Colombian Prostitution And AML

Here’s a difficult area to investigate: money laundering from Colombian prostitution.

http://www.ibtimes.com/secret-service-prostitute-scandal-sheds-light-sex-business-colombia-photos-555126
Secret Service Prostitution Scandal (from IB Times)

It is difficult for the usual reasons: cash transactions, foreign jurisdiction, lax law enforcement, violent business rings… And then there is the US government. Well, the government agents who are their clients.

That’s right. If you’ve been following the news, various Federal agencies have faced issues with their agents paying for sex while on business trips in Colombia.


Disclosure: I am not against prostitution as an isolated concept. But the reality is that prostitution in most parts of the world primarily takes place because of poor economic conditions and violent human traffickers. Often, prostitution rings are run by the same people who run other illegal/illicit businesses, like drug cartels. So, the reality is that even for who are in favor of legal prostitution, or at least not opposed to it, should be against allowing prostitution to take place.


Chuck Rosenberg has been named to replace retiring head of the Drug Enforcement Agency Michelle Leonhart. Leonhart’s career is prematurely ending because of the Colombian Prostitution Scandal.

Scandal aside, this means that DEA agents were funding the very drug cartels they’ve been fighting. We should look at the opportunity this brings, however. The downside has already been done and, let’s hope, it doesn’t happen again, although we all know that it will happen again, if not at the DEA then at some other place. The opportunity is that we have a chance to follow the money our own has contributed to the cartels. And I really hope we are doing this. This is really the only benefit we get out of this.



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.


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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.


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Compliance by death

Global Suicide Rate Map from Business Insider
Global Suicide Rate Map from Business Insider

South Korea has a very high suicide rate. It is second only to Lithuania. (Temporarily Greenland unseated Lithuania with the highest per capita suicide rate, but traditionally it has been Lithuania and South Korea.) South Korea’s suicide rate is more than double the rate in the United States. South Korean culture put a high price on one’s reputation. Once tarnished, the chance of recovery is slim. The work around is death. Forget about wrongdoing, death is the ultimate sacrifice one is willing to make to save his/her family from shame and is traditionally a sign of innocence. Innocence because only the innocent would find it unbearable to subject innocent family members to a tarnished reputation.

A construction executive, Sung Wanjung, had created a “bribery list.” As it sounds, it is a list of bribes he would pay to make his business more successful. He had accidentally left a printed copy of it somewhere and it was discovered. On the list were many of the President’s advisers and aides. The executive was on trial and facing imprisonment. Prison’s in South Korea are not nearly as nice as those in the States. So, he killed himself.

As the story implies, he killed himself out of guilt, not out of innocence. This has been the theme of suicides among politicians and the people in their circles. Former president of South Korea, Roh Moohyun, also killed himself when he was charged with taking bribes and embezzling. He was mourned. But right up until the news of his suicide was reported, most Koreans believed him to be guilty. Even if he was cleared of any wrongdoing, the Korean culture would have made him an outcast.

In South Korea, compliance, it seems, would have to take an extra care to prevent crimes from growing so that the result isn’t suicide.

Jang Jayeon

To prove that innocent suicides are common, or as common as they can be among suicides, a string of entertainers have killed themselves over the past twenty years due to pressures put on them by their management companies. It often happens when expectations for their success gets too high. One rising actress, Jang Jayeon, killed herself because the price she had to continue paying to get roles. She had to sleep with directors and financial backers to keep getting roles. She was a good actress, but with such fierce competition, she found the only way to get roles was to use her body. Victims of other crimes is what often leads to crime-inducing suicide, or, in the case of Jang, directly to suicide.

Sung’s death cannot be compared to Jang’s. Jang was a victim of systemic prostitution. Sung’s was likely a victim of his own guilt.

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One bit of business: I’m actively seeking contributors. If you or someone you know is a professional with at least ten years of experience in financial services with knowledge or opinions about regulation, I would like to invite you to be a guest author.


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.


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