More Than $350 Million Laundered Through Cyprus Bank

Charles Charalambous, Cyprus Mail

A 34-YEAR-OLD living in Canada has been charged by a United States federal court with bank fraud, illegal gambling and laundering more than $350 million through a Cyprus bank in order to operate an illegal gambling business.

According to the indictment filed on August 5 in Manhattan federal court, Douglas Rennick performed payment services for online gambling customers in the US States since at least 2007 to June 2009 through several companies under his control, including KJB Financial Corporation, Account Services Corporation, My ATM Online, Alenis Limited, and Check Payment Financial Co.

The indictment said that Rennick opened a number of bank accounts in the US under the names of his various companies, but in opening the accounts, he and his [unnamed] co-conspirators "provided false and misleading information to various United States banks", saying that the accounts would be used for such purposes as issuing cheques for rebates, refunds, sponsorship, affiliation and for minor payroll processing.

In fact, the indictment alleges, Rennick and his co-conspirators used the accounts to receive funds from offshore internet gambling companies that offered online poker, blackjack and other casino games, and then disbursed those funds in the form of cheques to US residents cashing in their gambling winnings.

The indictment alleged conspiracy because the banks would not have processed the transactions had they known they were gambling-related. It said that "Rennick and his co-conspirators have caused more than approximately $350 million to be transferred from a bank account in Cyprus to various US bank I order to pay funds to gamblers in the US". Since these payments were the result of illegal gambling, the transfer of funds from Cyprus is deemed to be money laundering.

When contacted by the Cyprus Mail, Rebekah Carmichael of the US Attorney's Office for the Southern District of New York said that she was "not able to discuss" the identity of the Cyprus bank, saying: "What is contained in the charge document is what is public knowledge at this time."

This response does not rule out the possibility of an ongoing investigation into the actions of the Cyprus bank.

Rennick has been charged with one count each of conspiracy to commit bank fraud, conspiracy to engage in money laundering, and conspiracy to operate an illegal gambling business. He faces a total of up to 55 years in prison, with bank fraud carrying up to a 30-year sentence, money laundering carrying up to a 20-year sentence, and illegal gambling carrying up to a five-year sentence. He also faces up to $1.75 million in total fines for the three charges.

The indictment also seeks the forfeiture of at least approximately $565,908,288, which represents the amount of proceeds obtained as a result of the illegal gambling and bank fraud conspiracies, and at least approximately $379,158,553, which was involved in the money laundering offence.

US Justice Department (USJD) officials claim that internet gambling by US residents is illegal even if the websites are owned by foreign operators. However, the USJD has focused prosecutions on those involved in financial transactions under the 2006 Unlawful Internet Gambling Enforcement Act, a law which bans US banks, credit card and financial companies from handling Internet gambling bets.

The US State Department issues an annual International Narcotics Control Strategy Report (INCSR), the second volume of which focuses on money laundering and financial crimes.

The 2009 INCSR listed a number of positive factors which it says have contributed to the development of Cyprus as a financial centre, but said that "these same factors also make Cyprus attractive to illicit actors seeking access to European markets or desiring to launder criminal proceeds."

The report detailed the strict measures introduced over recent years by the Central Bank and through government legislation to ensure that Cypriot banks and other financial institutions comply with EU and international requirements for combating money laundering and the financing of terrorism. However, it said that reporting from the non-financial sector - including lawyers and accountants - of suspicious transactions relating to companies registered and/or administered by them "remains low".

A major concern of the 2009 INCSR is that the "area administered by Turkish Cypriots (...) continues to lack the legal and institutional framework necessary to provide effective protection against the risks of money laundering, although significant progress has been made over the last year."

It said that the Turkish Cypriot anti-money laundering legal framework applying to onshore and offshore banks and companies "is far from adequate, and without ongoing enforcement, cannot meet its objectives. A major weakness continues to be the many casinos, where a lack of resources and expertise leave the area essentially unregulated and therefore especially vulnerable to money laundering abuse."

The report said: "It is thought the 23 essentially unregulated and primarily Turkish-mainland owned casinos and the 14 offshore banks are the primary vehicles through which money laundering occurs. Casino licenses are fairly easy to obtain, and background checks on applicants are minimal. A significant portion of the funds generated by these casinos reportedly changes hands in Turkey without ever entering the Turkish Cypriot banking system, and there are few safeguards to prevent the large-scale transfer of cash to Turkey."