Reports in the News Highlights section include the International Labor Organization's record global unemployment figures, Congressional Budget Office's look at the costs of Iraqi reconstruction, and the Northern Ireland Police Ombudsman's investigation into the Loyalist Volunteer Force (LVF) murder of Sean Brown in 1997. There are also updates on other news around the world and a Feature Article on "Financial Institution Fraud and Failure".

CONTENTS:

NEWS HIGHLIGHTS OF THE WEEK:

1. World
2. Africa
3. Americas
4. Asia Pacific
5. Europe
6. Middle East
7. South Asia
8. Cyberterrorism and Information Warfare
9. Finance
10 Human Rights
11. Law and Legal Issues
12. Transportation
13. Weapons of Mass Destruction
14. Recently Published

FEATURE ARTICLE:
Financial Institution Fraud and Failure

NEWS HIGHLIGHTS OF THE WEEK

1. World

The World Social Forum http://www.wsfindia.org/ in India ended after some 100,000 activists gathered in meetings and demonstrations to protest global capitalism and war. This was the fourth annual meeting, designed to offer an alternative to the World Economic Forum http://www.weforum.org/ that is underway in Davos, Switzerland. UN Secretary General Kofi Annan's speech emphasized the need to turn attention back to the world's poor, pointing to the links between development and collective security. http://www.weforum.org/site/homepublic.nsf/Content/Special+Address+by+Kofi+Annan

The International Labor organization reports a record number of worldwide unemployed, numbering 185 million, or six percent of the global work force. http://www.ilo.org/public/english/index.htm

North Korea hosted an unofficial team of nuclear experts to tour the Yongbyon plant. The visitors were shown what North Korea called nuclear reprocessing facilities, plutonium metal, and so on. The team was unable to verify whether a working nuclear bomb had actually been made.

Massive culls of chickens are underway in Japan, Thailand and Vietnam, hoping to head off the spread of avian influenza H5N1. Infected birds are also in Cambodia and South Korea, indicating a wider spread than previous infections. This flu has killed 14 people, most children. The bird virus jumped species to infect humans and there are indications that human to human spread could occur. Vaccinations and preventive medicines are being given to agricultural and health workers. http://www.who.int/csr/don/2004_01_24/en/ http://www.cdc.gov/flu/about/h5n1outbreak.htm

2. Africa

Burundi's government held initial talks with the rebel National Forces of Liberation (FNL) without reaching any compromise.

In Democratic Republic of Congo the UN mission is investigating a reported massacre in the east in which the ethnic militia Front des Nationalistes Integrantistes forced boats to land in the lakeside village of Gobu, separated the men and shot them in groups, killing at least a hundred. There were at least two rapes and the rebels forced women and children to transport the stolen goods. The event reportedly occurred on January 16. There are reports that Hutu militants opposed to repatriation are holding hostage 3,000 Rwandan civilians and former combatants in North Kivu.

Gabon and Equatorial Guinea have agreed the terms of a UN mediation over disputed sovereignty to the oil-rich Mbanie, Coctotiers and Congas islands in the Corisco Bay.

Liberia's transitional government leader Gyude Bryant plans to mediate a feud between the leader of the main rebel group, Liberians United for Reconciliation and Democracy (LURD) and his wife. LURD's political leadership backs Sekou Conneh but senior military commanders have rallied behind Aisha Conneh, his estranged spouse. The military leaders suggest that Sekou Conneh's relationship with the transitional government is corrupt and not in LURD interests.

Morocco will have until April to consider a UN proposal for a Western Sahara peace plan that has already been accepted by the Polisario.

Somalia's stability is seriously threatened by increasing insecurity in the self-declared autonomous region of Puntland and self-declared republic of Somaliland.

Sudan's government and Sudan People's Liberation Army rebels have agreed on the status of the Blue Nile and Nuba Mountain regions but are still sing the status of Abyei. Fighting in Darfur has forced some 18,000 additional refugees over the border into Chad.

The Ugandan army has announced the killing of Lord's Resistance Army commander Yadin Tolbert Nyeko.

In Zimbabwe, police left the offices of the Daily News and the paper was able to publish again for the first time since last September but the government has submitted two requests to the High Court to again stop publication.

3. Americas

Brazilian police plan to evict 3,000 indigenous people who are occupying farms in the south following the expiration of a 3-day warning they must leave.

Canadian police raided the home and office of a newspaper reporter who had secret government documents regarding alleged al Qaeda member Maher Arar. (Also see Law, below.)

"Colombia Targeting Rebel Strongholds: More Aggressive U.S.-Backed Strategy Expected to Be More Challenging, Brutal" describes Operation New Year in which the army has been spreading into village strongholds of the Revolutionary Armed Forced of Colombia (FARC) rebels. Scott Wilson of the Washington Post Foreign Service wrote it.
http://www.washingtonpost.com/wp-dyn/articles/A45203-2004Jan24.html The UN Assistant High Commissioner for Refugees is beginning meetings with the government to discuss the humanitarian crisis, including displaced persons along the Atrato River and people at the Ecuadorian border.

The Zapatista uprising in Chiapas, Mexico was ten years old January 1. The National Security Archive has obtained new documents that shed new light into the Mexican armed forces. http://www.gwu.edu/~nsarchiv/NSAEBB/NSAEBB109/index.htm

The US Congressional Budget Office released "Paying for Iraq's Reconstruction", a report finding that additional resources would be necessary to fund reconstruction. They arrive at this by three main conclusions. First, oil export revenues will be critical but not sufficient to finance all capital investments. Second, the current Iraqi financial plans to not anticipate war reparations or interest on foreign debts. Third, the approach to reconstruction based on alternate policy goals and priorities can have a significant affect on the costs. The report then analyses three approaches to give examples of potential costs. http://www.cbo.gov

Venezuelan supporters and opponents of President Chavez came out in tens of thousands to demonstrate for the rival causes.

4. Asia Pacific

Burma's government and rebels of the Karen National Union (KNU) have agreed to end hostilities.

Cambodian labor leader Chea Vichea was shot to death, the latest casualty in a string of suspected political killings directed against government opposition leaders.

Chinese authorities say that an explosion at a railway station was a suicide bombing. Three people were injured and the incident is under investigation. Suicide is a common form of protest in China.

Thai police defused a bomb found inside the fuel tank of a motorcycle. The device was similar to one that killed two police also in Pattani province that is one of three under martial law that was imposed after a spate of such attacks, linked both to Muslim separatists and bandits.

Uzbekistan freed 3,000 prisoners under a presidential amnesty including several hundred associated with banned opposition groups.

5. Europe

Georgia has sworn in new President Mikhail Saakashvili two months after the peaceful revolution that ousted President Shevardnadze.

In Dublin, Ireland, the coroner plans to open an inquest in April into the Dublin and Monaghan car bombs of 1974 that killed 33 people.

The Irish and British review of the Good Friday agreement will begin on February 3.

Swiss authorities are investigating two foreign residents suspected of being members of the Islamic Great Eastern Raiders' Front linked to the four truck bombings in Istanbul, Turkey last November.

Turkish officials are to meet with the UN to discuss resuming talks on Cyprus.

British Security Minister Jane Kennedy has blamed the Ulster Defence Association (UDA) for a series of recent hoax bombs and attacks on prison officers' homes in Belfast, Northern Ireland, demonstrating that their ceasefire is in name only.

Northern Ireland's Police Ombudsman has said that a Royal Ulster Constabulary (RUC) investigation into the Loyalist Volunteer Force (LVF) murder of Sean Brown in 1997 was "incomplete and inadequate". Police did not have cooperation from the community and there were "significant failures" in the inquiry. The police have announced a new investigation.
http://www.policeombudsman.org/publicationsuploads/Sean Brown report.pdf

6. Middle East

In the Gaza Strip an 11-year old boy was killed and two others injured when the children attempted to cross the electronic border fence. Israeli Defense Forces said they did not realize they were children. Near the Israeli border two unarmed Palestinian men were shot dead by Israeli troops. One of the dead is in a family associated with Islamic Jihad. In continued army operations searching for tunnels Israeli bulldozers and armored vehicles destroyed 36 buildings, leaving 81 families with 400 people homeless in Rafah, where 56 buildings had already been destroyed this month. Israeli forces and Palestinian fighters exchanged fire during the operation. A Palestinian woman was killed by Israeli fire as she hung washing out to dry. Five others were injured.

Iran's parliament approved a bill changing election law to overturn the reformist candidate ban. The bill was prompted by actions of the Guardian Council that banned thousands of candidates, followed by resignations by a number of cabinet ministers. The Council also must approve this bill.

Iran has said that it will try 12 suspected members of al Qaeda but provided no details of identity, timing, etc.

Iraq's political transition is under discussion with US, British and UN officials. There is mounting opposition to the US plan and growing insistence for elections. US officials have indicated they are open to alternatives as long as their June 30 deadline is met. David Kay has stepped down from his leadership of the team searching for weapons of mass destruction. Charles Suelfer, a weapons inspector who previously said he didn't believe weapons would be found, will replace him. In an interview with Reuters on his departure, Dr Kay indicated he did not believe there was any large-scale chemical or biological weapons production in the 1990s and that the majority of what could be found had been. This position supports the finding that UN weapons inspections during that time period had been effective and renews questions regarding the intelligence preceding the current military action. The findings of the British Hutton Inquiry (highlighted in next week's Feature Article) may provide some insight into this question. Meanwhile, the carnage on the ground continues with a number of improvised car bombs and roadside explosives.

Israel and Lebanese Hezbollah have agreed a prisoner exchange in which more than 400 Lebanese, Palestinian and other Arab prisoners will be swapped for Israeli businessman Elhanan Tennenbaum and the bodies of three soldiers. Missing air force navigator Ron Arad is not included in the exchange but if information about him is provided it may prompt Israel to release Lebanese militant Samir Kuntar who was convicted of several Israeli civilian deaths.

Israeli warplanes launched an air strike in southern Lebanon in retaliation after Hezbollah militants killed a soldier in a rocket attack. The situation in south Lebanon is increasingly volatile.

7. South Asia

In Afghanistan heavy weapons are being removed from the capital, Kabul, but in a southern village a US air strike killed 11 civilians, including four children. The US military deny reports of the strike.

Indian federal police have arrested twelve people on charges of murder and gang rape connected with the 2002 Gujarat riots in which more than a thousand people were killed. The Supreme Court asked the Central Bureau of Investigation (CBI) to take over the investigation because they had been badly handled by local police.

Kashmiri separatists met with Indian Prime Minister Advani a day after meeting with his deputy. The moderate representatives agreed to a statement calling for talks to end violence in Kashmir.

Nepal's Maoist rebel leaders have suggested they may accept a constitutional monarchy if the king relinquished control of the armed forces.

Pakistani authorities say they have identified the body of Abdur Rehman Khadar, a leading al Qaeda suspect killed during an operation last October.

Sri Lankan President Kumaratunga has formed a party alliance designed to thwart Tamils from forming a separate state. This has greatly angered the Tamil Tiger rebels, who say the move threatens peace negotiations. The Tigers are reported to have continued recruitment of child soldiers. http://www.unicef.org/media/media_19036.html

8. Cyberterrorism and Information Warfare

An analysis of the US Pentagon's electronic voting system has recommended it be scrapped due to numerous vulnerabilities in the system and the degree of impact such flaws could have. http://www.servesecurityreport.org/

The National Infrastructure Security Co-ordination Centre has issued notification of vulnerabilities affecting network protocol H.323 used to exchange audio and video information such as VoIP systems. http://www.uniras.gov.uk/vuls/2004/006489/h323.htm

The US Sentencing Commission has issued a request for public comment regarding sentencing guidelines for the CAN-SPAM Act of 2003. http://www.ussc.gov/FEDREG/fedr0104.htm

Another Microsoft Windows worm has surfaced called Bagle or Beagle. It poses as a test message and is similar to Sobig. It can open a backdoor on infected machines that provides access to the virus creator. http://securityresponse.symantec.com/avcenter/venc/data/[email protected]

The Federal Deposit Insurance Corporation (FDIC) has been the latest victim of a phisher scheme. Emails appearing to be from FDIC said that the Director of Homeland Security has advised all deposit insurance on bank accounts to be suspended due to suspected violations of the USA Patriot Act until personal data, including bank account information, cannot be verified. The FDIC immediately sent out an advisory warning of the hoax. With the FBI they are investigating the source of the fraud.

9. Finance

Saudi Arabia and the US have jointly designated four branch offices of the Al-Haramain Islamic Foundation as financial supporters of terrorism. They are in Kenya, Tanzania, Pakistan and Indonesia.

Sulaiman Abo Ghaith and Jamel Lounici have been added to the consolidated list of those subject to sanctions imposed by the UN Security Council against the Taliban and Osama bin Laden and his Al Qaeda associates.

US Immigration and Customs Enforcement agents arrested fifteen people connected with a Belarus-based child pornography ring that used the Regpay credit-card processing company to launder funds associated with paid memberships to pornography sites. http://www.ice.gov/graphics/news/newsrel/articles/ChildPorn.htm

Ukrainian Prime Minister Yanukovych met with FATF experts to discuss steps towards improving governance, combating money laundering, and legalizing shadow capital.

10. Human Rights

Amnesty International has launched a global campaign to abolish the death penalty for all child offenders. Since 1990 children under age 18 have been executed in China, Democratic Republic of the Congo, Iran, Nigeria, Pakistan, Saudi Arabia, United States of America and Yemen. http://www.amnestyusa.org/abolish/juveniles/

The Financial Times has published a Special Report on Investing in Young People http://www.ft.com/iyp2004 that argues "Young people must be at the heart of the action if the global development agenda is to succeed". Almost a third of the world's population is under 24 years of age.

11. Law and Legal Issues

Shamim Ahmed was arrested in Pakistan in connection with the bomb attack on a church last week. He is allegedly a member of Lashkar-e-Jhangvi.

Mohammad Afzal and Shaukat Hussain Guru were convicted of war against the state of India and conspiracy to murder in connection with the December 2001 attack against the Indian parliament. They were sentenced to death but the Indian Supreme Court has stopped the execution pending appeals on February 20.

Maher Arar, a Syrian-born Canadian citizen, is suing US officials over deporting him to Syria, where he was held for 10 months and subjected to torture.

Dan Dumitru Ciobanu is on trial for creating a variant of Blaster worm, Blaster-F. The original author remains at large, despite a $250,000 reward.

Hassan Ghul, an alleged associate of Osama bin Laden responsible for financing al Qaeda, has been arrested by military forces operating in Iraq

Jean de Dieu Kamuhande, former Rwandan education minister, has been sentenced to life in prison for genocide and crimes against humanity.

Maulvi Abdul Mannan Khawajazai, the former governor of Badghis region in Afghanistan and Taliban supporter, has been arrested near the border by Pakistani police.

Vladimiro Montesinos, former head of Peru's intelligence service, appeared in court again, this time to face charges of smuggling 10,000 rifles from Jordan to arm the Revolutionary Armed Forces of Colombia (FARC).

Jose Padilla, the "dirty bomb" detainee held in the US as an "enemy combatant" will have his case before the Supreme Court heard on an accelerated schedule. Last month an appeals court ordered him released but that has been delayed until the Supreme Court ruling.

Mohammed Abdullah Warsame has been indicted in federal court in Minneapolis, Minnesota, for conspiring to provide material support to al Qaeda. Warsame, a Canadian citizen of Somali descent, is a student at Minneapolis Community and Technical College.

Husam al-Yemeni, a leading member of Ansar al-Islam,, has been captured by US troops in Iraq.

12. Transportation

Flight International's 2003 Annual Safety Review finds that technical failure overtook controlled flight into terrain as the leading cause of fatal airline accidents last year. Technical failure has not held this position since the 1970s. http://www.flightinternational.com

Last fall, JetBlue admitted it had given passenger records to the US government. Last week, Northwest Airlines admitted that it too had neglected to inform consumers they had provided personal records after the September 11 attacks. Facing class action lawsuits, the airlines have begun to discuss how to protect themselves as they face demands from the government to provide data for the CAPPS II screening project. Note Sara Kehaulani Goo's "Airlines Hustling on Data Disclosure" in The Washington Post, January 24 at http://www.washingtonpost.com/wp-dyn/articles/A43060-2004Jan23.html

It was 25 years ago on January 23 that the USS Pueblo was seized by North Korean patrol boats. The intelligence ship was the first to be captured on the seas for 150 years. http://www.usspueblo.org/

13. Weapons of Mass Destruction

The International Atomic Energy Agency and US officials have been investigating Libya's nuclear program. They have uncovered a massive black market operation that provided parts, tools and designs for gas centrifuges to enrich uranium and designs for bombs. It is suspected that Iran and North Korea have been provided similar information. It has been reported that one source of the materials could be Malaysia. In addition, Pakistan President Musharraf has revealed that leading nuclear scientists in Pakistan sold nuclear secrets. His government is investigating their actions that appear to have been motivated by greed and were not sanctioned by the government.

The UN Security Council called for effective implementation of arms embargoes and cooperation to prevent diversion of arms to terrorists. http://www.un.org/News/Press/docs/2004/sc7984.doc.htm

The US General Accounting Office released a report on "Military Munitions: DOD Needs to Develop a Comprehensive Approach for Cleaning Up Contaminated Sites". They found there is no complete, viable plan and that DOD should work with Congress to develop budgets that support timely cleanup. http://www.gao.gov/cgi-bin/getrpt?GAO-04-147

Kurt D. Reed, M.D. et al write of "The Detection of Monkeypox in Humans in the Western Hemisphere" in the January 22 issue of The New England Journal of Medicine. Their conclusions find " Our investigation documents the isolation and identification of monkeypox virus from humans in the Western Hemisphere. Infection of humans was associated with direct contact with ill prairie dogs that were being kept or sold as pets". The issue also contains a Perspective article and a Brief Report on Tanapox infection. http://www.nejm.org

In case you missed the early release notice, the special SARS edition of Emerging Infectious Diseases (Vol. 10, No. 2, February 2004) is now online
http://www.cdc.gov/ncidod/EID/index.htm

14. Recently Published

Khassan Baiev, with Ruth and Nicholas Daniloff "The Oath: A Surgeon Under Fire" Walker (Chechnya)

Melody Ermachild Chavis "Meena, Heroine of Afghanistan: The Martyr Who Founded RAWA, the Revolutionary Association of the Women of Afghanistan" St Martin's

Bruce Cumings "North Korea: Another Country" New Press

Robert K Massie, "Castles of Steel: Britain, Germany and the Winning of the Great War at Sea" Jonathan Cape, Random House

Thomas Reppetto "American Mafia: A History of Its Rise to power" Henry Holt

Richard Rubenstein "Aristotle's Children: How Christians, Muslims and Jews Rediscovered Ancient Wisdom and Illuminated the Dark Ages" Harcourt

Jean Sasson "Mayada, Daughter of Iraq: One Woman's Survival Under Saddam Hussein" Dutton

Angus Wright and Wendy Wolford, "To Inherit the Earth: The Landless Movement and the Struggle for a New Brazil" Food First Books

FEATURE ARTICLE: Financial Institution Fraud and Failure

The masked bandit who robs a bank is passe. Today fraud generates more than a hundred times as much money.

The modern era of fraud began in the US 1982 with the failure of the Penn Square Bank of Oklahoma City and continued with notorious cases like those of Charles Keating (Lincoln Savings and Loan) and David Paul (Centrust Bank). Over 1,000 financial institutions failed, loosing $200 billion.

In 1989, the US Congress enacted the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) to help combat financial institution fraud. This law amended a number of criminal statutes, including the mail and wire fraud statutes, for offenses affecting financial institutions.

As part of this initiative, a number of oversight institutions were established. Among these, the Federal Bureau of Investigation's (FBI) Criminal Investigative Division (CID), Financial Crimes Section's "... mission in the area of financial institution fraud is to identify, target, disrupt and dismantle criminal organizations and individual operations engaged in fraud schemes which target our nation's financial institutions." (Grant Ashley, Assistant Director of the CID)

Investigations of the Financial Crimes Section include
* Financial Institution Failure
* Insider Fraud
* Identify Theft
* Check Fraud
* Counterfeit Negotiable Instruments
* Check Kiting
* Mortgage and Loan Fraud
* Emerging technologies and computer-related banking

These activities are reviewed in the annual report, and the 2003 issue has just been published.

When the unit began, cases of failed institutions dominated the investigations. In July 1992 investigations of failures reached a peak of 758 cases. Last year only 67 cases were failure investigations. This is less than one percent of the total pending investigations, numbering 5,869. This is a 91 percent reduction of failure investigations, in which insider fraud dominated. These cases have been replaced by external fraud schemes, supported by new technology that makes check fraud, counterfeiting, stolen identity and similar activities easier.

Last year, investigations led to $3.8 billion paid in restitution orders, $35.6 million paid in fines, $7.7 million in assets seized, $3.5 million assets forfeited and $15.1 million recovered. Since 1996 US financial institutions filed 569,294 Suspicious Activity Reports (SARs), excluding violations of the Bank Secrecy Act. Almost half of these were sent on to the FBI to investigate criminal activities that led to losses of some $8 billion.

Many of these frauds are controlled by organized groups including Nigerian and Russian criminal gangs who engage in check washing, letter fraud investments, theft of credit cards and checks, loan fraud and customer impersonations. Many frauds involve collusion with insiders. For example, mortgage brokers, accountants, appraisers, realtors and bank loan officers can share the profits from bogus loan approvals.

The report summarizes a number of interesting examples of these frauds:

"The FBI's Operation CheckMaster focused on Vietnamese groups from California and who had mastered the art of counterfeiting. They produced large volumes of bogus credit cards, payroll checks, traveler's checks, bank drafts and software. With today's computer technology, these organizations can easily create authentic-looking documents. While check fraud and counterfeiting are the most common bank frauds, loan frauds account for the largest dollar volume, almost 40 percent of all financial institution losses".

Linda Miller-Misarko "defrauded a bank of $1.3 million by submitting fraudulent invoices and other documents that let her deplete a million-dollar line of credit with non-existent assets".

Operation Bankfrost investigated Alaska StateBank (ASB) in Anchorage. ASB "folded because its chairman and board of directors embezzled its money and falsified records to conceal it". This year the chairman and majority stockholder, Ralph E Whitmore Jr, was arrested when he re-entered the US.

Oakwood Deposit Bank Company (ODBC) was made insolvent and closed after its CEO, Mark Steven Mill, embezzled nearly $50 million. In addition to embezzlement, he was convicted of money laundering after moving cash to finance casino boats, falsifying records to conceal the frauds.

Ryan Holt and Michael Tain invented a fictitious Swiss bank, the Swiss International Banc (SIB). They "used a number of foreign-based co-conspirators to assist in the fraud activity including known persons from England, Sweden, Pakistan, Egypt, and Hungary" using forged documents, including using digital scans of legitimate bank seals that had been downloaded from the internet.

Oyenokachikem Charles Osamor was convicted of conspiracy to possess stolen mail, conspiracy to launder funds, eleven counts of mail fraud, and nine counts of possession of stolen mail. He was one of a group of "primarily Ibo Nigerians and their associates participating in criminal schemes directed at financial institutions and investment firms in Houston as well as throughout the United States" using counterfeit and stolen checks.

Operation Swipe Out uncovered a large-scale fraud. "Among the various crimes committed by the group is the procurement of false identities, Social Security Account Numbers, and, in some cases, U.S. Citizenship. These same false identities are used to apply for credit cards which are subsequently used in a massive fraud scheme. Ninety subjects have been identified during the course of the investigation whose roles vary from providing identities to actively using multiple identities to engage in complex credit card fraud and mortgage fraud schemes. Identified losses to victims approximate $14 million." Among those indicted was Shah Nawaz who fled to Pakistan, where he is being held.

Learning from the past and looking towards the future, FIF says " Criminals interested in siphoning money out of our banks and other financial institutions famously adapt to the times. For example, in the 1980s, it was bank insider abuse. In the early 1990s, it was the savings & loan crisis. Now it is major fraud schemes launched by "outsider" criminals..... As financial institutions become less regulated and provide more financial services to the public through the sale of insurance, securities, investment products, and on-line banking, you can bet our investigations will change accordingly."

Additional Information: