-Caveat Lector- from: http://www.aci.net/kalliste/ <A HREF="http://www.aci.net/kalliste/">The Home Page of J. Orlin Grabbe</A> ----- ------------------------------------------------------------------------ Today's Lesson from The International Narcotics Control Strategy Report (1999) by U.S. Department of State Offshore Internet Money Laundering The majority of "virtual casinos" advertised on the Internet are said to have their physical locations in the Caribbean Basin, as can be seen in the OFC chart. While this is true in many instances, in other cases, these "Caribbean locations" are located there in name only. The New York Office of the FBI has targeted offshore websites engaged in wire fraud and money laundering. The investigation focused on offshore gambling operations and their managers. The sites affected were located on Curacao, the Netherlands Antilles, Antigua, and the Dominican Republic. As a result of a five-month FBI sting operation, numerous indictments and arrests of the web-site managers occurred in March 1998. The sting focused on virtual casinos, which are interactive websites that re-create the inside of a Las Vegas-style casino, offering everything from blackjack to slot machines. These virtual casinos exist only on the Internet, and the individuals operating them can be housed in a small office or villa on islands such as Antigua. The offshore governments mentioned above have at least 30 Internet gambling operations each of which pays an annual license fee of $75,000 for sports betting and $100,000 for virtual casinos. These booming offshore website businesses also offer opportunities for criminals to evade U.S. taxes and a vehicle to launder funds from illicit sources through these casinos. ===== Money Laundering How Russia Laundered the IMF Aid Money GKO's and tipoffs from the central bank. WASHINGTON, Sep 13, 1999 -- (Agence France Presse) Investigators have found evidence that 780 Russian officials used a bond-selling scheme to transfer billions of dollars overseas last year after Moscow received a $4.8 billion dollar IMF payment, USA Today reported Monday. The daily said US and British investigators have gathered evidence against high-ranking current and former officials including deputy prime minister Anatoly Chubais, architect of Russia's privatization, and former foreign minister Andrei Kozyrev. Both denied any wrongdoing, the daily said. US and British investigators are looking into whether up to $15 billion funneled through US bank accounts may have been laundered by Russia's political and business elite. USA Today, citing US, British, Russian and IMF officials and bank documents, said investigators believe the bond-selling scheme began just days after the International Monetary Fund deposited $4.8 billion in Russia's central bank. The daily said that Russian banks, some under the control of government officials, were tipped off to a plan to devalue the ruble. The banks and government officials then began selling high-interest, short-term treasury notes issued by the government and known as GKOs before the devaluation would drastically reduce their value. The proceeds from the sales were exchanged for dollars from the Russian central bank -- including some money from the IMF -- and then transferred to banks overseas. When the ruble collapsed in August 1998, the bonds held by central bank were worthless, and the IMF money was effectively gone. USA Today said that it became impossible to distinguish IMF funds from other dollars held by the central bank. "These people were tipped off, (they) speculated, cashed out and pocketed the difference," a US investigator was quoted as saying. "It was not an accident." The IMF has said it had found no evidence its financial aid to Russia had been misused. But USA Today quoted a senior IMF official in Washington as saying he had "no doubt" that IMF money was effectively transferred out. Russia Today, Sept. 13, 1999 Russia Follies Another Moscow Apartment Building Blown Up This ought to get the Kremlin money-laundering scandal out of the headlines. MOSCOW - President Boris Yeltsin, saying that ''terrorism has declared war on us,'' vowed Monday to take ''tough, swift and decisive'' action in the wake of the third apartment house bombing in nine days, but he stopped short of imposing a national state of emergency. As the death toll of Monday's blast rose to 61, Mr. Yeltsin ordered beefed-up security at nuclear power plants, airports, pipelines and train stations, and gave Moscow police the authority to remove anyone not formally registered to live in the capital. Mayor Yuri Luzhkov said that Moscow, which is home to more than 8 million people, accommodated nearly 3 million visitors daily. He ordered all visitors to re-register with the police within three days; however, many thousands are undocumented workers and migrants who have never registered. Officials acknowledged that they were targeting visitors and cargo from the separatist republic of Chechnya because of suspicions that Chechen rebels planted the bombs. Moscow officials imposed new security restrictions on markets and highways, and began the arduous task of checking 35,000 residential apartment buildings for bombs. But Mr. Yeltsin, Mr. Luzhkov and other Russian leaders said they did not want to declare a formal state of emergency. Politicians almost universally expressed concern that such a move could be used as a pretext to abort the scheduled December parliamentary elections. The blast at No. 6 Kashirskoye Highway struck with deadly efficiency at 5 A.M., destroying the eight-floor brick building completely, with not a single room left standing. As of Monday night, officials said 61 people were dead, including six children, but dozens more were feared lost under the rubble. Records showed that 142 people had lived in the building, but about 30 were absent at the time of the blast. The building is in the south of Moscow, about four miles from the explosion last week that killed 94 people in another apartment building. The blast came on a national day of mourning for victims of earlier explosions. The ''handwriting is the same'' in the two Moscow explosions, said a Federal Security Service spokesman, Alexander Zdanovich. ''The criminals are applying the following scheme, as we have established now: They rent space, either a depot or an empty space for some period of time, they pile up explosives, and then there is a blast,'' he said. He added that the latest explosion occurred in a space previously rented as a second-hand furniture shop. Police said they believed the explosive substance was hexogen in both cases. The police also said they believed the bombers were using the stolen identity of a man who died several years ago, , Mukhit Laipanov, and that he had been listed as the renter of space in both buildings hit by explosions. The authorities were circulating a photograph of a man suspected in arranging the blasts. In a third explosion, on Sept. 4, a car bomb in the troubled region of Dagestan killed 64 people, mostly families in a military officers' barracks. In the predawn darkness here Monday morning, rescuers raced to find survivors, but they were few. Mr. Yeltsin, in a broadcast address, described the attack as terrorism and added: ''This enemy does not have a conscience, shows no sorrow and is without honor. It has no face, nationality or belief. Let me stress - no nationality, no belief.'' Earlier, the Russian president, who had not taken such actions after last week's attack, assembled top officials in the Kremlin. ''The criminals have thrown down a sinister challenge,'' Mr. Yeltsin said at the outset of the meeting. ''They are trying to demoralize the authorities, to act covertly like wild beasts who sneak out at night to kill sleeping people without acknowledging their responsibility. But we already know who is behind the blasts - the name of the criminal is terrorism.'' While Mr. Yeltsin did not identify any group in particular, others were quick to point a finger at Chechen rebels who have recently fought Russian troops in Dagestan. Chechnya fought a war for independence from Russia from 1994 to 1996. The rebels recently crossed over into Dagestan, an internal Russian republic that borders Chechnya, and seized border villages and a town. Russian troops are fighting to expel them, and expelled a second, separate group of Islamic fighters from two villages deeper inside Dagestan. These fighters had also declared Islamic rule in their villages. The fighting has been intense, and Russia reported Monday that it had lost 180 soldiers since the Dagestan conflict began last month. Grigory Yavlinsky, leader of the Yabloko bloc in Parliament, demanded harsh action against the Chechens. He said that Russia had the right ''to conduct this fight, or this war, to destroy all those who behave in this inhuman way, blowing up sleeping people.'' Mr. Luzhkov also blamed Chechens. ''The source of this terrorism we are naming as Chechen bandits,'' he said. He added that the recent explosions, including a smaller blast at a shopping mall near the Kremlin, were an ''echo of the Chechen war and the shifting of that war to Dagestan by the bandits. All three blasts in Moscow are linked to Chechnya.'' Vyacheslav Izmailov, a journalist who for four years has been helping extract hostages in Chechnya, said in several television interviews that the Chechen fighters had laid a plan to strike back at Russia through the bombings. Mr. Izmailov said he had reported to Russian authorities that the Chechens had sent ''groups of terrorists'' to Russian cities - using Slavic agents rather than ethnic Chechens who might be more conspicuous - to plant the bombs. He said they were receiving $50,000 for each successful blast. In the Chechen capital of Grozny, the government issued a statement denying responsibility for the blasts. International Herald Tribune, Sept. 14, 1999 Princeton Notes Martin Armstrong Charged with Security Law Violations Was a $500 million trading loss covered up? US prosecutors last night charged the chairman of Princeton Economics International, an offshore investment group, with securities fraud in connection with the sale of about $3bn in bonds to foreign investors. US prosecutors said Martin Armstrong defrauded foreign investors by selling them "Princeton notes" under the promise that the proceeds would be used to establish trading funds at Republic New York Securities. The broker is part of Edmond Safra's Republic banking group, the $10.3bn (£6.3bn) takeover of which by HSBC Holdings, the UK-based international banking group, has been delayed by the investigation by Japanese and US authorities. The prosecutors said Mr Armstrong, 49, who lives in Maple Shade, New Jersey, issued false account statements to investors and concealed losses of around $500m. Many of the notes were sold to Japanese investors through a Princeton subsidiary, Cresvale International, which has an office in Tokyo. Under the charges, Mr Armstrong faces a maximum sentence of 10 years in prison and a fine of $1m if found guilty. The Financial Supervisory Agency, Japan's banking watchdog, last week banned Cresvale from selling Princeton bonds for six months. Several Japanese companies said yesterday their earnings could be hurt by losses on the bonds. The FSA launched a surprise inspection of Cresvale in May. At the time Mr Armstrong described the investigation as routine. Republic last night said it had no discretion over the account Princeton maintained with it. It continued: "The content of the account, approximately $46m, has been seized by the US government." Republic refused to comment on suggestions that HSBC was keen to renegotiate the terms of its $72 a share offer for Republic. HSBC declined to add to its previous statement that the investigation would delay completion of the bid. However, investors in Republic continue to have concerns and by the close Republic's shares had fallen $3 to $59 15/16. "We are banking on the price being reduced to, and probably past, the $70 barrier," one fund manager said. The Financial Times, Sept. 14, 1999 The Yen/Dollar Exchange Rate Why Japanese Foreign Exchange Intervention is Irrelevant FX operations are sterlized in the domestic money market. Whether or not to "sterilise" foreign exchange interventions sounds like a strangely abstruse issue over which a central bank would pick a fight with its finance ministry. But yesterday's announcement by Masaru Hayami, the Bank of Japan's governor, that he was planning to undo today in the money markets what he had been ordered to do last Friday across the foreign exchanges was taken by seasoned Japan watchers as highly symbolic. It indicated that the Bank's well-known reluctance to solve Japan's economic woes by pumping out money in all directions is continuing even as a strengthening yen - which yesterday reached a three-year high against the dollar and a record high against the euro - threatens to derail the recovery. The mechanics of sterilising interventions are relatively simple. When a central bank intervenes, as the Bank of Japan did last Friday, to sell its own currency, it in effect creates that money out of thin air as only central banks can. Having sold the yen for dollars, the Bank has a choice. It can leave the extra yen created in the money markets or withdraw it at the next available opportunity during its regular money market operations. In this case, the two-day settlement period for foreign exchange transactions means the estimated $1bn-$2bn worth of yen sold on Friday will be taken back today. Analysts admit that, in Japan's case, the direct effect of non-sterilisation on the markets is likely to be small. With interest rates in the money markets already close to zero, adding more supply cannot drive them down much further. "But the debate about sterilisation is part of a wider argument about monetary policy in general," says Divyang Shah, global strategist at economic consultancy IDEAglobal.com. "The main effect of such a move would be a strong signal that the Bank could be persuaded towards rapidly expanding the money supply." Setting targets for money supply growth, especially at longer maturities than the short-term money market, has been commended by many observers including the influential US economist Paul Krugman. They say it would benefit the economy by raising inflation expectations, thus driving real interest rates lower and encouraging consumers to spend and companies to produce. It could also benefit exporters by weakening the yen. But this is an argument which finds more support in the Japanese ministry of finance than the Bank of Japan. And while the ministry can order the Bank to undertake foreign exchange intervention, the decision whether to sterilise is the Bank's. Paul Donovan, international economist at Warburg Dillon Read, says the Bank has never, since the second world war, conducted unsterilised intervention. And its experience of too loose monetary policy in the 1980s, which created an asset price bubble, has made it even more opposed to monetary laxity. "It would take something dramatic like the resignation of Hayami, a currency crisis such as the dollar going to ¥80, a systemic financial problem or direct political interference, to make the Bank of Japan relent," he says. The Financial Times, Sept. 14, 1999 Spy vs. Spy New Curbs on MI5? That's about as likely as new curbs on the FBI. TIGHTER controls over the security service were ordered by Jack Straw, the Home Secretary, last night after MI5 admitted it did not consult ministers over a decision not to prosecute Melita Norwood, the 87-year-old spy, despite having confirmation of her treachery. The decision - taken seven years ago - effectively wrecked the prospects of a criminal prosecution, though officials said a rethink had now been ordered in the light of her subsequent admission that she had spied for the Soviet Union. Mr Straw published a five-page statement in which he disclosed that he was first informed of the allegations against Mrs Norwood, codenamed Hola, in December last year - while Downing Street said Tony Blair was not told until late last week. The statement revealed how Britain's biggest post-war intelligence coup - details of the KGB archives brought to Britain by the defector Vasili Mitrokhin - degenerated into a farce of Whitehall buckpassing over the non-prosecution of Mrs Norwood and another KGB spy, John Symonds, a former Scotland Yard officer. It disclosed that Mrs Norwood, dubbed the "Bolshevik from Bexleyheath", had been under suspicion for her communist associations for more than 50 years - and that the KGB regarded her as an important spy, passing information about the development of the atom bomb. In a statement released by a friend last night, Mrs Norwood said she would accept whatever decision the Government made about taking it further. She said: "I reiterate that I did what I did for the best intentions. I know many people find that hard to understand." Ann Widdecombe, the Tory home affairs spokesman, said Mr Straw's statement revealed a "shambles". She said Parliament and the country were "owed an explanation" as to why the matter was kept silent for so long. Mr Straw, according to Whitehall officials, is furious that ministers were not told earlier about what MPs are now calling the case of "the spies who got away". He has ordered an investigation into MI5's handling of the papers supplied by Mitrokhin - said to be the largest amount of information on Soviet Cold War spying activities ever obtained by the West. At an emergency meeting with Stephen Lander, the director general of MI5, Mr Straw insisted on stronger ministerial oversight of the security service - with an annual report covering all its current spy cases. Mitrokhin's notes of the KGB archive were obtained by the intelligence service MI6 in 1992 and confirmed the suspicions about Mrs Norwood's role in passing secrets of the development of Britain's atom bomb to Russia. But MI5 decided Mitrokhin's notes did not, on their own, provide evidence that could be put to a court. It also judged that the material should remain secret for some years as there were many leads to more recent espionage against some of Britain's close allies. MI5 believed that confronting Mrs Norwood, which might have provided evidence admissible in court, could have risked pursuit of active spies. Arrests are said to have been made in other countries. However, Mr Straw admitted these decisions were made by MI5 and MI6. "Ministers of the day, including law officers, were not consulted." In 1996, the Tory Government agreed that the story of Mitrokhin's defection and the information about the extent of Soviet espionage should be "placed in the public domain". The material was made available to the Cambridge academic, Christopher Andrew, who has co-written a book with Mitrokhin. Sir Malcolm Rifkind, the former Tory Foreign Secretary, who authorised the release of the documents, insisted last night that he had not been told of Mrs Norwood's spying or the decision not to prosecute her. Last December, Mr Straw - who had been told only in general terms about the Mitrokhin material when he took office - was informed of Mrs Norwood's role and the forthcoming book. The minute from MI5 also disclosed that the security service was considering whether to recommend her prosecution. It appears that MI5, clearly worried about looming public disclosure, decided belatedly to see whether she could be brought to court. Mr Straw said that on April 22 this year, he was told by his officials that the then Attorney General, John Morris, sent guidance to the security service that a prosecution was "inappropriate". This was later described as "an over-simplification". Apparently Mr Morris believed that 1992 represented the last opportunity for the authorities to proceed by way of a criminal investigation or possible prosecution. Mr Straw said: "The Attorney General had concluded therefore that there was no decision for him to make." Government officials said Mr Morris had decided that the reasons why MI5 did not prosecute in 1992, particularly the lack of admissible evidence, were still valid. At the end of last month, MI5's legal adviser asked Mr Morris's successor as Attorney General, Lord Williams of Mostyn, whether Mrs Norwood's alleged admissions in a BBC interview changed the position. Lord Williams indicated that the position was "unaffected" but left open the possibity of a rethink. The Home Office said last night that while a prosecution was "not ruled out, it is not highly likely". Mr Straw admitted he had not been personally briefed on the case of Mr Symonds, who claims to have worked as a "Romeo" spy for the KGB and to have been dismissed as a "fantasist" when he offered to co-operate with MI5. The London Telegraph, Sept. 14, 1999 ----- Aloha, He'Ping, Om, Shalom, Salaam. Em Hotep, Peace Be, Omnia Bona Bonis, All My Relations. Adieu, Adios, Aloha. Amen. Roads End Kris DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance—not soapboxing! These are sordid matters and 'conspiracy theory', with its many half-truths, misdirections and outright frauds is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRL gives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credeence to Holocaust denial and nazi's need not apply. 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