TSR Briefing 10/2012: Fraud, Money Laundering, Corruption, Financial Crimes Around the World
November 1, 2012 (TSR) – Here are the summary of what went on around the world in the crackdown of fraudulent financial activities around the world.
Former president’s son arrested on fraud charges in UK
The former president of Kyrgyzstan’s son (UID 327683) was arrested in London, by the Metropolitan Police Service Extradition Unit after the US had requested his extradition to face fraud charges. He appeared in court and was charged with conspiracy to defraud and conspiracy to pervert the course of justice in the US between April 2012 and April 2012. The charges are believed to be in connection with an alleged corrupt scheme involving the sale of fuel to a US airbase in Kyrgyzstan.
Swiss and French make arrests in suspected elaborate money laundering scheme
Three brothers, two of whom worked in the banking sector (UID 1864634, 1864640) are reported to have masterminded an elaborate scheme to launder illicit funds. Reports state that they handed the money from illegal drug sales to individuals who had money and assets in Swiss accounts which they wanted to repatriate. Some of these assets are believed to have been the proceeds of fraud and others hidden from the authorities to avoid tax. According to reports the equivalent of the cash was debited from the individuals’ accounts and funneled through a complex network of shell companies across the globe back to the alleged drug kingpins. Commission was reportedly paid on the transactions. The brothers are alleged to have handled EUR12 million in the past seven months. Assets seized during the arrests included a substantial amount of cash, gold ingots, art and firearms.
Nicaraguan promoter convicted of narcotics crimes and money laundering
The reported joint head of an international drug-trafficking ring (UID 1716626) that smuggled cocaine from Colombia through Central America to Mexico has been jailed for 30 years by Nicaraguan authorities and ordered to pay USD6.8 million. A member of the Supreme Electoral Council and the promoters two siblings were among others sentenced by the court. The final destination of the smuggled narcotics was reported to be a Mexican drug trafficking group allegedly linked to La Familia Michoacana (UID 931121).
Israel: Investigation reveals massive money laundering case
Authorities in Tel Aviv, Israel, arrested a number of individuals who were linked to a massive and complex money laundering operation. The investigation by authorities centered on a website (UID 1800767) which used word of mouth to bring in members and was only open to people who were invited by fellow gamblers. The laundering operation is reported to have worked with a clear hierarchy of money couriers, technical support workers, enforcers, shareholders and managers who operated databases of gamblers. The massive revenues, according to police, at least NIS6-7 billion over the past five years, were then laundered in Israel through money changers and real estate. The suspects were charged with money laundering, running an illegal gambling operation, conspiracy to commit a crime and tax evasion. Police also seized assets during the raids including real estate and bank accounts reported to hold tens of millions of dollars. Our research analysts are monitoring this developing story and will be updating and adding profiles as necessary.
Jailed for running illegal ticketing business
In October an individual (UID 224635) who ran an illegal ticketing business was jailed for 22 months, after pleading guilty to money laundering. He made approximately GBP4 million from selling fake entertainment events and sports tickets via websites. He had been previously been listed on the UK Disqualified Directors register (2010 until 2025) despite this he continued to run similar types of companies. The authorities are applying to seize the illegal profits he made.
Egypt sentence steel magnate for money laundering
Already serving a 10 year sentence for corruption, a close associate (UID 184501) of the former Egyptian President Hosni Mubarak, has now been sentenced to seven years imprisonment after being found guilty of money laundering. In addition the court fined him LE12,858 and ordered him to return LE6.429 billion in public money.
Former attorney pleads guilty to fraud connected to Ponzi scheme
A former Houston, US, based attorney (UID 1866138) has pleaded guilty to one count of wire fraud in connection with a Ponzi scheme which reportedly defrauded investors out of approximately USD7.8 million. He admitted to his fraudulent scheme, whereby he falsely represented to investors the existence or nature of various real estate investment opportunities, and accepted funds from investors. He has agreed to be held accountable at sentencing in January 2013, for all of the losses incurred by his victims.
Federal contracting bribery case accused sentenced
A former director of contracts (UID 1596263) at an Alaska based business has been sentenced to more than seven years in federal prison, with three years’ supervised release. In addition he was ordered to forfeit USD689,342 and pay USD9.4 million restitution jointly and severally with co-defendants. He had pleaded guilty to bribery and unlawful kickbacks in March 2012. He was arrested in October 2011. He is one of 12 people, including two employees at the Army Corps of Engineers to plead guilty to a scheme that ran from 2008 until 2011. It involved contracts steered towards favored subcontractors for kickbacks, contracts awarded through bribery, and phony invoices that were submitted for payment.
US drinks manufacturer investigates bribery allegations
A US based liquor maker and the world’s fourth largest spirit company has initiated investigations into whistleblower allegations of financial misdemeanors at its India unit. Sources alleged that the investigations cover possible violations of FCPA, but this is unconfirmed.
Control Components defendants due for sentencing
In April 2012 seven executives at an industrial valve manufacturer two of which are husband and wife Mr and Mrs C (UID 1056711) pleaded guilty to making a corrupt payment to an official of a foreign government, in violation of the FCPA. The couple are due for sentencing this month. In July 2009 the company admitted to bribing officers and employees of both state-owned and privately-owned companies in numerous countries including China, Korea and Malaysia, which reportedly resulted in the company securing more than USD46 million in sales. The company paid an USD18.2 million criminal penalty and also agreed to introduce a rigorous internal anti-corruption program.
More charged in stadium tender irregularities case
A fourth individual (UID 1864221), a manager at a Mpumalanga municipality in South Africa has been charged with corruption. His case is tied to alleged tender irregularities surrounding a consulting contract for the building of a stadium for the 2010 FIFA World Cup held in South Africa. Three other individuals were arrested and charged in August and are out on bail. The group reportedly submitted fraudulent documents to the South African Revenue Service (SARS), which misrepresented their company achievements, giving them a better chance of winning the consulting tender.
Kenya: Investigation into possible misappropriation of funds
The Kenya Ethics and Corruption Commission is reportedly investigating if a regional Water Services Board misappropriated USD11 million in funds from the World Bank and the Kenyan government. The funds were given for a dam construction project. According to reports a number of the directors have been questioned by the investigators, who are believed to be pursuing enquiries that the directors may have colluded with the contractor who won the tender. An official at the Commission is reported to have said “Although the directors are insisting that the dam is nearing completion, we have established that the work is shoddy and incomplete and does not signify the funds earmarked for the project.”
Polish based liquor supplier breaches FCPA
A Polish based distiller and distributor said in a statement that “It was determined that payments or gifts were made in a foreign jurisdiction in which the company operates, and that there was a failure to maintain documentation in respect of certain of these payments or gifts adequate to establish whether there was a valid business purpose in making the payments or gifts.” It also stated that it had uncovered a material weakness in its internal controls meant to prevent violations of the FCPA and other laws. In respect of the finding it is reported to have stated that it planned to implement heightened FCPA compliance measures, including new protocols, comprehensive training and quarterly evaluations.
Multinational pays USD27 million to settle alleged FCPA breach
Tyco International Ltd. agreed to pay nearly USD27 million in penalties to settle the US SEC charges that the company violated the FCPA. According to the lawsuit the Switzerland-based global manufacturing company and its subsidiaries arranged illicit payments to foreign officials in more than a dozen countries from 2006 to 2009, reaping benefits amounting to more than USD10.5 million. FCPA violations by Tyco allegedly occurred in a number of countries including China, Egypt, France, Malaysia, Thailand and Turkey.
Aluminum giant settles bribery lawsuit
Alcoa Inc. a New York, US based company agreed to an USD85 million settlement of a bribery lawsuit, filed by a state controlled Bahrain aluminum maker. In February 2008 the Bahrain company sued Alcoa claiming that they had made USD400 million in illegal profits by overcharging for alumina, and that part of the money went to bribes for the Bahrain company senior executives. Alcoa stated that it is not admitting liability. According to reports half of the USD85 million has been paid and that the balance will be paid in a year.
Afghanistan military training contract bribe case
The president of a Boston, US, security company (UID 1827091) and an army lieutenant colonel (UID 1827089) who are charged with the alleged bribery of a government official to obtain a USD54 million military training contract in Afghanistan, pleaded not guilty in federal court. They and one other individual are charged with bribing a public official, accepting of a bribe by public official, money laundering, and wire fraud. The contracts were reportedly related to logistics and weapons maintenance support for Afghan commando units. The judge scheduled a trial commencing 26 November 2012.
US Treasury designates IMU financier
On 17 October the US Treasury imposed sanctions on Mr B (UID 1866275) the “head of finance” for the Islamic Movement of Uzbekistan (IMU). He is reported to be a member of the group’s executive council and is alleged to provide financial and logistical support for the group’s operations in Pakistan and Afghanistan. He is also purported to raise funds for the group outside of the region, primarily Turkey and Europe.
Military commission conviction overturned
A federal appeals court has overturned the conviction of a military commission of a former driver and bodyguard to Osama Bin Laden, Mr H (UID 40683). In 2008, he was charged with conspiracy and eight counts of material support. He was acquitted of the conspiracy charge and was sentenced to 66 months imprisonment but was credited for time served. In 2011 he appealed his conviction but it was upheld by the Court of Military Commission Review.
Yemen: Six sentenced for Al Qaeda connections
Six people convicted of belonging to an al-Qaida cell and plotting attacks against Yemeni and foreign interests during 2009-2011, have been sentenced by a Yemini security court. Mr A (UID 1864435) was sentenced to one year, others were sentenced to terms ranging from one to five years. Access his World-Check profile for details of the sentencing.
Jailed terrorist appeals perjury conviction
Mr S (UID 259069) convicted for his involvement in the 1985 Air India bombing has appealed his secondary conviction of perjury at the Supreme Court of Canada. His appeal was rejected by the British Colombia Court of Appeal in July 2012. He was jailed for manslaughter but was later convicted of perjury after serving ten years of his sentence. Authorities claim he lied during the 2003 trial of two suspects who were purportedly involved in terror acts, resulting in the accused being acquitted.
Convicted of aiding Somalia terror group
After a two week trial a federal jury in Minneapolis, US convicted Somalian (UID 1166829) of sending both money and fighters from the US to a terror group in Somalia. His was the first case to go to trial in the US government’s federal investigation of al-Shabaab (UID 610115) recruitment in the United States known as ‘Operation Rhino.’ US Prosecutor John Docherty said “What was done here [was] the recruiting of young men, funneling them from here to the Horn of Africa… where some of them lost their lives, and some of them took other people’s lives. We’ll be very pleased if today’s verdict plays any part in bringing that kind of behavior to a stop, because that’s the kind of thing that cannot go on in this community.”
Two extradited terror suspects appear in court
Two British citizens (UID 245043, UID 472366) indicted in 2004 and 2006 respectively and extradited from the UK to the United States in early October, have pleaded not guilty to terrorism-related charges in a Connecticut, US court. They are alleged to have raised money and recruited militant fighters using a website on a Connecticut-based internet service provider. They are accused of assisting the Taliban and the Chechen Mujahedeen by providing funds, military items, communications equipment, lodging, training, safe houses and other assistance as well as supplies for military activities.
Indian Mujahedeen suspect arrested in Delhi
In October a mechanical engineer (UID 1746600) who was deported from Saudi Arabia was arrested on his arrival in India. He is accused of recruiting and terror financing for the designated terrorist organization the Indian Mujahedeen (IM) (UID 912891). Authorities believe he served as a link between members of IM in Saudi Arabia and the Pakistan terror organization Lashkar-e-Toiba (LeT). He is also reported to be a key suspect in a 2010 Bangalore bomb blast and in connection with a planned attack during the 2010 Commonwealth Games.
FATF says Turkey must tighten CFT laws or risk suspension
A statement on Turkey from the Financial Action Task Force (FATF) stated that it was deeply concerned with “Turkey’s continued failure to take action to fully criminalise terrorist financing and establish an adequate legal framework for identifying and freezing terrorist assets consistent with the FATF Recommendations.” It went on to state “In June the FATF decided that it would initiate discussions on suspending Turkey’s membership if adequate legislation were not adopted by October 2012. As of this date, Turkey has still not taken necessary action; therefore, the FATF has decided to suspend Turkey’s membership on 22 February 2013 unless the following conditions are met before that date.” Read more.