Issue link: https://maltatoday.uberflip.com/i/1019057
NEWS 14 maltatoday | SUNDAY • 26 AUGUST 2018 Laundering the Bolichicos' How a Maltese firm is believed to have assisted in a money laundering network for the Venezuelan elite, aided by an experienced Swiss banker MATTHEW VELLA THE revelation that a Maltese wealth management firm could be implicated in a money laun- dering network reaching up to Venezuela's highest echelons – the strongman president Nico- lás Maduro – is yet another piece of the jigsaw puzzle of pi- ratic financial elites exploiting corrupt governments and will- ing conspirators. What was surprising this week was the quick admission of Matthias Krull, a German banker and resident of Panama, formerly a vice-chairman of the Julius Baer bank, to con- firm most of the findings of the United States Homeland Secu- rity Investigations' 'Operation Money Flight'. With a confidential source at the heart of the conspiracy, and access to email servers, the HSI investigation revealed a money laundering network led by the so called 'boliburgués' – the Venezuelan elite, running through the US, Spain, Malta, and Hong Kong. Earlier in the week, police swooped in at the offices of Portmann Capital Manage- ment, owned by the Swiss fi- nancier Kurt Portmann and his son Yves-Alain, to carry out a data extraction of the com- pany's records. The company was formed in 2011 and banked with Bank of Valletta up until mid-2015, when the bank shut down the accounts and filed a suspicious transaction report with the Maltese FIAU. A site visit by the Malta Financial Services Authority revealed the company had been providing unlicensed payment services, and since then has been fined over €62,000, and ordered to cease activity. Portmann last banked with Sparkasse, an Aus- trian-owned international bank in Malta. But central to the money laundering network was Krull – a 'door opener' who used the Maltese firm to assist his Ven- ezuelan clients in laundering the cash. Krull is accused of having conspired to launder hundreds of millions of US dollars along with Jose Vincente Amparan Croquer and six other co-con- spirators – known colloquially as the 'Bolivarian' bourgeoisie or 'boliburgués' or 'bolichicos' (boliboys), a term coined by journalist Juan Carlos Zapata to describe the oligarchy created under protection of the Chavez government. Even Amparan has been as- sociated with Portmann Capital Management. The embezzlement was made possible through Venezuela's foreign-currency exchange sys- tem under which the govern- ment exchanges local currency (Bolivars) at a fixed rate for US Dollars. According to the US investi- gators, the fixed exchange rate has been well below the true economic rate by a substantial factor for several years. "For example, in 2014, an in- dividual could exchange 10 mil- lion US Dollars for 600 million Bolivars at the true economic rate. Then, if that individual had access to the government fixed rate, he could convert that same 600 million Bolivars into 100 million US Dollars. Essen- tially, in two transactions, that person could buy 100 million US Dollars for 10 million US Dollars," the complaint in court reads. The difference between the fixed rate and the true econom- ic rate created an opportunity for fraud and abuse, where the Venezuelan officials engaged in these foreign currency ex- change schemes in return for bribes and kickbacks. "These corrupt foreign cur- rency exchange schemes occur in significant amount within Venezuelan state-owned oil company Petroleos de Ven- ezuela, S.A. (PDVSA)," the HSI said – the PDVSA is Venezue- la's primary source of income and dollar and euro currency. The HSO, which had a confi- dential source inside the con- spiracy, said that Amparan told the source that a fake joint-ven- ture contract had been provid- ed to Portmann Capital Man- agement's banks in Canada and Malta. 'Sophisticated' operator Krull, a 44-year-old former vice-president of the Julius Baer bank, was described as a sophisticated operator who was well aware of banks' gen- eral due diligence and anti- money laundering practices, including know-your-custom- er (KYC) requirements. Importantly, for one party to wire funds to a third party, there must be some legitimate business justification provid- ed to the bank: for instance, a payment for the purchase of real estate or equipment. 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 crimi- nal proceeds must be moved around the financial system from one person to another as bribes, kickbacks, transfers, or exorbitant expenditures, for in- stance." So false investments in fake securities are convenient justi- fications because they are more difficult for a bank to investigate and verify: one party might wire US$30 million claiming this is a loan to a third party, supported by a US$30 million promissory note due at some point in the future, which neither party ac- tually intends to honour. For the bank, ascertaining the true intent of the parties and the fraudulent nature of the in- vestment is difficult. Supporting these false-invest- ment laundering schemes are complicit money managers, brokers and banks, operating as a network of professional mon- ey launderers. Corrupt PDVSA exchange scheme According to the HSI court complaint, the purpose of the money laundering conspiracy was to launder US$1.2 billion in funds embezzled from PDVSA by Venezuelan officials – in- cluding by 'Venezuelan Official l', now widely believed to be Venezuelan President Nicolás Maduro . The embezzlement operated by way of a PDVSA foreign- currency exchange scheme benefitting a Hong Kong firm called Eaton Global. The scheme was disguised as a "financing" arrangement using the following three doc- uments: 1. A loan contract be- tween PDVSA and Rantor Capital C.A., a Venezuelan shell company, in which Ran- tor agreed to loan 7.2 billion Bolivars to PDVSA. The loan contract was executed by 'Ven- ezuelan Official 1' and the PD- VSA's vice-president. 2. An assignment con- tract between Rantor and Ea- ton Global, in which Rantor assigns its rights as PDVSA's creditor to Eaton Global, while giving the PDVSA the right to cancel the debt within 180 days by paying US$600 million. 3. Finally, a notice of assignment letter in which Eaton Global informs PDVSA of the assignment and suggests that PDVSA repay the 7.2 bil- lion Bolivar loan in the Euro equivalent of US$600 million. The letter included instructions for PDVSA to wire the funds to "European Financial Institution 1" – allegedly Portmann's ac- counts, for the benefit of Eaton Global. In short, Eaton Global, which was controlled by members of the conspiracy, received about €511 million Euros from PDV- SA after loaning PDVSA about 7.2 billion Bolivars (worth around €35 million) for no more than a few months. The members of the conspiracy split the proceeds between them, in- cluding three stepsons of Ma- duro, known as "los Chamos". To conceal the nature, source and control of the PDVSA funds, the members of the con- spiracy included an array of straw owners, bankers, and money managers whose role was to facilitate the laundering. Krull's role Krull is described as the banker and money laundering facilitator for Francisco Convit Guruceaga, his contact to the conspiracy. Until approximate- ly May 2018, Krull was em- ployed at a Swiss bank where he was a managing director and vice-chairman. Krull's role was that of attracting private bank- 'Ethical and sovereign: socialist petroleum': Venezuelan president Nicolás Maduro greets PDVSA workers. The Miami Herald says he is one of the unnamed conspirators in the HSI complaint filed in Miami