False Legal Theory of Regulatory Compliance in Finance Banking

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One of the primary tasks of a “successful” fraudulent document is to give a false sense of confidence in the “legitimacy” of the transaction and the promoters.  This is commonly accomplished (among many other methods) by using language that pretends to be concerned with regulatory compliance and following certain well-known laws.

Among the most famous phrases found in fraudulent documents is contained in letters of intent, contracts (in a “key” section that is emphasized) or separate addendums to a contract (for extra emphasis).  In these sections, the victims are asked to sign a statement warranting that their hard earned money (that the fraudsters are attempting to steal) consists of “Good clean and clear funds of non-criminal origin.”  While this phrase at first sounds innocent and on the surface appears to be required in compliance with anti-money laundering and anti-terrorism laws, closer analysis reveals it to be yet another fiction designed to give false confidence.

Asking an investor or purchaser to sign a statement that their funds are legitimate is based upon a false legal theory of the wrong way to do “compliance”.  Simply signing a statement that funds are in compliance logically cannot possibly make them in compliance.  If that were true, then terrorists or organized crime groups laundering money would only have to sign such statements for all the bankers to be happy with the transaction.  Of course things are not that simple.  The fact is that compliance is the responsibility of the banks conducting a transaction, and the laws (and law enforcement agencies) place the burden on the banks to research and verify the source of funds and history of funds.  Merely relying on a standard flat statement from the owner of funds would be negligent and illegal.  The only rational purpose of such wording (since it is completely useless and meaningless to bankers) is to impress the victim of a fraud with a false face of the purported “legitimacy” of the transaction.

A closely related abuse of misleading wording is statements in contracts such as “the parties agree to comply with the Patriot Act.”  Anti-money-laundering laws such as the Patriot Act are laws with criminal penalties that are enforced by law enforcement and even national security agencies of the countries involved.  It is absurd to imply that parties to a private commercial contract can simply “agree” that they will comply, and present this as a claimed assurance that the transaction is thereby lawful.  The only way to comply with such laws is to use a contractual instrument carefully drafted by experienced licensed attorneys who know those laws in detail, and for the transaction itself in fact to comply, NOT merely state or “agree” that it will comply.

Another ill-conceived legal fiction is to show fake concern for compliance with “non-solicitation” laws.  This is traditionally accomplished by asking the victim to sign statements that they are “Ready willing and able” (RWA) to pay out their money and complete the transaction.  The phrase “ready willing and able” actually originated from the pornography industry of the early 1950’s.  Another term “soft probe” (a safe-sounding comfort term for full access to deplete your bank account under the pretense of limited verification of so-called “blocked” funds) appears to belong to the same industry that originated “ready willing and able”.  Like the culinary terminology, these terms most likely express what the fraudsters plan to be busy with after they steal your money, rather than stating any verifiable facts about the transaction.  In any case, federal regulatory and law enforcement agencies have given the strongest warnings that people who give you such unprofessional documents are certainly “ready willing and able” to give your bank account a “soft probe” that you weren’t expecting.

The founder of STILAS Matthew Greene is an anti-fraud and law enforcement expert for governments and financial institutions, who has helped clients around the world save hundreds of millions of dollars by avoiding fraudulent scams in banking and finance.