was a very efficient solution until the stakes for non-compliance became very high. The business process was no longer effective and there was no provision in the software to change it. Meanwhile, financial crimes posed a clear and present danger to banks. Banks did the only thing they could do to solve the problem – they created manual workarounds to process automation and hired more people to implement them.

Bank compliance teams are well-aware of the limitations of the process and use their judgment to execute their functions while staying within guidelines. However, exercising sound judgment does not necessarily free them from the tyranny of a process designed for a different time.

It is not unusual to see a bank increased its staff ten-fold in five years. Many people in banks have been deployed to manually (and intelligently) intervene where the software fell short. As banks continue to be fined for AML related activities, staffing continues at a frantic pace. Today, banks are actively looking at hiring more compliance people. Some are also moving compliance teams to low-wage geographies to reduce the burgeoning cost for compliance. Others are looking for outsourcing firms to manage this business process.

What is a banker to do?

Here are a few things to consider.

#1 There is No “App for That”

A risk-based business process is not something you buy. It’s something you do.

The FFIEC manual on AML/BSA says “The first step of the risk assessment process is to identify the specific products, services, customers, entities, and geographic locations unique to the bank.”

Sadly, this requirement is in direct conflict with the specifications of packaged enterprise software. This software was created as a solution that works for all banks. It caters to the “least common denominator” requirement of a large number of banks. It is very unlikely that a business process built into an enterprise solution will be optimized to a bank’s unique risk profile.

Today, when you buy a traditional AML software application you tacitly commit to a business process that goes with it. If the business process does not suit the risk profile of your bank, you need to deal with it. You can follow the process anyway even though it is neither efficient nor effective and rationalize it as an industry standard solution. You can also manually override the process and customize it to your needs. The first is not sustainable and the second requires manpower and resources, the extent of which depends on the amount of customization.

A third choice is to re-design the business process. This requires re-examining the objectives of the process and the underlying technology. It also means convincing your bank examiners that an updated process is more effective, efficient and minimizes risk.

A risk-based process can be broken down in terms of the 4 M’s – Measure, Monitor, Manage and Mitigate. There is some skill involved in deploying the right combination of human intelligence and machine intelligence in deploying such a process. As a bank, you have a unique understanding of your risks. These risks will determine your business process and the allocation of resources to that process.

An important question to ask a technology vendor in implementing a risk-based process – will the technology drive process, or will the process drive technology? If the process drives technology, will it let the bank change its business process when the risks change?

The question to ask yourself – how are the vendors’ incentives aligned with those of the banks’? Do they get paid for the success of a risk-based process, or for selling a software license and billable hours irrespective of the outcome?

#2 Understand the Modeling Math

Mathematical models can make your AML process more effective and slash your costs if (and only if) they are implemented judiciously.

George Box, a British statistician, is credited with the quote “all models are wrong, but some are useful”. A model cannot guarantee or predict an outcome, but it can provide a metric for its accuracy. Understanding model accuracy is a key input to designing a risk-based process.

Let’s take an example.

Current models used by AML software are wrong 90% of the time. Which means when they call out 100 suspicious actors, only 10 of them are suspicious enough to require a SAR (suspicious activity report) to be filed with FinCEN. A better model may produce 80% false positives for those 10 SARs. The second model is an obvious improvement. What is not so obvious is that the second model will produce a 100% increase in productivity because it produces only 50 alerts for the same 10 SARs – and only needs 50% of the resources.

Both models have a finite possibility of being wrong and letting some bad actors slip through the cracks. However, the second one is more useful. A model’s usefulness can be measured in mathematical terms which can be the basis for allocating resources to the business process.

The important question to ask a vendor who provides a model is – how can a model’s performance metrics be used to modify the business process?

The question to ask yourself is – do I clearly understand the trade-offs of using a risk-based approach powered by a mathematical model? Can I explain this approach to a regulator during a bank examination?

#3 Regulatory guidance is global. Bank exams are local.

The long-term impact of policy changes is often underestimated. The short-term impact of these changes is often overestimated.

Bank regulators are encouraging banks to adopt new technology to make it easier to manage AML processes. A recent report from the US Dept. of Treasury says “Regulators should not impose unnecessary burdens or obstacles to the use of AI and machine learning and should provide greater regulatory clarity that would enable further testing and responsible deployment of these technologies by regulated financial services companies as the technologies develop.”

This is a welcome change from the past. Implementing this change will need alignment with the rank and file of all regulatory organizations. Regulators understand that this entails a process of education and training of bank examiners to familiarize them with the technology.

Much as we would like changes to be immediate, banks and regulators have a history of being deliberative in adopting new ways of doing things. There is a natural gestation period between policy changes and gaining familiarity with new approaches by bank examiners and compliance officers.

Recent guidance from regulators indicates that the stage is set for pilots to deploy in a manner where bankers will get some relief from regulatory scrutiny. This will make it easier for banks to try new technologies.

The important question to ask a vendor who provides a new technology is – can they help you through the transition to the new way of doing things?

The question to ask yourself is – can my bank define a path from the current situation to a future where new technology can be used to work with regulators?

In the science fiction film, The Matrix, Neo, played by Keanu Reeves, is given a choice between the blue pill of comfort coupled with ignorance and the red pill of reality that has an uncertain future. The rebel leader’s closing words to Neo are – “Remember, all I am offering is the truth. Nothing more.”

Here are our truth offerings on AML for bankers:

Design your AML process around desired outcomes; not legacy technology.

Understand trade-offs between human intelligence and machine intelligence.

Be practical about the ground realities of affecting change.

Danske Bank, ex-CEO are sued in U.S. over money laundering scandal

By Jonathan Stempel

NEW YORK (Reuters) – Danske Bank A/S and four former top executives were sued on Wednesday by a U.S. shareholder that accused Denmark’s largest bank of defrauding investors and inflating its share price by hiding and failing to stop widespread money laundering at its Estonian branch.

The complaint was filed in the U.S. District Court in Manhattan by a New York pension fund that is seeking class-action status and damages for investors in Danske’s American depositary shares from Jan. 9, 2014 to Oct. 23, 2018.

Danske was accused of being “intentionally less than forthcoming” to Danish regulators even after a whistleblower alerted the Copenhagen-based bank to suspected money laundering, while overstating its legitimate profitability and ability to thwart misconduct.

The bank did not immediately respond to requests for comment after market hours in Europe on behalf of the defendants, who include former Chief Executive Thomas Borgen, former Chairman Ole Andersen, and two former chief financial officers.

Borgen resigned last Sept. 19, when Danske said an internal probe had uncovered about 200 billion euros (US$231 billion) of payments made from 2007 to 2015 through its small Estonian branch, and that many payments appeared suspicious.

Andersen was replaced in December.

Authorities in Denmark, Estonia, Great Britain and the United States are investigating the payments, including in a criminal probe by the U.S. Department of Justice. Danske has said it has been cooperating with authorities.

The Sept. 19 report came one year after Danske expanded its probe into the Estonian branch, following what it called “a root cause analysis concluding that several major deficiencies led to the branch not being sufficiently effective in preventing it from potentially being used for money laundering.”

According to the complaint, the market value of Danske’s ADRs fell by more than $2.54 billion as investors learned of the full scope of the scandal.

It is common for shareholders to sue companies in the United States after what they consider unexpected share price declines.

The lawsuit is led by the Plumbers & Steamfitters Local 773 Pension Fund of Glens Falls, New York. Its law firm Robbins Geller Rudman & Dowd specializes in securities fraud.

The case is Plumbers & Steamfitters Local 773 Pension Fund vs Danske Bank A/S et al, U.S. District Court, Southern District of New York, No. 19-00235.

DEA agent linked to Colombian money laundering scheme, prosecutors say

By Scott Glover

(CNN)An agent with the US Drug Enforcement Administration is under investigation in connection with a scheme to launder millions of dollars for Colombian drug traffickers, CNN has learned.

The years-long conspiracy sometimes “involved the use of undercover accounts controlled by the DEA,” according to court papers filed in US District Court in Tampa, Florida.
The agent is not identified by name but is characterized as a “co-conspirator” in the case against a long-time DEA informant who has pleaded guilty to money laundering for the Colombians.
The agent, according to court papers, received cash payments from an account containing hundreds of thousands of dollars in drug money. The agent also directed additional money to be deposited into the accounts of his family members, the documents state.
A DEA spokeswoman in Washington declined comment.
Though the case was filed in Tampa, the prosecution is being overseen by the US Attorney’s Office in Atlanta, Georgia. The transfer of the matter to another jurisdiction is the sort of step federal authorities sometimes take in investigations involving allegations of official corruption.
Kurt Erskine, a top official in the US attorney’s office in Atlanta, declined comment on the case.
The information about the allegedly rogue agent is contained in a plea agreement between federal prosecutors and former DEA informant Gustavo Yabrudi, a Venezuelan-born Miami resident.
Yabrudi’s defense attorney, Leonardo E. Concepcion, said in an email that the case is “still active” and, “I cannot discuss it as this time.”
Yabrudi worked on and off as an informant for the DEA from 2010 to 2016 with stints in New York, Boston and Miami, according to court records. He was deactivated at one point in 2013 for “unauthorized money movements.”
According to court records, the agent identified as a co-conspirator instructed Yabrudi in 2015 to recruit someone to open a bank account under a false name in Miami. Hundreds of thousands of dollars “from illegal drug sales” was deposited into the account, the records state.
Neither the agent nor Yabrudi informed the DEA of the existence of the account, according to the court records.
The pair subsequently spread the money around among fellow conspirators who laundered the proceeds in various ways and got the money into the hands of traffickers in Colombia, the documents allege.
At least $7 million in “illegal funds” passed through a business account belonging to one co-conspirator, according to Yabrudi’s plea agreement.Yabrubi was charged with money laundering in September. He agreed to plead guilty later that same month.
In December, federal prosecutors and Yabrudi’s defense attorney filed a joint motion requesting that his sentencing be postponed for six months. He is currently set to be sentenced in May.
“The defendant is cooperating against others who facilitated sophisticated money laundering schemes, in part, by using undercover accounts that were shell companies and controlled by law enforcement,” the motion states. “Some of the illegal proceeds laundered during these schemes derived from drug trafficking and public corruption related offenses.” The agent’s current status with DEA is unclear.

Former Ohio City nightclub owner pleads guilty to drug, money laundering charges

By Eric Heisig

CLEVELAND, Ohio — A former Ohio City nightclub owner arrested by the FBI as part of a large-scale investigation pleaded guilty Monday to federal drug and money-laundering charges.

Emad Silmi, 44, the owner of Global Auto Body & Collision in Cleveland’s Puritas-Longmead neighborhood, acknowledged to a federal magistrate judge that he ran a drug ring out of his shop that spread large amounts of marijuana, cocaine and a designer drug similar to “molly” throughout Northeast Ohio.

His arrest came after a federal investigation that lasted more than a year and also resulted in charges against 25 other people. It is the second time the North Olmsted resident, who previously owned the popular club Moda, was caught trafficking drugs.

He was sentenced in 2006 to 57 months in federal prison for similar charges.

Silmi said little more than “yes, your honor” during his plea hearing in front of Magistrate Judge Jonathan Greenberg. A bald, gray-bearded man in an orange jumpsuit, he has been in the custody of the U.S. Marshals Service since his arrest in December 2017. He acknowledged his crimes to the judge as Assistant U.S. Attorney Matthew Cronin read them aloud from a plea agreement.

His lawyer Craig Weintraub said after the hearing his client is looking at a likely sentence of about 10 years in federal prison. Silmi also agreed to forfeit more than $54,000 and a gun, and federal prosecutors agreed to drop several charges in exchange for his plea.

U.S. District Judge Christopher Boyko will sentence Silmi on April 29.

The FBI dubbed the investigation “Operation Snow Globe.” Agents discovered that drugs were shipped through the mail, FedEx and UPS. The drug money was laundered through auto shops throughout Cleveland and in Parma. Agents listened in on phone calls and read text messages, according to court records.

Silmi obtained large amounts of cocaine from Cleveland resident Samer Abu-Kwaik, prosecutors said. He also obtained large amounts of designer drugs from Huron resident Anthony Quinn Greenelee, who obtained it from China.

He sold all the drugs out of his shop and disguised drug payments as business expenses to launder the money.

Others netted in the FBI’s investigation were also caught shipping and selling heroin, fentanyl and the synthetic opioid U-47700 from Puerto Rico, court records said.

Prior to his recent arrest, Silmi was likely best known as the owner of his West 25th Street nightclub, which in its day was frequented by stars such as LeBron James, Shaquille O’Neal, the rapper 50 Cent, Mötley Crüe drummer Tommy Lee and hip-hop mogul Russell Simmons.

The Ohio City club was shuttered in 2006, and its former building now houses the Mitchell’s Homemade Ice Cream shop.

Weintraub described Silmi’s charging and plea as a “fall from grace” for a once-successful businessman.

“That was the club in Cleveland for a while,” the attorney said of Moda. He said Global Auto Body & Collision is still open and is run by Silmi’s wife.

Federal prosecutors accuse multiple Colorado restaurants of drug money laundering

By Trevor Reid

GREELEY — Almansitas Mexican Food restaurant in Greeley is one of 17 restaurants implicated in a federal drug trafficking and money laundering investigation, with each of those restaurants having their accounts frozen and assets seized by federal authorities.

The original court filing from Nov. 13, has been sealed, but court filings in response to the charges from Almansitas owner Ana Cejudo hint at the allegations.

Cejudo in her response says the restaurant has never served as a drug trafficking front, nor has it laundered money, according to federal court filings.

But the response also refers to Drug Enforcement Administration databases and two safe deposit boxes seized by federal authorities containing more than $805,000.

The response also touches on money laundering operations, including a reference to layering — in which criminals use complex financial transactions to hide illegal sources of cash.

The case against Cejudo and Almansitas could also sweep up other Mexican restaurants, including Taco Star, with locations across Colorado, as it appears many of the same people are involved, and those people also appear to share a bank account, according to court filings.

Taco Star, a 24-hour Mexican fast food restaurant with drive-through service, has locations in Longmont, Northglenn, Aurora and Colorado Springs.

Despite the similarities between Almansitas and Almanzas — both 24-hour Mexican food restaurants with similar menus, signs and food — the restaurants are listed under different owners, the latter belonging to a Tomas Lopez Alamilla, according to Secretary of State business filings.

In Cejudo’s response, she asserts that Almansitas and Almanzas are separate entities owned by different people.

Taco Star is filed under a registered agent named Carolina Almanza, who shares a mailing address with Almansitas, according to business filings. But no one with the surname Almanza is listed as a defendant in the case.

In her response, Cujedo admits Cosme Gutierrez, another defendant listed in the court filing, is an owner of Taco Star. Cujedo also admits she, Gutierrez and Almansitas are the claimants for a single bank account, according to court records.

Gutierrez claims to be one of the owners of Almansitas in his response to the initial filing and is listed as a founder of the restaurant in its 2014 articles of organization. Cujedo, Gutierrez, Almansitas and Taco Star are being represented by Thomas Fleener, a Wyoming and Colorado criminal defense attorney based in Laramie.

The responses reference analyses of seized accounts dating back to October 2015. The responses also reference a section of the original filing titled “Connections between Jose Aguilar and Narcotics Trafficking.” The same Aguilar appears to own a bank account also associated with a business called El Potosino Foods, LLC, prosecutors asserted in the original filing.

When asked over a Friday evening phone call about the federal case, an Almansitas employee spoke with a man working at the restaurant before responding that they can’t give any information out.

East Bay defense contractors charged with money laundering, fraud, conspiracy

MARTINEZ — Three members of a respected San Ramon business family have been accused of engaging in money laundering, bribing employees, and insurance fraud, all while their companies were contracting with the U.S. Armed forces.

Wife and husband Selina Singh, 55, and Manjinder Paul “MP” Singh, 57, along with their son, Kabir Singh, 28, were charged in November with conspiracy, $1.5 million in money laundering and several counts of workers compensation fraud and insurance fraud, according to court records. The charges are tied to two San Ramon businesses owned by the family, Bara Infoware and Federal Solutions Group.

Selina and Kabir Singh have both posted bail, and are out of custody. MP Singh has not yet been arrested, prosecutors said. On Monday, a judge will review a prosecution motion to increase the bail amount to $500,000.

The charging documents allege that the defendants instructed employees not to report injuries, sometimes giving them bribes as an incentive, in order to avoid paying insurance fees. They’re also accused of providing false information to insurance companies.

Both companies are construction businesses that contract with the Department of Defense, according to the companies’ websites. Federal Solutions Group’s website says its clients include the U.S. Armed Services, the Federal Bureau of Prisons, the National Guard, and the U.S. Army Corps of Engineers.

Neither business nor Selina Singh immediately returned email requests for comment. A 2016 article by a business news site called American City Business Journals says Singh is Federal Solution’s Group’s CEO. She is quoted in the article saying she immigrated to the United States from Northern India and had no business experience in the U.S. when she started. She talked about the need for obsessive attention to detail in her field.

“One failed project can bring you down after five or six years of work,” she told the publication. “So we have to be extremely diligent in everything we do.”

A former manager at Federal Solutions Group is quoted in the story saying Singh “takes care of her employees.”

The charging records cover a seven-year period, starting in September 2010 until December 2017. All told, the Contra Costa District Attorney’s office filed 14 felony charges, including enhancements alleging aggravated white-collar crime.

What drives a public official to white-collar crime? ‘Greed’

By Jennifer Bowman

ASHEVILLE — Buncombe County officials illegally used taxpayer dollars to enrich themselves, paying for daytime shopping trips, private phone bills, meals, vacations, spa treatments and other personal pleasures, according to federal indictments. Three of them have admitted as much.

Research says they’re not the first to try out government corruption.

A 2018 report by the Association of Certified Fraud Examiners found occupational fraud in government and public administration caused organizations a median loss of more than $125,000, most commonly through corruption schemes. Financial damage was worse when the fraud was committed by a person of authority like a manager or executive, and even greater when multiple perpetrators were involved.

What is the cost to Buncombe County?

In Buncombe, federal prosecutors say corruption has cost much more. Even without quantifying the alleged kickbacks received by former managers Wanda Greene, Mandy Stone and Jon Creighton, the U.S. Attorney’s Office cited more than $200,000 in illegal credit card purchases and more than $2.5 million used for life insurance policies.

That’s not including millions of dollars in other controversial expenses made under Greene’s 20-year tenure as county manager, prosecutors allege.

What would drive Buncombe’s highest-ranking administrators — already paid handsomely with six-figure base salaries, bonuses, retention incentives and some of the best benefits in the state — to behave in such a way?

If they’re like any white-collar criminal, it’s greed, said Michael Clark, a former FBI agent with decades of experience investigating public corruption.

“They go in there usually with pretty good intentions, and they see (money) all around them,” Clark said. “They’re giving out a million-dollar contract to a sewer guy, another million to a road guy. Everyone’s getting rich around them — they have a lot of money, beach houses, ski trips, trips to Florida.

“The county manager — they’re civil servants. They’re making a set salary, which is comfortable but not rich. They kind of feel this sense of entitlement. ‘I’m as smart as these guys. They’re rich. I’m stuck with a civil service job. I deserve the perks.’ The greed part steps in. And we saw that time after time after time.”

No oversight? ‘That just opens the floodgates’

The report by the Association of Certified Fraud Examiners, conducted annually and in its 10th edition, said most employees never commit fraud. But when they do, researchers said, they can cause “enormous damage.”

Of nearly 2,700 cases across more than 100 countries, the study found that most occupational fraud costs a victim organization less than $200,000. Twenty-two percent, however, exceed $1 million in financial damage.

The schemes last an average of 16 months, according to the report. Government and public organizations are among the industries with the highest proportion of corruption cases.

Prosecutors allege fraud in Buncombe County government is wide-ranging, involves multiple longtime officials and dates back to more than a decade ago.

Four officials have been indicted: Greene, Stone, Creighton, and Michael Greene, Wanda Greene’s adult son and the county’s former business intelligence manager.

All but Wanda Greene have reached deals with the U.S. Attorney’s Office, pleading guilty to conspiracy charges. Joe Wiseman, a Georgia-based engineer said to be at the center of the yearslong kickback scheme with the former managers, has not been charged.

The four ex-officials represent a total of nearly 110 years as county employees. Wanda Greene served as county manager for two decades — nearly three times longer than the average tenure of city and county managers in the U.S. Stone and Creighton were Buncombe staffers for even longer.

Fraudsters who had been working with their company longer stole twice as much, according to fraud examiners’ findings: If the perpetrator had worked more than 10 years at the organization, the financial damage increased by over six times more than the median loss caused by the fraudulent scheme of someone who worked there less than one year.

“Some people get in these positions and there’s no oversight,” said Thomas Raftery III, a former FBI agent who investigated construction and contract fraud in the Afghanistan war zone.

“And that just opens up the floodgates. You gotta have some type of system of checks and balances and it doesn’t look like this county had any.”

The FBI investigation: 18 months and counting

Federal officials confirmed Wanda Greene “and others” were under investigation in August 2017, more than a month after county officials flagged financial irregularities during Greene’s last week as manager.

The investigation continues nearly a year and a half later. That’s common, former FBI agents said.

“Some of these types of investigations, they’ve taken several years — as many as five years,” Raftery said. “It depends on what’s involved, what else is going on. The agents typically have other cases, so there’s peaks and valleys in attention.”

Raftery said it’s likely the county investigation has required “a whole host of subpoenas.” The superseding indictment, in which a grand jury indicted Greene for additional charges in August, is evidence that investigators likely are picking up additional information along the way, he said.

Raftery, who has 23 years of federal law enforcement experience and served as the first inspector general for the Delaware River Port Authority, said the FBI also pays special attention to professional services contracts like those granted to Wiseman. In North Carolina and other states, they’re not subject to bidding requirements and “are a great way to shield bribes,” he said.

“They’re just more prone to manipulation,” Raftery said.

Clark said corruption cases can be complicated. A 22-year veteran of the FBI, he supervised the investigation of former Connecticut Gov. John Rowland, a case that ultimately led to the governor’s imprisonment for corruption and fraud.

Clark also oversaw major bribery and kickback investigations of several mayors throughout the state, and his work on high-profile corruption cases made the bureau’s public integrity operation in Connecticut a national model. He now is a senior lecturer in the criminal justice department at the University of New Haven.

Investigators looking into Buncombe County likely have been working through subpoenaed records, from credit card statements to travel documents, Clark said. And corruption cases often work on “moving up the food chain,” he said — finding others, perhaps more significant participants, potentially engaged in corruption.

“Let’s say they get a plea or someone decides to cooperate,” Clark said. “They’re cooperating behind the scenes before they even plead, most of the time. (Investigators) are lifting up the rocks and taking a peek and looking around, and they are sent down a whole new path.”

And the decision to cooperate is a common one, he said.

“For the most part, they’re not hardened criminals who are used to doing jail time,” Clark said. “If you’re a drug dealer or in the mob, that’s a red badge of courage. With a white-collar crime person or a public official, that’s not the case.

“They’ll cut a deal.”

‘There’s got to be checks and balances’

Internal control weaknesses were responsible for nearly half of all fraud cases, according the fraud examiners’ report. In Buncombe, officials quickly became aware of what they lacked, albeit after the fact.

“When they’ve been in that one job for that long, they certainly know how to manipulate the system, there’s no question about that,” Clark said. “They know where they can hide things or grab things from, things along those lines.”

The investigation revealed glaring problems in Buncombe County government.

Commissioners never received line-item budgets under Greene, never gave her annual performance reviews and did not regularly ask for information about her expense reports. Greene, meanwhile, redacted receipts she submitted for reimbursement, was accused of using bullying and intimidation techniques, and never reported back to commissioners on no-bid contracts,.

The county has since overhauled its policies, clamping down on how economic development money is spent, capping performance bonuses and promoting their whistleblower hotline. They’ve also changed auditing firms, strengthened the role of the county’s internal auditor and required more public reporting of contract activity.

Raftery said oversight is key, even if it’s unpopular in the organization. As inspector general, he said he regularly received pushback after issuing negative reports and implementing policies against waste and fraud. He left the job in 2014, penning a scathing resignation letter that accused officials of interfering with his independent watchdog role and preventing him from issuing audits.

Commissioners need to take responsibility for their fiduciary duty, Raftery said, and that includes being aware of contracts that don’t require their approval.

And they should remember that the county manager works for them, not the other way around, he said.

“What little I saw (about the case) just struck me — where is the oversight?” Raftery said. “Nobody’s watching. You’ve got two, three people there it looks like just doing whatever they wanted to do.

“And they got caught. Because, eventually, you’re going to get caught.”

A New Business Internet Scam Puts Companies in Legal Hot Water

By Erick Sherman

Criminals are trying to turn companies into money mules, according to the FBI.

Under the scam, criminals with illegally gained money—often through other Internet frauds—get a company to receive cash and then forward it to an account in another country. The intent is to get around official scrutiny of financial transactions.

Money mule schemes themselves aren’t new. In the past they targeted consumers, some of whom were aware of the schemes and others taken in by a con artist. The criminals often disguised themselves as work-from-home opportunities, according to the U.S. Computer Emergency Response Team (CERT), although another popular approach was romantic interaction that starts on a dating site.

Now companies are targets, according to the Associated Press. One executive in Connecticut received an email from someone who seemed to be the small business’s owner requesting a money transfer. It was really a money mule plot targeting companies, schools, and non-profits.

“They trial and error this stuff and they see what works and they see what doesn’t,” FBI supervisory special agent James Abbott told AP.

Not only will money mule scammers try what seem to be legitimate requests, but also might try attacking computer systems for covert access to bank details.

The Department of Justice began to more heavily target money mule scams starting October 1, the agency said in a press release. It has worked to stop 400 money mules in 65 federal districts.

Potential consequences for being a money mule include frozen bank accounts, prosecution, and liability for others’ losses. The consequences can be serious, so companies should be on guard. CERT suggests companies use anti-virus and anti-spyware, limit access to sensitive data, regularly check employee lists and financial transactions, and consider isolating computers that perform banking functions from other systems.

Morgan Stanley Fined Over Anti-Money Laundering Program

By Ross Snel

Finra has slapped Morgan Stanley Smith Barney with a $10 million fine for problems in its anti-money laundering program that lasted more than five years.

In an announcement Wednesday, the self-regulator for the brokerage industry said Morgan Stanley’s AML program failed to meet requirements of the Bank Secrecy Act because of three shortcomings:

•Morgan Stanley did not allocate enough resources to review alerts generated by that surveillance system, so its analysts frequently closed alerts without sufficient investigation and/or documentation.

•The company’s AML department failed to “reasonably monitor” customers’ deposits and trades in penny stocks for suspicious activity.

Finra said it found other problems, including a failure to create and maintain a supervisory system capable of complying with securities laws that generally prohibit the offer or sale of unregistered securities. According to the regulator, the company divided responsibility for reviewing customers’ deposits and sales of penny stocks among branch managers and two home-office departments with insufficient coordination among them.

Additionally, Finra said the Morgan Stanley failed to implement policies and procedures to ensure it was conducting periodic risk-based reviews of correspondent accounts it kept for some foreign financial institutions.

The action underscores the importance for broker-dealers of developing and maintaining robust AML programs that are in full compliance with the law.

“As we stated in our Report on Finra Examination Findings released earlier this month, Finra continues to find problems with the adequacy of some firms’ overall AML programs, including allocation of AML monitoring responsibilities, data integrity in AML automated surveillance systems, and firm resources for AML programs,” said Susan Schroeder, Finra executive vice president, Department of Enforcement, in the announcement. “Firms must ensure that their AML programs are reasonably designed to detect and cause the reporting of potentially suspicious activity.”