The Malta Financial Services Authority is taking seriously the case in which American investigators allege that up to €511 million was laundered through a still unnamed Maltese financial institution, €160 million of which are being linked to the president of Venezuela through his stepsons.
Asked to comment on the case and the Malta connection, the MFSA told this newspaper that, at least for the time being, it would be “imprudent to comment at this stage given the complexity of the case at hand”.
The MFSA said it is “taking this case very seriously and is collaborating closely with the Financial Intelligence Analysis Unit, as well as other local and foreign law enforcement agencies so that all the facts are established”.
Such work, an MFSA spokesperson told The Malta Independent on Sunday, involves “the collection and analysis of all relevant data from different sources in order to establish a clear picture of the situation”.
Any administrative measures that would be taken by the Authority will be immediately made public, the spokesperson confirmed.
The case in question has just commenced in the United States, with a Homeland Security Investigations criminal complaint, spelling out most of the scam’s modus operandi in detail, having been filed in the courts of Miami at the end of last month along with the arrest of two of its participants.
As such, the case has not begun in earnest, which explains why there has not been any action against the Maltese financial institution yet.
The MFSA elaborates: “It is pertinent to point out that even though certain licence holders could be on the MFSA’s radar for various reasons, enforcement action kicks in following due process to ensure that the Authority’s actions are grounded on fact and sound legal arguments.”
As the MFSA notes, the case is a complex one indeed, but not only the main implications are concerning for Malta, but also the underlying implications.
‘We will manipulate any investigation’
A still unnamed Maltese private investment firm that allegedly laundered the ill-gotten proceeds, according to the criminal complaint, shows that the Maltese firm received upwards of €20 million for laundering the money, €511 million in all, at a four per cent service charge.
Moreover, the Venezuelan “professional money launderer” had assured his clients that they need not “worry about [Maltese] European Financial Institution 1 and the fake contracts because European Financial Institution 1 would let him know if there is an investigation and that he could ” manipulate that”.
The criminal complaint alleges that Maduro’s stepsons (identified as Venezuelan Official 2 in the criminal complaint) helped launder US$1.2 billion in funds pilfered from Venezuela’s state oil company, Petroleos de Venezuela, S.A., or PDVSA, much of which was wired to and laundered through the unnamed Maltese firm between late 2014 and early 2015.
The scam was employed through a series of fake investment schemes including fraudulent bond issues and investment funds.
The specific deposits for Maduro’s three stepsons were among 10 wire transfers amounting to around €511 million that was wired to and laundered through Malta, according to the criminal complaint.
The eight defendants named in the complaint are accused of embezzling funds from Venezuela’s enormous oil income and exploiting its foreign-currency exchange system to amass illicit fortunes in Europe and the United States.
To leverage their profits, the defendants took advantage of their special access to the Venezuelan government’s foreign-currency exchange system, which offers a far superior rate of exchange than the normal market. That access was allegedly used to convert bolivars into dollars and euros as the defendants plundered the country’s oil riches.
In 2014, the Venezuelan government rate overvalued the bolivar by a factor of about 10, allowing massive returns for people able to use the government rate, the complaint said.
Professional money launderer used Maltese firm to launder money
One of the main players in the operation, according to the criminal complaint, is a certain Jose Vincente Amparan Croquer, aka ‘Chente’, a Venezuelan national who is described by Homeland Security Investigations as a “professional money launderer”.
According to the criminal complaint, “Amparan also maintains relationships with ‘European Financial Institution 1’ in Malta, a private investment firm, which he uses to launder money.”
The criminal complaint shows how records obtained from email search warrants confirm the flow of the funds “from PDVSA to the defendants and other conspirators through European Financial Institution 1 (the Maltese institution).
One email cited in the criminal complaint includes an attachment titled ‘Operation 600k’, which contained work sheets detailing the illicit cash flows from Venezuela to Malta.
A work sheet titled ‘Detailed Income from PDVSA’ shows 10 transfers from PDVSA from 29 December 2014 through 3 February 2015 totalling €511,913,270.74.
According to the affidavit submitted in court, another work sheet titled ‘Summary of the 600 Operation’ shows that of the €511 million, €20,476,530.83 was assigned to the unnamed Maltese European Financial Institution 1 as a 4% fee. €227,265,537.52 went to Francisco Convit Guruceaga (a Venezuelan national – who, along with the unnamed Conspirator 2, is often referred to as a member of the ‘boliburgues’ – members of the Venezuelan elite); €159,085,876.26 went to ‘los chamos’ (the stepsons of Venezuelan Official 2 – purported to be the Venezuelan president by several media sources); and €68,179,661.26 went to a certain Conspirator 7, who has been identified in the press as Raúl Gorrín, owner of the Globovision television network in Venezuela.
Gorrín, who reportedly has close ties to Maduro and the late president Chávez, has been criticised for having turned his pro-opposition news network into one more friendly to the president.
The work sheet shows that the remaining €36,905,664.87 was accounted for as the ‘Cost’ of the initial 7.2 billion Bolivars used to obtain the €511 million.
That transaction was done through a Hong Kong shell company named Eaton Global, which ended up with the right to pay PDVSA about 7.2 billion Bolivars (worth around €35 million) and receive about €510 million, of which about €78.8 million was sent to the confidential source.
Further worksheets account for how each recipient moved the money further. The boliburgues, for example, moved €78.8 million to Homeland Security’s confidential source and the majority of the rest through apparent Spanish shell companies Volbqr Vontobel and Vencon Holding.
Conspirator 7, the television network owner, is meanwhile alleged to have sent dozens of US Dollar wires through banks in Malta and Austria, including to aviation and yacht services as well as brokerage companies in Miami, Florida.
An artless attempt to hide embezzlement
According to the criminal complaint, the source of the PDVSA funds was a PDVSA foreign-currency exchange scheme benefitting Eaton Global.
The exchange scheme ‘was disguised as a “financing” arrangement using the following three documents “in an artless attempt to hide what was ultimately revealed as embezzlement”:
1. First, ‘a loan contract, dated 17 December, 2014 between PDVSA and Rantor Capital C.A., a Venezuelan shell company, in which Rantor agreed to loan 7.2 billion Bolivars to PDVSA. The loan contract was executed by ‘Venezuelan Official 1’ as Vice President of PDVSA;
2. Second, an assignment contract, dated 23 December, 2014 between Rantor and Eaton Global, in which Rantor assigns its rights as PDVSA’s creditor under the loan contract to Eaton Global and in which it is contemplated that PDVSA is given the right to cancel the debt within 180 days by paying 600 million US Dollars [€511 million] and
3. Third, a notice of assignment letter, dated 23 December, 2014 in which Eaton Global informs PDVSA of the assignment and suggests that PDVSA repay the 7.2 billion Bolivar loan in the Euro equivalent of 600 million US Dollars. The letter included instructions for PDVSA to wire the funds to [Maltese] European Financial Institution 1 accounts for the benefit of Eaton Global.
According to the complaint, the case was one of “false-investment money laundering” in which most of the defendants are sophisticated operators with respect to the international banking system and are aware of banks’ general due diligence and anti-money laundering practices, including know-your-customer (KYC) requirements.
“Importantly, for one party to wire funds to a third party, there must be some legitimate business justification provided to the bank; for instance, a payment for the purchase of real estate or equipment. Moreover, a bank will ask for documents supporting the justification, which – depending on the transaction – can be difficult to manufacture; for instance, a bank may be able to verify whether a supposed real estate transaction took place.
“This verification poses a problem for money laundering transactions in which large, sums of criminal proceeds must be moved around the financial system from one person to another as bribes, kickbacks, transfers, or exorbitant expenditures, for instance.
“Accordingly, false investments in fake securities are convenient justifications in that they are more difficult for a bank to investigate and verify. By way of example, one party might wire 30 million US Dollars to a third party with the justification that the amount is a loan to the third party, supported by a 30 million US Dollar promissory note due at some point in the future, which neither party actually intends to honour.
“For the bank, ascertaining the true intent of the parties and the fraudulent nature of the investment is difficult.
“Sophisticated false-investment money laundering schemes are used throughout this conspiracy, ranging from individual false securities (promissory notes and bonds) to entire false investment funds, which can be subscribed to as needed to justify transactions.
“Surrounding and supporting these false-investment laundering schemes are complicit money managers, brokerage firms, banks, and real estate investment firms in the United States and elsewhere, operating as a network of professional money launderers.”
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