Gunster – Banking and Financial Services, March 2009
In a situation reminiscent of Beacon Hill (NewYork), the U.S. Drug Enforcement Administration (“DEA”), obtained a Court Order on Wednesday, March 25, 2009 freezing funds (“Freeze Order”) inan “umbrella” account at Bank of America (“Account”). The Account belongs to Rosemont Finance Corporation, a Miami based corporation(“Rosemont”), that handled a large percentage of Venezuelan ”parallel market” business. The Freeze Order results from a Massachusetts Grand Jury Indictment of the principal of Rosemont, Rama Vyasulu, on several charges of money laundering (“Indictment”). The Indictmentappears to indicate that this case originates from a DEA undercover operation. A warrant for his arrest was issued on Wednesday, March 18, 2009. According to media reports, the Account consistedof a large number of sub-accounts belonging toaround 50 foreign exchange brokers (65% ofwhich operate in the Venezuelan parallel market). This would appear to indicate that Rosemont was operating the Account in the form of a payable through arrangement. Limited information is available at this time as the Court file remains sealed.The Venezuelan parallel market emerged after the government of President Hugo Chávez imposed exchange controls in 2003, banning the free trading of foreign currency in Venezuela. The Venezuelan parallel market consists of an indirect exchange mechanism involving the buying and selling of bonds that can be traded in either dollars or Venezuelan Bolivars. With the government of Venezuela strictly rationing dollars at the rate of2.15 Bolivars to the dollar, individuals have turned to the parallel market to buy or sell dollars. Based on the Indictment and Freeze Order, we can assume that the U.S. government has already (or will promptly) obtain Rosemont Account records and with these records begin following the paper trail of funds to accounts at other financial institutions, possibly seeking to freeze/seize other funds thereat. The Freeze Order further demonstrates the U.S. government’s interest in parallel market transactions. Banks must be vigilant in the monitoring of such transactions and, more importantly, must have internal controls in place to detect and report suspicious transactions that maybe identified in parallel market transactions.
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