Kenneth Rijock

Kenneth Rijock

Monday, January 23, 2017


Just when we think the reported misconduct of Leon Frazer & Associates, Inc., in the Cayman Gang of Four case* can't get any worse, regarding the missing millions in the Cayman Gang of Four case, newly-discovered evidence confirms that it was even more egregious than previously believed. Now, we can see that two of Leon Frazer's most senior directors actually lied to a major client, to his face, in order to remove his substantial assets, and move them offshore, to a shell bank that was insolvent, and which would reward the two of them richly, for their larceny.

William Tynkaluk, then the Chairman of the Board, notified the client that the TD Bank subsidiary, where the client's assets under LF management were held, notified him, and then-Managing Director Lyle Stein, that all his TD accounts would be closed. The purported reason was the client's investment in a money service business in Panama, and Tynkaluk promised that he would deliver that letter to him.

Although no letter was ever produced, Leon Frazer immediately, transferred all the client's funds, and assets, to Cayman Islands-based Dundee Merchant Bank, which was a wholly-owned subsidiary of Canada's Dundee Corporation, whose own chairman had been publicly quoted as declaring that, due to competition, the bank was in serious difficulty. The truth was much worse; the bank was reportedly insolvent, and was desperate need of funds. We wonder how much in the way of "financial incentives" Tynkaluk and Stein received to accomplish this fraud.

 Dundee never returned to solvency, and later mysteriously closed, without any liquidation proceedings being held, to determine where its remaining assets went. The local regulator, the Cayman Islands Monetary Association (CIMA), never ordered it to liquidate, most likely because of the scandal that its huge losses would generate, and the resultant loss of confidence in the Cayman Islands as a financial center.

The rest is history; the client lost an estimated $13m, which has never been recovered, attributed to the financial criminals who compose the Cayman Gang of Four,  ex- Dundee officer Sharon Lexa Lamb, ex-Dundee officer Derek Buntain, stock trader Ryan Bateman, and Leon Frazer Director, William Tynkaluk.

Back to the story: in truth and fact, the real reason TD closed the client's accounts is that Leon Frazer failed to file annual corporate tax returns for the client, which was its responsibility as a fiduciary, and to deliver copies to TD. There was NO Panama issue, just a ploy, set up by William Tynkaluk, and Lyle Stein, to be able to divert the client's assets to Dundee, which was in financial trouble. I have seen the letter from Dundee, and it makes no such claim. The truth is TD did not receive tax returns, and therefore, closed the client's five accounts, as a compliance action.

Should Wiliam Buntain and Lyle Stein be charged, convicted, and imprisoned for their actions, and what about their company, Leon Frazer & Associates, Inc. ?
*Willaud Corporation et al vs. Leon Frazer & Associates, Inc., Superior Court of Ontario.

Sunday, January 22, 2017


Nidal Ahmed Waked Hatum, accused of operating a global money laundering enterprise that cleaned Colombian and Mexican narcotics profits, was extradited to the United States this week, from Colombia, where he had been detained upon arrival several months ago. Waked's arrest caused a furor in Panama, where his family owns several large businesses, which employ thousands, who feared loss of jobs, and the possible shutdown of a bank, and a major newspaper.

Waked was charged, in a previously sealed Federal Indictment issued in the Southern District of Florida in 2015, with two counts of Money Laundering Conspiracy, and Bank Fraud, and there are Forfeiture allegations. He faces a possible maximum sentence of 70 years in Federal Prison, though the unknown amount laundered, which could be in the hundreds of millions. over two decades, could result in a Life Sentence, in a system where there is no parole.

The Waked money laundering operation was known to the Government of Panama for at least a decade, but due to the close cooperation, between local law enforcement and the criminal syndicates, no charges were ever brought. In truth and in fact, in 2008, a financial crime analyst turned over his detailed report on the money laundering activities of the Wakeds, and a copy was provided to the office of the Attorney General of Panama. The report was, amazingly enough, turned over to the Wakeds by government organized crime attorney José Ayú Prado Canals, who was then in the Fiscal's office, and who is now the president of the Supreme Court of Justice of Panama. The analyst was identified by Prado, and forced to flee Panama for his own personal safety; Ayú Prado remains in office, notwithstanding multiple allegations of his links to career criminals like the Wakeds.

Lic. José Ayú Prado
The Waked's legitimate business empire, 68 companies, was allegedly used to launder narco-profits, and for that reason, all the principal businesses have had OFAC sanctions placed against them; some have been issued limited exemption licenses, which permit them to continue to operate, but Panamanians are apprehensive about the future of those companies, which are central to the Panamanian economy, and which include a  luxury shopping mall, and duty-free stores at Tocumen International Airport.

Some Panamanians, in line with the new anti-American posture seen in public lately, accuse the United States of harming the legitimate economy of the country, through the sanctions surrounding the Waked case. OFAC sanctions re commonly known, in Latin America, as the Clinton List, due to the fact that it began during the administration of US President Bill Clinton.

Waked has not yet been arraigned in US District Court in Miami, according to a search of the court docket.


It is clear, from any objective review of the District Judge's latest order, in the Zarrab case, that the Court has a real problem with the fact that HSBC made a huge profit, by intentionally evading Iran sanctions, and running a lucrative program that had written policies, which ensured no US bank would tumble to the truth.

The Court even quoted from the Motion to Dismiss,
 " Even where a bank is deceived, a jury cannot infer the defendant [HSBC] attempted to victimize the bank [because] the actual exposure of [the] bank, to losses, is unclear, remote or non-existent " Another quote, " ... if the scheme works, the bank is better off."

The Court also quoted from the Statement of Facts, in the HSBC Deferred Prosecution Agreement, about the 'repaid queue," where the bank actually placed cautionary notes in SWIFT messages, including " DO NOT mention our name in NY [emphasis supplied]," and "DO NOT mention Iran [emphasis supplied]," so that American banks would not be tipped off. the fact that the Court cited these statements should not be underestimated.

There remains a strong feeling, in the US compliance community,  that HSBC received a pass on a criminal indictment that should have been filed. One widely distributed compliance article asked "Why is this bank still in business?" Should HSBC USA have been subject to harsh sanctions ? That question remains unanswered.

If the prosecution of Reza Zarrab, allegedly the most prolific Iran sanctions violator, in the history of the sanctions, is harmed in any way, perhaps the new Attorney General should revisit the HSBC case, and the bank's reportedly incomplete and insufficient progress in its reform program.


An analytical report on the Republic of Malta, commissioned by a political party in the European Union, has reportedly concluded that the country, by virtue of its laws and practices, should be classified as a tax haven. The white paper, which was written by an accounting professor at Nottingham University Business School, at the request of the Green Party, constitutes clear and convincing evidence that corporations who choose Malta as their domicile are required to pay an extremely small amount of tax on their profits.

According to statements made by Green Party MEPs, who have quoted extensively from it, Malta has a declared corporate tax rate of 35%, but dividend and other exceptions pare it down to an effective 5% rate, for corporations, which is far below the tax rates of Western European nations that are members of the European Union. Some intellectual property companies actually enjoy a actual tax rate of zero per cent.

This extremely favorable tax rate has cost the nations of EU, where those corporations originally were formed and operated, has reportedly been more than €14bn in lost revenues; this money would have gone to the renewal of infrastructure, payment for social services, retraining of employees, and in many other vital sectors of their budgets.

This news comes at a time when Malta, have succeeded on January 1 to the rotating presidency of the EU, is still reeling politically to the fact that two senior Maltese politicians have been named & shamed in the Panama Papers, and have still not accounted for undeclared wealth now linked to them. Additionally, there are many unanswered questions about its controversial economic citizenship program, which is not favored by many in Malta, and in the EU, as it grants participants complete Schengen Zone access, which could facilitate crime and terrorist financing inside Europe.

Will the EU committee, now charged with the preparation and publication of a comprehensive tax haven blacklist, actually name Malta, an EU member, to that list ? We cannot say, but  if it fails to do so, questions about its accuracy may be asked, by compliance officers outside Europe.   

Saturday, January 21, 2017


The European Union Parliament voted to send back to its executive commission a proposed Blacklist of countries that are at risk of facilitating money laundering or terrorist financing, as its Members stated that the list was too short, and did not include tax havens known to be involved. The vote was reported to be 393 to 67, which resulted in a rejection of the list as drafted by the Parliament, according to the legislative body's website.

 One prominent Member specifically pointed to the Republic of Panama, publicly remarking that "it is ridiculous that Panama, and other famous havens for dirty money, are still not on the [EU] Commission's Blacklist." This statement was widely reported in Europe, and reflects Members' known position on tax havens.

 Panama was removed last year, from an earlier version of the Blacklist, after it claimed that it had closed the legal loopholes that facilitated money laundering, but there were persistent rumors that government officials in Panama City had made veiled threats, regarding a possible change in the conditions of visits of EU nationals to Panama, and access of EU-flagged vessels to the Canal, which resulted in the deletion of the country from last year's list.

The countries named on the rejected Blacklist draft appear below; note that none of the Caribbean tax havens, also known as offshore financial centers, are included:

(1)  North Korea
(2)  Iran
(3)  Afghanistan
(4)  Bosnia & Herzegovina
(5)  Iraq
(6)  Syria
(7) Uganda
(8) Vanuatu
(9)  Yemen
(10) Laos
European Parliament 
The fact that Panama was specifically named by an MEP, for inclusion in a future draft of the Blacklist, should be taken into account by compliance officers, in updating their assessment of Country Risk on Panama.

Friday, January 20, 2017


Panamanians, who appear to be rapidly returning to the Anti-American posture that the country has taken in the twentieth century, are now alleging that the naming of President Varela, and others in his administration, as recipients of Odebrecht bribes, was done with malice, and with the intent to harm the country, harm the image of the president, cause the loss of thousands of jobs, and turn back economic progress. Additionally, they intimate that bribes occur regularly in the United States, and Panama should not be placed in the spotlight, for what is a widespread (albeit illegal) practice.

Those individuals with the loudest voices might want to remember that there was NO official naming & shaming of the Panamanian officials taking bribes from Odebrecht; an unofficial list, purported to have come from the "Fiscal" (attorney general) in New York. First of all, the Attorney General in NY is a state official, not the Federal US Attorney, who prosecutes FCPA violations, and US law enforcement does not name criminal defendants when they are not yet in custody, lest they engage in flight to avoid prosecution.

There was no malicious naming of President Varela, just a listing of bribe recipients concocted by a zealous anti-corruption civilian, I will wager, and if you want to know the truth about the extent of corruption in the US, look it up on Transparency International. It is nowhere near the levels seen in the Republic of Panama. In my humble opinion, there was no targeting of Panama's president by American authorities.


Members of the United States Senate, yesterday interviewing the new Trump Administration nominee for Treasury Secretary, asked the candidate how he intends to close down the Caribbean tax havens, specifically naming the Cayman Islands. The Senators were demanding details on how the new Secretary expects to close the tax loopholes that allow American entities and individuals to use foreign subsidiaries, in zero-tax jurisdictions, to avoid taxable events.

The Senators, in their questioning, focused upon the Cayman Islands, as well as the more obscure tax haven of Anguilla, in showing their displeasure of what they clearly indicated was abuse of American tax laws. We have recently detailed how financial service professionals, working in the Cayman Islands, intentionally use combinations of jurisdictions, like forming a BVI company, owned by a Belize trust, to create a totally opaque, non-transparent vehicle, tax-free, with no identifiable beneficial owner.  

In the aftermath of the Panama Papers scandal, members of the Senate and the House of Representatives have affirmed the immediate need for effective tax reform, whether through new legislation, or Treasury regulations, to eliminate the present situation; they appear to be looking for the incoming Treasury Secretary for a solution; Political pressure is clearly present on this matter.

What will the end of offshore tax advantages for US taxpayers mean, to the Cayman Islands, as well as other Caribbean financial centers that do not impose taxes upon profits ? Will investors, and the hedge fund industry, flee Grand Cayman, completely torpedoing the local economy, and plunging the island into a major depression, requiring financial aid from the UK ? We cannot say, but we will be closely watching Washington in 2017.  One wonders whether this might be a good time to sell off all Cayman Islands real estate holdings.