Visa: Everywhere you want to be (in the US)

U.S. INDICTS ALLEGED CORRUPT CHINA OFFICIAL AND WIFE FOR MONEY LAUNDERING, VISA FRAUD – from FCPA Blog

Visa
Visa

Last month, US arrested Zhao Shilan and her ex husband Qiao Jianjun, both 51, in Newcastle, Washington, a suburb of Seattle. This isn’t the normal visa fraud story. It has multiple parts.

House in Newcastle, WA from South China Morning Post
House in Newcastle, WA from South China Morning Post

US has laws that allow a wealthy foreigners to own a business in the US with an investment of at least $500,000 and must create some jobs to gain a visa, specifically an EB-5. The idea is to encourage foreign direct investment. The minimum required is $500,000. The Chinese couple, they were married at the time, bought a home in Newcastle for $500,000.

Here’s the string of lies:

  • Zhou and Qiao are married, but they aren’t, so, Qiao doesn’t qualify as family.
  • Neither owns any business in China.
  • Qiao performed an illegal transaction at a grain storehouse, where he was a director, to acquire the funds for this real estate purchase.

Zhou has been arrested and faces charges for immigration fraud and money laundering, which could land her in jail for 30 years if she were to do them consecutively. Qiao is a fugitive and has not been found.

Qiao Jianjun from The Chinese Journal
Qiao Jianjun from The Chinese Journal

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is the author of the forthcoming book History of Money Laundering: How criminals got paid and got away.


btn_donateCC_LG

Advertisements

Cleaning Money At Soaplands

Police in Tokyo arrested a manager at Kanaden, an electronics parts company. He was charged with bribing Hideyuki Tominaga, head of the development division of Japan Freight Railway. The bribes were supposed to encourage development work to be given to Kanaden.

What is interesting, and scintillating, is the way the bribes were executed. Tominaga would over pay for massages at a soapland, the change going to Kanaden. This is a lot like money laundering techniques export-importers use.

http://www.pornjapan.jp/jp_sexculture/soapland.html
a soapland scene by Riana Natsukawa

For those of you who do not know what a soapland is… Well, it isn’t exactly safe for work to show you. The image I provided give you an idea if you don’t want to do a search. The quick description would be that a man would go in to an establishment called a soapland. He is assigned to a beautiful female attendant who washes him, baths him and massages him in private. You can see all of the potential, can’t you? One thing to note, in Japan, only intercourse for pay is considered prostitution. All other types of sexual activity can be compensated without going afoul of the laws.

In this particular case, the only part that was afoul of the laws was the bribery. Another interesting thing is that paying money for more business is generally not a bribe in Japan. Japan Freight Railway, however, is a pseudo-private company. Meaning, it is state sponsored, although it is in most other ways just like any other company. But these pseudo-private companies must follow all government business practice standards.

So, what is amazing about this case from a compliance standpoint is that neither the use of sexually charged, if not actual sex, service nor paying to direct business their way are illegal acts in themselves. Tominaga really had to work hard to run afoul of the law.


About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is the author of the forthcoming book History of Money Laundering: How criminals got paid and got away.


btn_donateCC_LG

Reverse Morris Trust Is A Tax-Free Merger Deal

In order to talk about Reverse Morris Trust, we need to discuss Morris Trust. And then we will talk about why this is relevant.

Morris Trust was a company that, in the 1960s, received a tax-bill for unpaid taxes for a $413.44. The trust was being held at American Trust Company. The tax bill was a result of ATC merging with a competitor. Mind you, nothing about the Trust had changed, it’s just that the merger created a transaction with tax consequences.

The tax liability is created for the target company because the target company, presumably, sells its shares at a premium to the buyer. The Reverse Morris Trust puts the tax liability to buyer instead, which it may be able to offset with other expenses. (Expenses reduce income, lowering the tax liability.)

Example of a Reverse Morris Trust from Tax Interpretations
Example of a Reverse Morris Trust from Tax Interpretations

The mechanics goes something like this. Buyer wants to buy Target and Target wants to sell to Buyer. Buyer divests a portion of itself into a newly created subsidiary. At this point Buyer own 100% of the subsidiary. Buy SELLS 49% of the shares of the subsidiary to Target for a price. The price costs Target its whole company. So, now, the subsidiary includes 100% of Target and a line of business from Buyer. Having sold 49% of the subsidiary, Buyer retains control. Target, having BOUGHT 49% of a company using itself as the price, it writes off the expense of purchasing those shares. The Target is allowed to merge with the subsidiary. See the trick here? Buyer SOLD while Target BOUGHT.

Executing an RMT is difficult. Buyers and Sellers must find each other for not just for the M&A and the right price, but then also willing to go through with this complicated transaction method. While tax compliance isn’t my area of expertise or interest, business is. M&A is an interesting area that creates many compliance issues, including tax compliance. Tax avoidance is legal, but tax evasion is illegal. RMT offers a way to avoid taxation when done right.


About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is the author of the forthcoming book History of Money Laundering: How criminals got paid and got away.


btn_donateCC_LG

OFAC Resolve Clash With First Amendment

Akamai Traffic to Syria
Akamai Traffic to Syria

In may of 2014, Office of Foreign Assets Control (OFAC) imposed sanctions on trade with Syria, including books and other works by Syrian authors. The sanction on Syrian authors include Syrian nationals in the United States. Pen American Center and other publishers and author groups opposed this move as an infringement on the First Amendment. Last week, OFAC amended the sanction to excluding trade involving publishing. This was a similar move made a decade ago when OFAC amended sanctions on Cuban, Iranian and Sudanese transactions “necessary and ordinarily incidental” to publishing and marketing written works from those regions.

Rosie Malek-Yonan, Assyrian Authoer
Rosie Malek-Yonan, Assyrian Authoer

While OFAC’s amendment makes obvious sense, so does its pre-amended sanction. Trade involves money and the transactions of money in exchange for expression could lead to funding terrorism because “expression” could mean a whole lot of things. Even if trade didn’t involve money or things of monetary value, publishing could be a method of providing communication for terrorists. Of course, providing communication paths is not unique to publishing. Messages could be attached to invoices as well. And then there are the great number of communications devices and software available for free.


About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is the author of the forthcoming book History of Money Laundering: How criminals got paid and got away.


btn_donateCC_LG

Healthcare Compliance

This is not about health insurance fraud. There are plenty of articles about that. Healthcare compliance is compliance with law, regulations and policies of running healthcare institutions.

New York City Sanitary Inspection Grades
New York City Sanitary Inspection Grades

Compliance in healthcare has always been driven by regulation. When it concerns life, people are not too afraid of having more regulation. Unlike business professionals, who are always concerned about the happiness of their customers/clients, doctors are more concerned with health, even if the patient is not happy with the care provided. That is to say, most doctors will do what s/he can to keep a patient alive and well even at the cost of the patient’s happiness. This is where regulation does not contribute well. And the solution isn’t to add more regulation.

Corporate policies about how to handle scenarios with patients and the public is best served by taking a page from business professionals. Keeping patients happy can contribute to patients being more compliant with drug regiment, faster payment and less time in the exam room discussing not healthcare-related matters, like the annoyance of the drug regiment and dislike for paying of invoices. While the following policy suggestions mostly lack enforceability, simply having them will require a discussion of them at implementation, training and performance evaluations. That is good enough to start affecting change in the institution’s culture. After all, compliance is only effective if it is embedded to the culture.

  1. Eye contact when answers to questions are being provided,
  2. Physical touch to show connection, a handshake will do,
  3. Patient speaks first, do not cut off a patient mid-sentence,
  4. Thank the patient for something, anything,
  5. Apologize to the patient for even the slightest delay or interruption,
  6. Spend the full appointment time with the patient, if exam is completed early, complete notes in the room – patients often forget something,
  7. Ask about other people in their lives – sometimes the medical solution is addressing the environment, not the body,
  8. Always use medical terminology to explain or prescribe, but also use vernacular – use of vernacular terms sometimes cause liabilities but if used to clarify or emphasize medical terminology, the liability is gone,
  9. Inquire about what activities the patient enjoys for no other reason than to get an idea about the patients inclinations when given a choice,
  10. Share something personal so that the healthcare provider is human to them, you are human, after all.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is the author of the forthcoming book History of Money Laundering: How criminals got paid and got away.


btn_donateCC_LG

Greek Tax Evasion Is Money Laundering?

Yanis Varoufakis, Finance Minister of Greece
Yanis Varoufakis, Finance Minister of Greece

Tax evasion in Greece reached 49% in 2005. Has come down since but still above 40%.

Fakelaki means “little envelope”, the term being used as the bribes made to public servants to expedite certain services or look the other way on certain infractions.

Forokarta means “tax card”, the term being used as the failed proposal to give everyone in Greece a spending card to track how much each person is spending. If the spending be beyond the income, wealth and other financial resources available, then that person is a likely tax evader.

Tax evasion is a predicate crime to money laundering. Tax evasion is, in essence, skimping out on one’s debt to society. Many wealthy tax evaders hide their funds in tax havens with lax AML programs and loose incorporation standards. These are the same jurisdictions that tend to allow shell banks – banks that do not have a physical presence anywhere, just a bank on paper. If only half of Greece’s taxable income earners are paying taxes, that means the nation is half populated by money launderers. The reason Greece doesn’t consider them money launderers is because they are voters. Plus, Greece isn’t the only country with high tax evasion rates. It has been reported that about 20% of taxable income is never reported in Italy.

Tax collection is important for two main reasons:

  1. the need to pay government employees, and
  2. the need to show creditors that they have the ability to pay back its loan.

This second reason is often overlooked by people who are not involved in sovereign debt markets. Simply put, if the borrower shows that it should be able to bring in a certain amount of money each year but its history shows that it always brings in less, then the stated projection is not to be trusted. Once trust is gone, it is very difficult to get it back. While Italy might be able to win trust back quickly if it gets its act in order because it is such a large economy, Greece is not in such a recoverable state at the moment. Not only does it have among the lowest tax collection rates in the Eurozone, but it is also a very small economy in it as well. Greece makes up about 2% of the Eurozone GDP. The only importance Greece has is a symbolic one: the Euro currency stand to lose trust in the world markets if Euro economies can leave the currency zone.

This is a long way of saying that Greece’s economic problem might start to get solve simply by reclassifying tax evasion, a minor offense, to money laundering, a major offense. This reclassification does not take any change in laws because Greece already has laws that state that tax evasion is money laundering. It had to write such laws to join the Financial Action Task Force, the world’s leader in the promotion of anti-money laundering.

Note: While all of the figures are correct, they might be a little outdated. The difference with updated data should not material change the issues.


About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is the author of the forthcoming book History of Money Laundering: How Criminals Got Paid and Got Away.


btn_donateCC_LG

Whistleblower’s Tight Rope

Whistleblowers are a tough issue to deal with in terms of compliance. On one hand, they usually have to break a lot of corporate policies to blow the whistle. On the other hand, they are a witness to criminal or immoral activity in the workplace. Ideally, whistle blowing is not necessary. Ideals are not the reality.

http://robruotolo.com/employers-seek-unbiased-advice-for-private-exchange-strategy/
from Human Capital Catalyst

Generally, corporations are good business entities that do not break the law or harm others. Society benefits by having legal entities that can continue a business even when the founders are no longer willing or able to run it.

For the whistleblower, a wrong must be performed to expose another wrong. Regardless of corporate policy, sharing the secrets of the corporation is legal and immoral. So, whistleblowers need compelling reasons to cross that good-bad line. Obviously, letting one’s superiors and the corporation’s compliance department is important. But if nothing is being changed, then the whistleblower is compelled to cross the good-bad line. Who to contact next is difficult to figure out. Some industries or activities do not have regulators. In such a situation, the default government entity to contact is the Federal Bureau of Investigations, FBI. The FBI may advise the whistleblower on what to do next. The FBI may even advise the whistleblower that the suspect activities related to them are not crimes. But the FBI may suspect the whistleblower is/was somehow involved and wants to get out of a bad situation in the whistleblower’s own interest. In the last situation, the FBI has had a reputation of protecting bad actors who report bad behavior if they own up to their bad behavior when reporting large crimes. Whistleblowers may still be tried for their crimes, but might get reduced sentences, vacated sentences, immunity, or delayed prosecution agreements, DPA. DPA’s are generally reserved for financial institutions, though, not individuals. And also DPA’s are effectively a pass on conviction. There maybe a hefty fine associated with it but it still means a clean criminal record, which is of great value in many part of the developed world.

Whistleblowers really need to think these things through. Speaking with a knowledgeable and trusted attorney would be advisable before crossing corporate policy. Should one doesn’t know of an attorney through his/her network, then reading the Wall Street Journal to see who have protected whistleblowers in the past are also a good way to find them.

###

One bit of business: I would like to interview compliance practitioners in financial services. If you think you have something worth sharing, I would like to speak with you.


About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.


btn_donateCC_LG