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Scapegoated Merrill Lynch Banker And Practical Hawala Privacy Tips

by Bill Rounds, J.D. on November 11, 2010 · 6 comments

Reading time: 4 – 7 minutes

A Merrill Lynch banker has been indicted on charges of helping clients move undeclared money abroad. By using a few simple and free hawala privacy tips he could have drastically strengthened his criminal defense and perhaps even avoid arousing suspicion in the first place.

A bedrock legal principle is that the accused stands innocent until proven guilty.


Bloomberg reported:

Just before dawn on a cool June morning, six submachine-gun-wielding federal agents charged into Alexandre Caiado’s Sao Paulo apartment. After arresting him, they hustled Caiado into a pickup truck for a 30-block drive to Merrill Lynch & Co.’s office, where he had been working as a private banker for two years.

As the agents scoured Caiado’s desktop computer, Mary Livingston, a lawyer for Merrill, sat down alone with Caiado. “She gave me very specific instructions,” says Caiado, recalling the scene in 2006. “I wasn’t supposed to say what I really did.”

Prosecutors charged Caiado with arranging illegal fund transfers for Merrill clients — part of what has become a four- year investigation into bankers helping clients secretly move undeclared money abroad to evade Brazilian income taxes. …

“I kept trying to figure out what I did wrong,” says Caiado, in his first interview ever with journalists. “It was Merrill Lynch, one of the most respected places to work on the planet. They were emphatic about the fact that it was OK to transfer money abroad.”

Caiado, who wears jeans and a sports shirt with the sleeves rolled up, says he’s a scapegoat.

An ounce of prevention is worth a pound of cure.


In this interview with Bill Rounds of How To Vanish we discuss the Merrill Lynch banker’s case and provide three powerful tips on how to protect your privacy when engaging in legal hawala transactions. Bill has contributed before with Hawala Banking And Currency Controls Part I and Part II. These privacy tips would also be helpful for those who are implementing the strategies found in the Tax Domicile Report.

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1. Advantageously use the $10,000 reporting limit. When you cross borders there is often a safe haven of having to declare only amounts of cash or monetary instruments in excess of $10,000 per person per crossing. If you, family and friends travel frequently then availing yourself of this limit can quickly add up to material amounts.

2. Use encryption. Encrypt email. Encrypt files. I find using TrueCrypt and Dropbox to be a potent duo for encrypting and transferring files.

3. Jurisdictional arbitrage. Different jurisdictions have different privacy laws and free speech protections. You can use the differences, multiple jurisdictions and information technology to leverage your defensive position and make it exponentially costly for nefarious individuals to breach your privacy in the first place.

For example, England may throw you in the pokey if you do not disclose an encryption key in contrast to the United States where you often do not have to disclose an encryption key. Iceland recently enacted extremely strong legislation to protect free speech that was almost entirely written by the team at Wikileaks. By encrypting and bouncing data around the globe which resides in the cloud you can make the acquisition of your personal information without your consent extremely costly in terms of time, money and legal process.

The goal is to protect your data and have it reside safely and out of reach in the cloud. If costumed thugs break into your office wielding submachine guns then they will find nothing useful. By using anonymous web surfing techniques such as VPNs or proxy servers you can obfuscate the path to your data.


A bedrock legal principle is that the accused stands innocent until proven guilty. While it is possible that Mr. Caiado did engage in illegal conduct we should keep in mind that the case has not been proven beyond a reasonable doubt and therefore Mr. Caiado is presumptively innocent. Additionally, unlike real criminals who lie, steal, murder and intimidate, even costumed ones wielding submachine guns, even if Mr. Caiado engaged in the alleged illegal conduct there is no victim. None of the allegations are for charges of using violence or intimidation against innocent people or their legitimately acquired property.

But as quantitative easing increases, the State becomes hungrier and currency controls are ratcheted up there will be increasingly large amounts of innocent behavior that is criminalized by various costumed criminal gangs to extort holders of capital. But the cost of protection has dramatically fallen and jurisdictions like Iceland and Montenegro are arising and catering to the productive members of society. By starting early and taking proactive steps to engrain these privacy tips into your habitual activities you will be in a better position to avoid arousing suspicion and if in the unfortunate and unlikely event there is a criminal case brought your defense will be that much stronger. An ounce of prevention is worth a pound of cure.

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ABOUT THE AUTHOR: Bill Rounds, J.D. holds a degree in Accounting from the University of Utah and a law degree from California Western School of Law. He practices civil litigation, criminal defense and privacy law. He is a strong advocate of personal and financial freedom. This is merely one article of 4 by .
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{ 6 comments… read them below or add one }

1 John Sawkins November 12, 2010 at 5:37 am

Once again Trace, thank you on another excellent article. Last week we spoke with a US Customs official and she insisted that we had to declare $10,000 in cash or equivalents per vehicle or ‘family group’. I knew she was wrong but you again support my suspicions.

2 Trace Mayer, J.D. November 12, 2010 at 9:28 am

Hi John,

The customs form states: “13. Mark an X in the Yes or No box. Are you or any family members traveling with you bringing $10,000 or more in U.S. dollars or foreign equivalent in any form into the United States?” Here is a Customs and Border Protection advice page.

The wording of the question is ambiguous. I suppose her interpretation is fairly broad. For example, if she asserts ‘per vehicle’ this is obviously in conflict with standard practice as not all several hundred people on an airplane all come through on the same customs form. There may also be an issue when it comes to what constitutes ‘any family members traveling with you’.

Beware of civil forfeiture though; it is a beast. Before traveling with large sums of cash or trying to test any of these issues you may want to read Policing For Profit. Also, watch BUSTED so you know what to say and how to respond.

3 Kyle November 14, 2010 at 11:52 pm

If it’s legal, why would you even try to hide with encryption and VPN?

If your computer or communication devices were EVER searched and subpoena’d, are investigators stupid? NO, since the Patriot Act has been implemented, use of encryption and proxy servers can be considered “probable cause” or “evidence” on the argument that “if you do nothing illegal, you got nothing to hide”.

If you were hiding from jurisdictions, you’re obviously knowingly breaking the law. If you’re just hiding from competitors, crooks, it’s quite unnecessary if you never made enemies, and banks are generally insured against fraud.

Iceland? Wasn’t Iceland the country which had a collapse of major financial banks? Wouldn’t that make their data technology less reliable if money isn’t flowing steadily?

Granted, you might only use proxy services for short bleeps of time.

4 Bill Rounds, J.D. November 15, 2010 at 11:04 am


I’m afraid that what you do when you are alone with your wife might be “illegal.” Why are you trying to hide by closing the door and drawing the drapes? Please leave them open so that passersby on the street can see at all times what you and your wife are doing privately because “if you do nothing illegal, you got nothing to hide.”

This request is ridiculous, and so is your statement.

Refusing consent to search CANNOT give police probable cause to search. Please see the video BUSTED which Trace recommended in the previous comment or ask your lawyer about it.

Most competitors would not spy on your internet usage, some will. Other enterprising individuals might, and regularly do, steal data and offer it to competitors.

In my law practice I have worked on criminal cases which make it clear that criminals know how to protect their privacy and they prey on those who don’t. If you are not using VPN’s, encryption, and taking other precautions, you are making yourself the low hanging fruit for worldwide organized crime networks. Not using those tools is like writing your pin number on your debit card with a magic marker. But “banks insure against fraud,” so go ahead.

The information you send unencrypted over the internet is a lot like sending information on a post card. Anyone who handles it may read it. And, there are free programs which any computer novice can use to snoop on everyone using unencrypted networks within a one mile radius.

Governments conduct warrantless wiretaps, criminals steal information, nosy high school kids look for something juicy just for fun, no enemies needed.

And yes, Iceland has had financial trouble, yet in the face of that adversity, and because whistleblowers and TV stations were prevented by law at the behest of the banks from publishing whistleblower information, therefore they affirmed their commitment to free speech and passed legislation which makes them the greatest protector of free speech in the world. Unlike the US which has routinely bent over and taken it every time someone with nail clippers tries to board a plane. Iceland understands the importance of freedom of speech and the safety and solvency of financial markets.

I wish you luck, but I am not optimistic about your ability to manage risk when you are ignorant of the risk.

5 Kyle November 15, 2010 at 12:19 pm

Let’s talk about the snooping.
Let’s say, I have $100,000 and I wanted to move it out of the country in 10 trips.

What good information are you getting from snooping my e-mails?
a) You won’t get any PIN, SSN
b) at best and most you’ll find who handles my cash, go rob him at gun point
c) being able to locate and rob my handler assumes you have a network of agents in every country, just ready to go, you really be so prepared and want only $10K at a time?
d) If I can have proxy locations and speak freely, why don’t I talk in code without proxy, would it fool the snoopers any less?

Maybe I’m still unsure what the GOAL is.
Let’s say you quickly moved $100K out of the country without a trace.
Then what? How do you spend it or cash it out?
Do you go to that country? Or sneak it back in?

6 Robert Hicks December 12, 2010 at 1:24 pm

I’ve been to both Iceland and Montenegro. While Iceland is a very odd place, its people are very timid and kind. Montenegro on the other hand seems quite normal and beautiful, but is a crook culture. Some 95% of the cars rolling on the streets were stolen from other European countries, even police cars! I wouldn’t trust my money to a country like that.

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