Source: Patrick Hogan via Getty Images

Ponzi Suspect's 17 Accounts Raise Questions Over Bank Safeguards

  • New accounts opened after Feds seized gold bars, Lamborghini
  • As one bank got wary, $1.8 million sent to Citibank, U.S. says

The U.S. requires banks to know their customers. Looks like several big ones, including Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co., may have missed getting acquainted with Daniel Fernandes Rojo Filho.

Filho, a 48-year-old Brazilian self-proclaimed billionaire living in Orlando, Florida, came under U.S. investigation in 2009 related to an alleged conspiracy involving drug trafficking, money laundering and a Ponzi scheme. Around then, he and others under the federal probe forfeited tens of millions of dollars worth of Lamborghinis, gold bars and other assets, according to court documents. He agreed in 2013 to forfeit another $25 million in accounts registered to his children and businesses.

That was all a matter of public record in mid-2014, when Filho started opening new bank accounts. He set up at least 17 of them in the name of his company -- DFRF Enterprises, derived from his initials -- and signed his own name.

Filho’s banking flurry is detailed in several fresh cases against him, including an August criminal indictment alleging he used some of these accounts in a scheme that promised investors income from nonexistent gold-mining operations. Filho faces similar allegations in separate lawsuits filed this year by the Securities and Exchange Commission and by a group of investors. 

“If the banks had just Googled this guy, they would have known enough to stay away,” said Evans Carter, a Framingham, Massachusetts-based attorney who brought the investors’ class-action suit early this year.

Filho, arrested in July, was due to appear at a hearing today in Boston connected to the criminal charges against him. He couldn’t be reached for comment on the recent charges and hasn’t responded through courts to the civil actions. His public defender didn’t respond to requests for comment and two attorneys who have previously represented him declined to comment on his behalf.

Spot Check

The Justice Department didn’t bring charges against Filho or any others in the earlier probe that resulted in the asset forfeitures. In the current matter, neither the SEC nor U.S. prosecutors have accused any banks of wrongdoing.

Still, their latest allegations against Filho -- including that he duped 1,400 people into signing up for a pyramid scheme whose payments flowed through these accounts -- offer an anecdotal spot check of how some big banks are doing as a first line of defense against financial crime.

By the time Filho went to open his accounts, U.S. authorities had already penalized global banks more than $10 billion since the financial crisis for providing services to suspected money launderers, sanctions violators or other criminals. Six months earlier, JPMorgan had agreed to pay more than $2.5 billion in settlements and penalties, admitting oversight lapses in handling accounts for Ponzi schemer Bernard Madoff.

The banks where Filho allegedly opened the new accounts included the North American units of JPMorgan and Wells Fargo, as well as RBS Citizens of Massachusetts, according to the class-action suit. The suit named Filho and the banks among the co-defendants. After the plaintiffs reached an undisclosed settlement with Filho in April, they voluntarily dismissed their complaint against JPMorgan, Wells Fargo and Citizens, said Carter. 

Representatives for JPMorgan and Wells Fargo declined to comment, as did a representative for Citizens Financial Group. Citizens was until September 2014 a unit of Royal Bank of Scotland Group Plc, which also declined to comment.

Filho also used an account at Citigroup’s Citibank as part of the scheme, according to the indictment. Citigroup has been cooperating with authorities, spokesman Mark Costiglio said.

Extra $2 Billion

Several big global banks have bolstered their compliance departments in recent years. These workers are responsible, among other things, for making sure the banks don’t run afoul of so-called Know Your Customer laws meant to keep the institutions from handling criminal proceeds.

JPMorgan spent an extra $2 billion from 2012 through 2014 to improve its overall compliance and cybersecurity efforts, it said last year. Citigroup, which has said it is cooperating with a U.S. money-laundering investigation related to its Mexico unit, has spent about $1.5 billion to boost the number of staff with some form of compliance or control function to 30,000.

By October 2014, a few months after beginning to open bank accounts, Filho was promising investors that his company would pay up to 15 percent interest monthly -- “fully guaranteed” -- the SEC alleged. 

Filho talked up his investment company during an October 2014 promotional event for DFRF held aboard the Spirit of Boston party boat in the Boston Harbor, according to the SEC. A video of that event was posted on YouTube a few days later, among the first of severalpromotional clips posted in at least four languages.

In one video, a promoter said DFRF had 80 gold mines, with more than $1 trillion in reserves, according to the SEC. Filho and other promoters told investors that the operation insured their funds and donated one-quarter of its profits to charity. 

The mines were a fiction, as were the other claims, the SEC said in its June 30 suit. In the year through May 2015, Filho brought in $15 million from investors, and paid out more than $6 million to himself, including for a Rolls Royce, two Lamborghinis and two Ferraris, according to the SEC’s suit, which accused Filho of selling unregistered securities and mail fraud.

Also in May, Boston-based Eastern Bank Corp. was looking into suspicious activities in one of DFRF Enterprises’ accounts, according to the federal indictment. Before that account was closed, Filho wired $1.8 million to a DFRF account at Citibank, according to the indictment.

‘Mind-Boggling’

The cases underscore what banks are up against as they try to isolate potentially illicit money flows amid billions of dollars in transactions.

“These banks are massive. The amount of account activity they handle is mind-boggling,” said Dennis Lormel, a former Federal Bureau of Investigation agent who is a consultant specializing in financial crimes. "It doesn’t surprise me” that a person with Filho’s profile would be able to open accounts, he said.

It’s possible, too, that a person could avoid background checks by appearing to branch employees as a low-risk client, said Cliff Johnson, a former federal prosecutor. At branch offices, where employees are often rewarded for bringing in new business, that may not be a tough sell.

"At the local level, I’m not sure bank employees see themselves as responsible for big initiatives, like enforcing the Bank Secrecy Act," said Johnson, who is now the chairman of the MacArthur Justice Center at the University of Mississippi School of Law. "They’re just sitting in a local branch serving the nice folks who come through the door."

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