A $2 million money laundering racket through Bermuda has been (broken up) (cracked) in a joint operation between detectives on the Island and officers in the US, The Royal Gazette has learned.

Herman W. McEwan, who has connections in Bermuda, is awaiting sentence in New York State after pleading guilty to one count of conspiracy to commit wire fraud, and two counts of wire fraud.

The Bank of Butterfield contacted Bermuda Police's Financial Investigations Unit (FIU) in April of last year after it became suspicious of activity surrounding one of its accounts.

Inquiries by the FIU took it to the US, where detectives learned of an on-going investigation in New York into McEwan and his financial affairs.

It is believed that the case involved a criminal scheme to defraud investors in America and abroad by inducing them to purchase bogus bank notes, purportedly issued by major European banks.

The investors sent funds to McEwan to purchase the bogus notes, some of which were then forwarded by wire transfer to bank accounts in Bermuda.

But detectives in Bermuda, led by Inspector of the FIU Alan Cleave, were able to recover the cash, which was just over $2 million, and return it to the US where it could be given back to the victims.

After months of investigations, McEwan appeared in court at the end of October and pleaded guilty to all three counts.

Mark Harris, the Assistant District Attorney in the Southern District of New York who handled the prosecution, has since written to Police Commissioner Jonathan Smith to commend the FIU officers who helped to solve the case.

In his letter, he said: "Through the Financial Investigation Unit's efforts, more than $2 million in criminal proceeds were discovered in those bank accounts.

"With additional help from the unit, we were able to repatriate the money so that it can eventually be returned to the victims of the fraud.

"Although the case is not yet complete, we would not have had nearly as much success without the exemplary work of the officers involved, for which we are very appreciative."

Inspector Cleave said this was another example of how Bermuda's anti-money laundering systems were working and producing results.

Only a month ago, Californian Dennis Herula, 54, pleaded guilty in Magistrates' court to trying to open an account at the Bank of Bermuda using false documents and information.

As a result of investigations by the FIU and the bank, he was sentenced to one month in jail for the charge of uttering a forged document.

He was trying to set up the account in the name of a business he told the bank he was hoping to form on the Island called Platinum Asset Management. Herula told the bank that $10 million would be forwarded to the account, which he claimed were the proceeds of bond trading, from a company overseas named Legacy 2000 Inc. However, investigations proved that no such company existed.

Insp. Cleave said he was delighted to see the rules and regulations put in place in Bermuda paying dividends.

He added: "We are very pleased with the results that have been achieved recently, and hope that it sends a clear message to people who want to use Bermuda for criminal purposes, to launder money or criminal proceeds.

"The mechanisms in place do work and we are able to deal with those who chose to test them. Our system involves a lot of people working together, such as the financial institutions, the Department of Public Prosecutions, ourselves, and the community. It's a big effort from a lot of people, but it is working.

"We have the legislation in place, and the ability and the will to enforce it, so it's just a matter of time before people are caught."

Insp. Cleave said he was particularly pleased in this case that the $2 million discovered in Bermuda will be returned to the victims.

He added: "Money launderers are not welcome in Bermuda. There is too much good business out there on this Island - we don't need the bad.

"The last two cases we have had in recent weeks are prime examples of how our anti-money laundering system works. We are on the right track."

Vice President of Group Compliance for the Bank of Butterfield, Chris Wilson, said the bank would continue to work with the Police to rid Bermuda of any criminal banking activity.

He said: "Bank of Butterfield is pleased to see that our internal policies, which are designed to complement Bermuda's anti-money laundering rules and regulations, have assisted the Bermuda Police in this investigation, which has resulted in a significant amount of money being returned to the United States.

"The bank will continue to fully support efforts to ensure that Bermuda's banking system is not used for illegal purposes."

One man, Reginald A. Jennings, is still awaiting trial in the US for his alleged involvement in the scheme.