Natalie Luna: Money laundering is the process by which a person takes illegally obtained money and conceals its existence, source, or location and then disguises that income to make it appear legitimate. It is estimated that as much as 300 billion dollars worldwide is laundered each year. Jonathan Turner: The key concept in money laundering is legitimization. In other words, I've got to be able to take criminal proceeds and be able to portray them as legitimate proceeds. The easiest way for me to do that is to move them through otherwise legitimate businesses. So if I can take the proceeds from an illicit activity and use those to purchase dishwashers, for example, and then sell those dishwashers, I can then claim the income from the sale of the dishwashers. So we're going to have lots of legitimate manufacturers, distribution places, but most importantly, the biggest category is banks. When I get a cashier's check from a bank, it doesn't say "illicit proceeds." It says "guaranteed funds." Phil Manuel: You can also buy securities, you can buy cashier's checks, you can establish real estate trusts and put the money here in the United States. There are just any number of ways that you can use this money to launder the proceeds so that it becomes useful money to you down the road. That first tier of movement is the most important. Once a criminal, or someone with criminally derived money, gets past that first crucial step of taking the cash or the money that's illegally derived and putting it into a legitimate institution, once he takes that step, then the whole world is his oyster in terms of where he can invest, what he can invest in, and he's limited only by his ingenuity and his business acumen as to how he's going to move from that point. JT: You could catch a money launderer at any of the stages. If you think about it, they have a risk in each place and the risk is going to be different. So depending on the sophistication of the money launderer, placement is obviously very risky. It's getting the illicit cash into the banking system or into the business system itself. The layering process is going to involve multiple transactions, each one of which could get discovered. And then of course, the final part is integration. If you are living a lifestyle above your means, that's an opportunity for discovery. So money laundering is often caught at one stage or another and unfortunately, money laundering is often caught because of an unrelated crime. PM: Cash now is a magnet for suspicion. All merchants, all automobile dealers, all jewelry dealers, anybody selling anything of value has to declare with the government, on a special form, whether they've received over $10,000 for payment of any type of merchandise or service. Dennis Lormel: That's why we have reporting requirements. That's why we have currency transaction reports. Any transaction greater than $10,000 has to be reported and the premise for that was drug money laundering years ago. So what the bad guys have done is they go below that threshold. They don't want to be detected and they don't want a currency transaction report filed against them. What they are doing is they are coming in and putting $9500 or $9000. It's usually a round amount but it's an amount under $10,000. And what's happened over time is money launderers are like fraudsters are adaptable. They understand that when the banks or law enforcement put mechanisms into place to identify what they're doing, these guys are going to take other steps to avoid detection and look for other ways that they can exploit the system. So, like with money laundering, instead of that $9000 threshold, what the money launderers will do, they'll what we call "microstructure" and they'll break those transactions down into two or three thousand dollar increments. Now if they're going to do that, and they have the resources and capability to do that, those 2 and $3000 transactions are going to be so difficult to detect as the proceeds of money laundering and basically what financial institutions have now, they have pretty robust software money laundering systems in place because of the bank secrecy act and the reporting requirements, banks are mandated to have a robust money laundering program, but again, because of the totality of transactions and the versatility of the bad guys, because of their adaptability and flexibility, it becomes very challenging on the part of the bankers to be able identify this. JT: One of the money launderer's favorite techniques is the wire transfer. The wire transfer allows him to move many anywhere around the world instantly. Wire transfers were always popular because otherwise you had to carry cash or you had to mail checks, whereas a wire transfer is instantaneous. But in ltoday's technology driven world, it's even more popular. You could have a money launderer sitting with his laptop logged into multiple online banking sites at one time, wiring funds back and forth between the various accounts, all from one computer. The best part about the wire transfer is it's almost impossible to track, because I wire transire money to a safe haven, maybe the British Virgin Islands, possibly Switzerland, the Isle of Man, anywhere around the world, and from there I withdraw it as cash and then deposit it again and wire it somewhere else. After making these transfers multiple times, it makes it very difficult for somebody to follow my steps because I'm in a different jurisdiction with a different law enforcement requirement, with different court issues, all of which makes it much harder, and by the time you get to me, it only takes 30 seconds to move the money again. PM: The businesses that you want to look for, in terms of hiding money, especially cash money, are high intensity cash businesses. Historically, the best businesses for moving cash in and out would be restaurants, bars, theaters, businesses which take a lot of cash and where the infusion of cash is very difficult to separate from the sales of the institution itself. Restaurants and bars and theaters, bowling alleys, all meet this criteria. You establish yourself a friendly banker, one who will take this cash money. You take the cash, you deposit it in the bank. It's not a good idea to do it in your own name, but you're probably going to establish an offshore corporation to which you will deposit these funds These lawyers in offshore locations often have a shelf of shell corporations that they use for the specific purpose of assisting someone who wants to do a financial transaction in an offshore place and does not want to be discovered. Confidentiality in offshore places is often regarded as a very, very legitimate function. They view it as ensuring privacy, not assisting the criminal. Your favorite countries are going to be those that have created that type of tax haven offshore protection. There are any number in the Caribbean, southern United States area, off the southern coast of the United States starting with Bermuda, the Bahamas, Grand Cayman, the Turk and Caicos Islands, Panama has probably become the biggest banking center ssince money laundering laws were established in the United States. It seems like banks have sprung up all over the place in Panama. You have Antigua. You have just any number of places where these banking laws are favorable to the potential money launderer. JT: Money launderers can use a variety of techniques besides wiring money to transfer their money around the world. They can physically carry cash, but that gets bulky. One of the techniques is to physically carry checks, money orders, and other financial documents to transfer funds in those means. Travelers checks used to be used but travelers checks in this day and age are fading from view. It's much more common to see them use cashier's checks and money orders, because even though there is reporting requirements at certain dollar levels, you can buy a lot of them. PM: You go into any place that sells them and you buy multiple $200 money orders and you can fill a shoebox full and now you have a million dollars in cash that you can transport by mail, in person, or by common carrier, anywhere around the world. Many people mail cash. As simple as it is, mailing of cash outside the United States is a very common thing. Putting cash in containers of merchandise that are being taken out of the United States by ship or by plane is another very common way to get cash out of the country. It's a very simple process if you want to risk the discovery of the cash and the confiscation of it. Illicit money moves in the same way and through the same channels as does legitimate money. And once it gets out of the country, it can be used in any type of investment which is seemingly legitimate. It can come back to the Units States. Taxes can be paid and the criminal gets the benefit of 178
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that circuit.
