Re: List of Money Laundering Examples


We know more details for some (Black Market Peso Exchange, Russian
Correspondent Banking, The Wachovia Case, and Riggs). The intention for
this discussion wasn't to dig into each case deeply but to highlight what
we see as their importance in terms of money laundering mechanics very
succinctly.
We can talk about this more, but I think where we are heading with this is
writing up two or three of these as in depth case studies that do give
insight into money laundering.

On 10/28/11 3:59 PM, Ben West wrote:

These just seem like Wikipedia blurbs for each example. They don't go
into the nuts and bolts of HOW the money was laundered. The first
example glosses over some pretty complicated shit. I don't feel like I
got any more insight into money laundering reading over these. Do you
guys know more of the details and just aren't including them here? If
that's the case, flesh it out with some more details. Specifically, I
want to know who was complicit in the schemes and who wasn't. It's key
to know if money launderers are getting help from a specific bank or
financial institution.

On 10/28/11 12:23 PM, Frank Boudra wrote:

Matt and I are beginning to compile a list of the historical examples
of major domestic and international money laundering schemes. We're
looking mostly for cases that have been investigated on a large scale
or broken up by authorities so that we might gain insight into the
mechanics of their illicit operations.
Laundering schemes use a range of mechanics to clean money. These
include things like using front business to make criminal income
appear legitimate, using multiple wire transfers to obscure the
original source from which dirty money came, or paying bribes to
corrupt bank or government officials to look the other way when
suspicious transactions pass their way. Some laundering mechanics get
repeated over and over--like bulk cash smuggling--while others like
the using online payment systems are relatively new.
Below we have listed a few cases and the laundering mechanics they
highlight. Please add any comments on the cases we have listed or add
any other cases you can think that highlight some interesting
laundering mechanics. Our goal beyond learning the information
ourselves is to read through these cases and put together a reading
list for everyone else on cases or even compile succinct briefs to
redistribute within Stratfor.
The Black Market Peso Exchange (BMPE)
Mechanics Highlighted: Trade-based money laundering and currency
conversion
As of 2005, the BMPE was the largest single money laundering scheme
($5 billion annually) in the Western Hemisphere. It has been primarily
used by Colombian drug cartels to move money back home. The BMPE is a
trade-based money laundering scheme in which money brokers in the US
take deposits of dollars from drug dealers and use these dollars to
buy legitimate goods on behalf of Colombian importers. The importers
then pay affiliated money brokers in Colombia in pesos. The pesos are
transferred to the Colombian cartels, but they appear to be
legitimate. Investigators in the US and Colombia have made large busts
in connection with the BPME and are currently figuring out ways to
target it on a more systemic level.

Bank of New York/Russian Correspondent Accounts (The Benex Scandal)
Mechanics Highlighted: Correspondent Accounts, Wire Transfers, Bank
Complicity

Between 1995-1999, two Russian banks deposited more than $7 billion
in correspondent bank accounts at the Bank of New York. Correspondent
accounts allow banks in one country to deposit money in and access the
wider financial system of another country. After successfully gaining
entry for these funds into the U.S. banking system, the Russian banks
transferred amounts from their New York bank correspondent accounts to
commercial accounts at the bank that had been opened for three shell
corporations. These three corporations, in turn, transferred the funds
to thousands of other bank accounts around the world, using electronic
wire transfer software provided by the bank. According to the
defendants in the case, their money-laundering scheme was designed,
in part, to help Russian individuals/businesses (often mafia
connected) transfer funds in violation of Russian currency controls,
custom duties, and taxes.

Al Capone and Meyer Lansky

Mechanics Highlighted: Use of front companies, casinos, and permissive
offshore financial centers
The best known of America's mobsters, Capone was at the forefront of
the birth of modern money laundering schemes. It is estimated that he
laundered $1 billion through various businesses. His first businesses
were in fact laundromats, which, being cash operated, were very
helpful in hiding and disguising illegal gains. The fact that Capone
made use of the laundry trade is frequently given as the origin for
the phrase "laundering" - however this is still subject to debate.
Capone was eventually indicted in 1931 for a different financial
crime: tax evasion.
Following Capone's imprisonment one of his contemporaries, the Polish
born "mob's accountant" Meyer Lansky, deduced that he needed to hide
the root of money gained through illegal means in order to avoid the
law. It has been said that he can be credited with establishing the
modern form of money laundering. He siphoned off around $1 billion
from his growing casino empire into Swiss bank accounts and businesses
in Hong Kong, South America and the Caribbean. He was never convicted
and died in 1983 with an estimated net worth of $100 million.
Iraqi Oil for Food Program
Mechanics Highlighted: High level corruption
The UN Security Council started the Oil-for-Food program in 1996 to
allow Iraq to sell enough oil to pay for food and other necessities
for its population, which was suffering under strict UN sanctions
imposed after the first Gulf War. But Saddam Hussein exploited the
program, earning some $1.7 billion through kickbacks and surcharges,
and $10.9 billion through illegal oil smuggling, according to a 2004
Central Intelligence Agency investigation. Wide-scale mismanagement
and unethical conduct on the part of some UN employees also plagued
the program, according to the UN Independent Inquiry Committee.

The BCCI Scandal

Mechanics Highlighted: Bank Complicity

At its peak, the Bank of Credit and Commerce International (BCCI) was
the seventh largest private bank in the world. However, during the
mid-1980s the bank was found to be involved in various fraudulent
activities including massive amounts of money laundering. Billions in
criminal profits, including drug money, went through its accounts. The
bank was not too picky about its customers, either: clients included
Saddam Hussein, former military dictator of Panama Manuel Noriega, and
Palestinian terrorist leader Abu Nidal. It has also been alleged that
the CIA used accounts at the BCCI to fund the Afghan Mujahideen during
their war with the Soviet Union in the 1980s.
Nauru
Mechanics Highlighted: Permissive Offshore Jurisdictions
Nauru is a tiny Pacific island, 1,200 miles off the coast of New
Guinea. It may well be one of the most obscure places on earth.
However, this little-known landmass was also at the center of some of
the highest profile money laundering activity of recent years. In the
late 1990s, Russian criminal gangs laundered around $70 billion
through "shell banks" registered on Nauru. Shell banks exist only "on
paper" (they don't have a physical presence in any country), and Nauru
allowed its banks to operate without recording the identities of its
customers or the trail of deposited money in its accounts. All of
which made them extremely popular with money launderers. Since 2001,
Nauru has taken steps to clean up its act and has accepted financial
aid from Australia.

The Wachovia Case

Mechanics Highlighted: Bank Complicity, Bulk Cash Smuggling, Use of
Currency Exchange, Use of Wire Transfers
In 2008, Wachovia was placed under investigation and ultimately fined
$110 million for failing to adequately screen nearly $400 billion
dollars flowing into its accounts from exchange houses in Mexico,
which were known to be used by Mexican DTOs for moving bulk cash
smuggled out of the US back into the US financial system. The exchange
houses or casas de cambio serve as both currency exchange and wire
transfer services. They are often temporary and lightly regulated.

Riggs National Corporation

Mechanics Highlighted: Failure to Report Suspitious Transaction, Assitance in
Offshore Money Movement

Riggs Bank pleaded guilty in 2005 for the failure to report suspicious
transactions, and poor oversight. They were responsible for helping General
Pinochet coordinate the transfer of funds in excess of $10 million to two
offshore companies. They also admitted to opening numerous accounts for
government officials of Equatorial Guinea to hide more than $700 million. In
total they were fined $41 million and acquired by PNC Financial Services.

--
Ben West
Tactical Analyst
STRATFOR
512-744-4300
Ext. 4340

--
Matt Mawhinney
ADP
STRATFOR
221 W. 6th Street, Suite 400
Austin, TX 78701
T: 512.744.4300 | M: 267.972.2609 | F: 512.744.4334
www.STRATFOR.com