Posts Tagged ‘money laundering’
“Would you like your money starched, sir? Box or hanger?”*…
Xizhi Li pioneered a new method of money laundering that enriched Latin American drug lords and China’s elite; Sebastian Rotella and Kirsten Berg explain…
In 2017, Drug Enforcement Administration agents following the money from cocaine deals in Memphis, Tennessee, identified a mysterious figure in Mexico entrusted by drug lords with their millions: a Chinese American gangster named Xizhi Li.
As the agents tracked Li’s activity across the Americas and Asia, they realized he wasn’t just another money launderer. He was a pioneer. Operating with the acumen of a financier and the tradecraft of a spy, he had helped devise an innovative system that revolutionized the drug underworld and fortified the cartels.
Li hit on a better way to address a problem that has long bedeviled the world’s drug lords: how to turn the mountains of grimy twenties and hundreds amassed on U.S. streets into legitimate fortunes they can spend on yachts, mansions, weapons, technology and bribes to police and politicians.
For years, the Mexican cartels that supply the U.S. market with cocaine, heroin and fentanyl smuggled truckloads of bulk cash to Mexico, where they used banks and exchange houses to move the money into the financial system. And they also hired middlemen — often Colombian or Lebanese specialists who charged as much as 18 cents on the dollar — to launder their billions.
Those methods were costly, took weeks or even months to complete and exposed the stockpiled cash to risks — damage, robbery, confiscation.
Enter Li. About six years ago, federal antidrug agents in Chicago saw early signs of what would become a tectonic change. They trailed cartel operatives transporting drug cash to a new destination: Chinatown, an immigrant enclave in the flatlands about 2 miles south of the city’s rampart of lakefront skyscrapers.
Agents on stakeout watched as cartel operatives delivered suitcases full of cash to Chinese couriers directed by Li. Furtive exchanges took place in motels and parking lots. The couriers didn’t have criminal records or carry guns; they were students, waiters, drivers. Neither side spoke much English, so they used a prearranged signal: a photo of a serial number on a dollar bill.
After the handoff, the couriers alerted their Chinese bosses in Mexico, who quickly sent pesos to the bank accounts or safe houses of Mexican drug lords. Li then executed a chain of transactions through China, the United States and Latin America to launder the dollars. His powerful international connections made his service cheap, fast and efficient; he even guaranteed free replacement of cartel cash lost in transit. Li and his fellow Chinese money launderers married market forces: drug lords wanting to get rid of dollars and a Chinese elite desperate to acquire dollars. The new model blew away the competition.
“At no time in the history of organized crime is there an example where a revenue stream has been taken over like this, and without a shot being fired,” said retired DEA agent Thomas Cindric, a veteran of the elite Special Operations Division. “This has enriched the Mexican cartels beyond their wildest dreams.”…
The fascinating– and chilling– story in full: “How a Chinese American Gangster Transformed Money Laundering for Drug Cartels,” Part 1 of a series in @propublica; Part 2: “The Globetrotting Con Man and Suspected Spy Who Met With President Trump,” a portrait of Li’s colleague Tao Liu and his separate (but related) crimes.
* Mohsin Hamid, Moth Smoke
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As we clean currency, we might recall that it was on this date in 1956 that Mike Todd’s adaptation of Jules Verne’s classic Around the World in 80 Days was released. Directed by Michael Anderson from a screenplay by James Poe, John Farrow and S. J. Perelman, the movie starred David Niven, Cantinflas, Shirley MacLaine and Robert Newton, and featured cameos from Cesar Romero, Charles Coburn, Peter Lorre, Red Skelton, Frank Sinatra, Buster Keaton and Glynis Johns. Its six-minute-long animated title sequence, shown at the end of the film, was created by award-winning designer Saul Bass.
The film was shot in just 75 days, in England, France, India, Spain, Thailand and Japan, using 680,000 feet of film that was edited down to 25,734. The cast included 68,894 people (wearing 74,685 costumes and 36,092 trinkets) and 7,959 animals.
The movie was nominated for eight Academy Awards and won five: Best Picture, Best Cinematography, Best Film Editing, Best Music and Best Screenplay-Adapted.
“Money laundering is giving oxygen to organized crime”*…
The United States Treasury Department is putting art galleries and museums on notice over the high risks of financial crime in their trade, warning that various aspects of the art industry makes “it attractive to those engaged in illicit financial activity, including sanctions evasion.”
The advisory, published on Oct. 30, calls out the art industry’s heavy use of shell companies. Citing the “high degree of confidentiality and anonymity” in the art trade, the advisory cautions that art dealers may find themselves unwittingly working with criminals seeking to move illicit funds. It also notes that artwork’s often “subjective value” creates an additional attractive value to financial criminals — who are known to manipulate invoice prices to covertly shift money around the globe.
“The advisory serves as another reminder that the $28.3 billion American art market is the largest unregulated industry in the United States,” [said] Tess Davis, executive director of the Antiquities Coalition, which advocates the return of stolen relics to their home countries…
The U.S. Treasury urges new safeguards against financial crime, money laundering, and sanctions evasion: “Secretive high-end art world can be vehicle for dirty money.” From the International Consortium of Investigative Journalists, part of their on-going investigation of international money laundering, FinCEN Files.
Turns out that a U.S. Senate investigation led to the same conclusions: “The art world has a money laundering problem.” So did a House investigation: “Art and Money Laundering.”
And for the curious, here is a look at how it’s done: “Laundering money through art, if you’re into that sort of thing.”
All-too-appropriately, Hasbro has released, in collaboration with the Metropolitan Museum of Art, a fine-arts edition of its flagship game: “Monopoly: The Met Edition.”
* then-President of Mexico, Enrique Peña Nieto, June 2012. It’s alleged that he spoke with authority based on personal experience: in 2020, his successor as President, Andrés Manuel López Obrador, asked Mexicans if they would like to see former Mexican presidents face trial against allegations of corruption (a move deemed constitutional by the Mexican court and laws); the people will vote to decide in a referendum in 2021. According by a survey by newspaper El Universal, 78% of Mexicans polled do indeed want the former presidents of Mexico to face trial– and Enrique Peña Nieto is the one they most want to be incarcerated.
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As we note that cleanliness isn’t always next to godliness, we might spare a thought for Jean-Baptiste Say; he died on this date in 1832. An economist and businessman, Say argued in favor of competition, free trade, and the lifting of restraints on business, and was among the was among the first economists to study entrepreneurship– and to valorize entrepreneurs as organizers and leaders of the economy.
He is probably best remembered for the assertion that supply creates its own demand– “Say’s Law“– a label first used by John Maynard Keynes, who went on to argue that it is wrong… the debate (e.g., as between Steven Kates and Paul Krugman) continues to this day.
“Money laundering is a very sophisticated crime and we must be equally sophisticated”*…
It’s bad form to mention money-laundering. Instead, you talk about asset-management structures and tax beneficial schemes. — John Sweeney
This is the untold history of how prominent civil servants in the UK tailored US-devised anti-money laundering (AML) policies in ways that suited the needs of Britain’s financial services industry. In the aftermath of these initial compromises in 1987, criminal money managers in both the US and the UK were able to continue to operate in an environment that easily allowed them to hide and use dirty money. The researchers analysed six months of previously unseen personal correspondence and documents exchanged between various actors in the UK Government during 1987. From this they conclude that the core of the current, global AML regime, was not the destruction of drug money laundering and banking secrecy, nor the ending of criminal financial enablers and with it hot money; rather it was the protection and leverage of national trading interests on both sides of the Atlantic. And the drive to protect these interests would see crime control laws made, amended and changed to cater for the interests of the US and UK banking and finance industries. The file had been classified as secret and held by the UK Treasury until it was released to the public in 2017 as an archive document transferred to The National Archives in accordance with The Public Records Act and the Freedom of Information Act…
Mary Alice Young and Michael Woodiwiss tell the extraordinary story of governments effectively competing with criminal gangs at “A world fit for money laundering: the Atlantic alliance’s undermining of organized crime control.”
(Image above: source)
* Attorney General (1993 to 2001) Janet Reno… whose words can be understood, per the article cited above, in more than one way…
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As we follow the money, we might recall that it was on this date in 1957 that George B. Hansburg was issued a patent (#2,793,036) for his invention of “an improved pogo stick”– the modern two-handled pogo stick.
While spring stilts had been invented in 1891, the original pogo stick was created in 1920 by Max Pohlig and Ernst Gottschall– the first two letters of whose surnames gave the device its name.
“Results aside, the ability to have complete faith in another human being is one of the finest qualities a person can possess”*…
Downtown San Francisco ablaze after the 1906 earthquake, from the slope of Nob Hill
Amadeo Peter Giannini was born in San Jose, California in 1870. The son of Italian immigrants had an outsized personality and unlimited faith in the American dream.
Giannini began by selling fruits and vegetables from a horse-drawn wagon. But he was made for bigger things. At age 34, he launched a small bank in the Italian neighborhood of North Beach, San Francisco. At the time, big banks lent only to large businesses, handled deposits of the wealthy, and frowned on aggressive advertising.
The novice financier knocked on doors and buttonholed people on the street. He persuaded “unbanked” immigrants that gold and silver coins were safer in vaults than under mattresses. Moreover, the money would earn interest at his “Bank of Italy.”
On the morning of April 18, 1906, a massive earthquake hit San Francisco. The ensuing fires burned down the large banks. Their superheated metal vaults could not be opened for weeks—lest the cash and paper records catch fire when oxygen rushed in.
As flames threatened his one-room bank, Giannini spirited $80,000 in coins out of town. He hid the precious metal under crates of oranges and steered his wagons past gangs of thugs and looters in the streets.
As other banks struggled to recover, Giannini made headlines by setting up a makeshift bank on a North Beach wharf. He extended loans to beleaguered residents “on a handshake” and helped revive the city.
The innovative bank welcomed small borrowers who might otherwise have to use high-cost loan sharks. Most banks at the time regarded people with modest incomes as credit risks not worth the paperwork. But experience had taught Giannini otherwise: that working class people were no less likely to pay their debts than the wealthy.
Seeking more customers, the former produce salesman returned to his old haunts—the fertile valleys of California. He “walked in rows beside farmers engaged in plowing” to explain how bank branches make credit cheaper and more reliable. Town by town, he built the first statewide branching system in the nation.
On November 1, 1930, the Bank of Italy in San Francisco changed its name to Bank of America. The bank today has the same national bank charter number as Giannini’s old bank— #13044.
When A.P. Giannini died in 1949, the former single-teller office in North Beach claimed more than 500 branches and $6 billion in assets. It was then the largest bank in the world…
How a humane response to a community tragedy launched what became the biggest bank in the world: “Bank of America: The Humble Beginnings of a Large Bank.”
* The Wind-Up Bird Chronicle
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As we learn from our elders, we might recall that it was on this date in 2006 that the first news stories based on the Panama Papers were published. A cache of 11.5 million leaked documents that detailed financial and attorney–client information for more than 214,488 offshore entities, all from Panamanian law firm and corporate service provider Mossack Fonseca, the Panama Papers chronicled tax evasion, money laundering and fraud involving 12 current or former world leaders; 128 other public officials and politicians; and hundreds of celebrities, businessmen, and other wealthy individuals from over 200 countries.
An online chat between Süddeutsche Zeitung reporter Bastian Obermayer and anonymous source John Doe
“Whoever fights monsters should see to it that in the process he does not become a monster”*…
When the U.S.S.R. collapsed, Washington bet on the global spread of democratic capitalist values—and lost…
Much of the rest of the world wanted to shout for joy about the trajectory of history, and how it pointed in the direction of free markets and liberal democracy. [CIA Moscow station chief Richard] Palmer’s account of events in Russia, however, was pure bummer. In the fall of 1999, he testified before a congressional committee to disabuse members of Congress of their optimism and to warn them of what was to come.
American officialdom, Palmer believed, had badly misjudged Russia. Washington had placed its faith in the new regime’s elites; it took them at their word when they professed their commitment to democratic capitalism. But Palmer had seen up close how the world’s growing interconnectedness—and global finance in particular—could be deployed for ill. During the Cold War, the KGB had developed an expert understanding of the banking byways of the West, and spymasters had become adept at dispensing cash to agents abroad. That proficiency facilitated the amassing of new fortunes. In the dying days of the U.S.S.R., Palmer had watched as his old adversaries in Soviet intelligence shoveled billions from the state treasury into private accounts across Europe and the U.S. It was one of history’s greatest heists.
Washington told itself a comforting story that minimized the importance of this outbreak of kleptomania: These were criminal outliers and rogue profiteers rushing to exploit the weakness of the new state. This narrative infuriated Palmer. He wanted to shake Congress into recognizing that the thieves were the very elites who presided over every corner of the system…
The United States, Palmer made clear, had allowed itself to become an accomplice in this plunder. His assessment was unsparing. The West could have turned away this stolen cash; it could have stanched the outflow to shell companies and tax havens. Instead, Western banks waved Russian loot into their vaults. Palmer’s anger was intended to provoke a bout of introspection—and to fuel anxiety about the risk that rising kleptocracy posed to the West itself. After all, the Russians would have a strong interest in protecting their relocated assets. They would want to shield this wealth from moralizing American politicians who might clamor to seize it. Eighteen years before Special Counsel Robert Mueller began his investigation into foreign interference in a U.S. election, Palmer warned Congress about Russian “political donations to U.S. politicians and political parties to obtain influence.” What was at stake could well be systemic contagion: Russian values might infect and then weaken the moral defense systems of American politics and business.
This unillusioned spook was a prophet, and he spoke out at a hinge moment in the history of global corruption…
This was capital flight on an unprecedented scale, and mere prologue to an era of rampant theft. When the Berkeley economist Gabriel Zucman studied the problem in 2015, he found that 52 percent of Russia’s wealth resided outside the country.
The collapse of communism in the other post-Soviet states, along with China’s turn toward capitalism, only added to the kleptocratic fortunes that were hustled abroad for secret safekeeping. Officials around the world have always looted their countries’ coffers and accumulated bribes. But the globalization of banking made the export of their ill-gotten money far more convenient than it had been—which, of course, inspired more theft. By one estimate, more than $1 trillion now exits the world’s developing countries each year in the forms of laundered money and evaded taxes.
An amazing amount of the illicit cash is being solicited and handled by Americans– by banks, lawyers, real estate developers actively conspiring with he mobsters. dictators, and oligarchs whose money they are hiding in anonymized investments.
The defining document of our era is the Supreme Court’s Citizens United decision in 2010. The ruling didn’t just legalize anonymous expenditures on political campaigns. It redefined our very idea of what constitutes corruption, limiting it to its most blatant forms: the bribe and the explicit quid pro quo. Justice Anthony Kennedy’s majority opinion crystallized an ever more prevalent ethos of indifference—the collective shrug in response to tax avoidance by the rich and by large corporations, the yawn that now greets the millions in dark money spent by invisible billionaires to influence elections.
In other words, the United States has legitimized a political economy of shadows, and it has done so right in step with a global boom in people hoping to escape into the shadows.
American collusion with kleptocracy comes at a terrible cost for the rest of the world. All of the stolen money, all of those evaded tax dollars sunk into Central Park penthouses and Nevada shell companies, might otherwise fund health care and infrastructure. (A report from the anti-poverty group One has argued that 3.6 million deaths each year can be attributed to this sort of resource siphoning.) Thievery tramples the possibilities of workable markets and credible democracy. It fuels suspicions that the whole idea of liberal capitalism is a hypocritical sham: While the world is plundered, self-righteous Americans get rich off their complicity with the crooks.
The Founders were concerned that venality would become standard procedure, and it has. Long before suspicion mounted about the loyalties of Donald Trump, large swaths of the American elite—lawyers, lobbyists, real-estate brokers, politicians in state capitals who enabled the creation of shell companies—had already proved themselves to be reliable servants of a rapacious global plutocracy. Richard Palmer was right: The looting elites of the former Soviet Union were far from rogue profiteers. They augured a kleptocratic habit that would soon become widespread. One bitter truth about the Russia scandal is that by the time Vladimir Putin attempted to influence the shape of our country, it was already bending in the direction of his.
* Friedrich Nietzsche
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As we get down with Diogenes, we might recall that it was on this date in 1866 that Jesse James robbed his first bank, in Liberty, Mo. James and his crew (a remnant of his Civil War service in the Confederate guerrilla outfit known as Quantrill’s Raiders) are believed to have targeted the bank because it was owned by abolitionist Republican former militia officers.
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