So you wanna launder money! Does the process appear mysterious? It's not. But the only way to understand money laundering is to think about it in operational terms. What exactly would you do to get the job done, if your mother told you that you had to do it?
Okay. Let's take a simple example. Suppose you had a fried chicken outlet (let's call it "Tyson's Tasty Tidbits") and you also dealt heroin on the side. In your chicken business, you fry up Tasty Tidbits, people come in and give you cash for the chicken, and with the cash you pay your wages and other expenses. What's left over is profit. In your accounting records you write up an income statement that says:
profit = sales - expenses.
So if you took in $1000 and paid out $800 as expenses, leaving $200 profit, you would record:
200 = 1000 - 800.
Now in your heroin business, you sit at the bar of the Capital Hotel during the evening, and your customers, posing as "friends", come up to chat with you for a moment. You slip them a packet of smack and they slip you money. (At 35 percent purity no one need bother with those nasty needles anymore, they can just snort heroin like coke.) It's a good evening, and you sell $800 worth, for which you paid the heroin wholesaler $600. You have $200 heroin profits.
Next, to conceal your heroin profits, to "launder" them, you walk back to your chicken outlet and put the $200 cash in the cash drawer. Remember that equation that said profit = sales - expenses? Now it reads like this:
400 = 1200 - 800.
Wow, the chicken business is good! Way over in New York, a company analyst working for Goldman Sachs looks at the figures and writes: "Due to the amazing increases in efficiency at Tyson's Tasty Tidbits, profits have doubled (from 200 to 400) while sales have only increased by 20 percent (from 1000 to 1200). Stock in Tyson's is a recommended buy."
No one is going to ask any questions where you got the money for that new car, because everyone knows you earned it fair and square in the chicken business. Your chicken is lip-smacking good! Your advertiser builds a huge sign depicting a beautiful girl, happily munching on a drumstick with the caption: "Tyson's Tasty Tidbits: Smack & Smile!"
Nor will any bank (the government's new spies) wonder where you got the cash, for yours is a cash-based business. The Banking Secrecy Act allows your bank to exempt you from filling out currency transaction reports (CTRs) if your deposits or withdrawals of currency fall into any of the following categories (see 31 C.F.R. 103.22(b)(2)(1992)):
1) They are made from an existing bank account, and you are an established U.S. depositor who operates a "retail type of business". This means that you sell consumer goods for which payments are substantially in the form of currency, just as long as you are not an automobile, aircraft, or boat dealer. (Wal- Mart, for example, can get a bank exemption.)Also exempt from CTR reporting are currency transactions made with Federal Reserve Banks or Federal Home Loan Banks, transactions between domestic banks, or transactions between commercial banks and nonbank financial institutions.
2) They are made from an existing bank account, and you are an established U.S. depositor who operates a sports arena, race track, amusement park, restaurant, hotel, check cashing service licensed by state or local governments, vending machine company, theater, regularly scheduled passenger carrier, or public utility. (The Oaklawn racetrack in Hot Springs, Arkansas, can get a bank exemption.)
3) You are a local, state or United States governmental agency or instrumentality. (Both the National Programs Office and the Arkansas Development Finance Authority can get bank exemptions.)
4) They are made from an existing bank account, and you are an established U.S. depositor who regularly withdraws more than $10,000 to pay your employees in currency. (The paymaster for the pilots at Mena airport can get an bank exemption.)
Pretty neat, huh? Now I hear you ask: But what can I do if I am just Joe Blow, and I don't have a bank or a chicken franchise or a sports arena? The answer: "Tough luck, Buster. The money- laundering regs were written for you."
Modern techniques of money laundering began back in the 1920s when Americans decided to rid their fair society of that evil drug Alcohol. Alcohol was destroying the social fabric of this nation! So we enacted a constitutional amendment and ushered in the Era of Prohibition. We had solved our problems in the lawyerly fashion of passing a law saying they weren't allowed to exist! So they all disappeared! Paradise was at hand!
Some people, however, saw it as a great opportunity to get rich. Al Capone, for example. And Joseph Kennedy. And the Bronfman family of Canada.
Exporting alcohol to the U.S. was not illegal in Canada; it was only illegal to import it from the U.S. side. Naturally those writing checks to pay for imported Canadian booze didn't like to be so obvious as to make them out to Bronfman. So the Bronfmans opened up an account at the Bank of Montreal under the fictitious name "J. Norton". Since no one knew anything at all about J. Norton, money could be wired to this account from the U.S. Or U.S. cash or checks could be used to purchase a bank draft made out to "J. Norton" at any branch of the Bank of Montreal. These drafts could then be deposited into the bank account of any Bronfman-controlled company. The company treasurer would see the name "J. Norton" and credit the payments to the company's U.S. Booze account.
Modern laundries are complicated versions of simple structures like that established by the Bronfmans. The operational head of the laundry is frequently a lawyer, who deals with the contracts needed to put the structure into place. Donovan Blakeman, a Toronto lawyer who handled the finances for an international drug ring in the 1980s, called his structure "the Spaghetti Jungle". It involved eleven shell companies in the Channel Islands; fifteen other shell companies in the Cayman Islands, Switzerland, the Netherlands Antilles, Liberia, and the British Virgin Islands; fourteen secret bank accounts in the Channel Islands, Liberia, and other places; and real estate developments in West Palm Beach, Florida; Barrie, Ontario; and Kitchener, Ontario. Eventually the drug profits would be used to purchase real estate. The money for the purchases would come from "offshore investors"--one of the many "Spaghetti Jungle" shell companies ultimately owned by the same drug ring.
Blakeman himself would carry currency or monetary instruments to the offshore bank accounts. But, any way you look at it, carrying large amounts of currency is inefficient and a pain in the ass. "Wire transfers" are faster and cheaper. There is no longer any telegraph "wire" involved, of course, but rather computer telecommunication links through phone lines, fiber optic cables, and satellite relays. Most money is just data in a computer that looks like this:
BANK ACCOUNT AMOUNT Underwater Mellon XYZ Corp. $1,000,000.
When XYZ Corp. "wires" $250,000 to Pearly Gates Corp. at Bank of America, the computer data now looks like this:
BANK ACCOUNT AMOUNT Underwater Mellon XYZ Corp. $750,000 Bank of America Pearly Gates Corp. $250,000
Because money is computer data, getting the money offshore just means incurring a bigger phone bill. And you can get it offshore without hardly anyone knowing about it. One way is to "donate" money to charity, along with a side agreement you get half of it back in the form of an off-shore account. Let's say your name is Mike Bilk'em and you give $1 billion to the Israeli Children's Educational Fund. First the check gets deposited in Bank Hapoalim, Chicago:
BANK ACCOUNT AMOUNT Bank Hapoalim, Chi Children's Fund $1 billionNext one-half of the money is transferred to Bank Hapoalim, Tel Aviv.
BANK ACCOUNT AMOUNT Bank Hapoalim, Chi Children's Fund $500 million Bank Hapoalim, Tel Av Children's Fund $500 million
Then the $500,000 in Tel Aviv is transferred to a Bilk'em controlled account called Lakeside Resources at Credit Suisse in Geneva, Switzerland:
BANK ACCOUNT AMOUNT Bank Hapoalim, Chi Children's Fund $500 million Bank Hapoalim, Tel Av Children's Fund $ 0 Credit Suisse, Geneva Lakeside Resources $500 million
So, at this point, Bilk'em is not only a world-renowned philanthropist, he has also achieved political diversification of his assets. Naturally the Children's Fund person who authorized the transfer to Geneva is not going to talk, because that would cut off donations to the Children's Fund and she would also lose her well-paying, cushy job.
Now the problem with laundering money through banks is those snoopy bank regulators. Not that they actually mind someone laundering: after all, it gives them something to investigate, and they need something to do when they are not busily "solving" the latest banking crisis. But they can look at your records and muddy up the money cleansing process. In the U.S., for example, national banks are regulated by a hodge-podgely overlapping structure of the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC). Snoop. Snoop. Snoop. And if you have publicly-traded stock, you also have SEC reporting requirements, and probably have to file financial statements audited by some major accounting firm like Arthur Anderson. All this increases your cost of doing business, especially if you have to pay off a lot of people to get the job done the way you want it done.
Consider poor Christopher Drogoul at Banca Nazionale del Lavoro (BNL) in Atlanta, Georgia. He found a money machine in making guaranteed loans to Iraq. One day Continental Grain came to him and said, How would you like to loan money to Iraq, so they can buy some of our grain? It turned out the U.S. was gung-ho in getting food and arms to the Iraqis, and the Commodity Credit Corporation (CCC) said, We'll guarantee the loans. If Iraq defaulted, the CCC would pay BNL 98 cents on the dollar (the 98 cents coming, naturally, from the American taxpayer). Hey, this was great! Drogoul had entered the world of international lending, and there was virtually no risk involved! He kept lending more and more until one day he gave the Iraqis a CCC-backed $556 million line of credit that the bank head office in Italy hadn't approved. They denied approval when asked.
Instead of reneging on the loan, Drogoul simply made it disappear. At the end of the month when he submitted his report to headquarters, he simply took the loan (and its funding source) off the books. The next day, the loan went back on the books. He called this "skipping". But the unapproved loans kept getting bigger, until Drogoul took them off the bank's books entirely, and put them in a separate set of "gray books" kept in a closet. The gray books were a sort of separate "bank within a bank". When auditors were scheduled to visit, the gray books were removed out of the building entirely. Eventually BNL, Atlanta, was able to amass $2.1 billion in "agricultural" loans to Iraq.
Calling them "agricultural" loans allowed for CCC guarantees, but in fact loan proceeds can be laundered just like money. The transshipment point for goods going to Baghdad was the port of Aqaba in Jordan. The port was controlled by the Jordanian commodity trader Wafai Dajani, and he would simply swap the grain for weapons, electronic goods, or whatever else Iraq was in the market for. (Other purchases would simply be mislabeled, such as the "300 tons of yarn" that Entrade shipped to the Iraqi Atomic Energy Commission.)
Well, this all came crashing down on Drogoul's head because of his inability to continue to conceal information about his "bank within a bank" from bank regulators. What was needed was a better system. What was needed was a system for setting up a bank within a bank that even the bank's managers didn't know about. What was needed was a whole network of banks to launder money in such a way that the banks concerned wouldn't even know what was going on. If ignorant, they couldn't say the wrong thing to the regulators or the auditors. If ignorant, they couldn't say no to the laundry.
You would then be in the right position to provide laundering services to drug dealers, arms smugglers, and the covert agencies of the U.S. and foreign governments. The provision of services to covert agencies was a very important aspect of the process, because when you got into trouble you could quash the investigation with appeals to "national security".
What was needed was a laundry controlled by computer software. What was needed was Jackson Stephens' software firm Systematics to sell and install a network of interlocking banking software, and a Rose Law Firm management team to ultimately oversee the process--people like Vince Foster, Webster Hubbell, and Hillary Rodham Clinton.
The "back offices" of banks are the guts of the monetary system. It is here that the actual money "flows", as money is switched between accounts and between banks. Systematics supplied software to banks either for them to do the operation themselves, or for Systematics to do back office processing on their premises ("on-site outsourcing"), or for Systematics to process transactions from remote locations ("remote outsourcing").
Was Jackson Stephens really interested in money laundering? Well, first of all, he helped engineer the BCCI takeover of First American Bank, thereby giving it a foothold in the United States. Jackson Stephens' first foreign bank purchase (with Mochtar Riady) was Seng Heng Bank in Macao, the "Oriental Las Vegas", where gambling is the primary source of government revenue. Systematics also supplied software to the Banco Nacional Ultramarino, the cashier and treasury bank of the Macao government and the bank that issues the local currency. Macao is conveniently located less than 40 miles from Hong Kong, the center of the heroin trade. Add to this Stephens Panama connections, and his effective control of Arkansas' largest bank-holding company, Worthen Banking Corp., with its provable involvement in the money-laundering process, and draw your own conclusions.
Why would he think he could get away with it? Because he had covert agencies running interference. The National Security Agency is that Great Whore who recently tried to impose the "clipper chip" for encrypted communications as a way of ensuring it could access all private American conversations. Systematics operated its "bank within a bank" operations on behalf of the NSA. The NSA also runs the secure facilities of the National Programs Office where weapons flow out of the U.S. and drugs flow in (not only at Mena in the 1980s, but also at other locations in the 1990s).
Mena began as the brain-child of CIA's Bill Casey, operated by CIA pilots flying out of NSA-controlled facilities. But the process became an NSA institution, a vast money-making enterprise by the nation's largest, best-financed intelligence agency. And they've been making too much money to stop.
No, the Systematics project overseen by Vince Foster wasn't just a matter of NSA spying on U.S. domestic transactions (the data turned over to analysts at FinCEN). It was a vast project that also involved the oversight of money for covert operations, and the laundering of the proceeds of drugs and arms sales. When Vince Foster spooked, the NSA was one of several parties who had a good reason to want him dead.
Is that why when Vince Foster left the White House at approximately 1 p.m. on July 20, 1993, approximately two hours before his death, he met with a man whose Arkansas license plates were registered to a company that builds signals collection facilities for the National Security Agency?
Why did the Rose Law Firm begin shredding files upon hearing of the death of Vince Foster? What was Foster involved in that made it necessary to destroy the files? Why did two Rose Law Firm lawyers show up at Foster's house and remove approximately eight boxes of records? What happened to those records? Why did Foster keep them in his basement? What was in the envelope addressed "eyes only, not to be opened, William Kennedy" that Deborah Gorham testified Vince Foster kept in Bernard Nussbaum's safe?
Why have the U.S. Park Police been guarding the grave of Vince Foster in Hope, Arkansas? Have they done the job with the same bungled skill they demonstrated at Ft. Marcy Park? Or are they there simply to keep the Wackenhut Corporation from stealing the body?
Why has someone reportedly put out a murder contract on Lt. Com. Alexander Martin? Who would have an incentive to see him dead? Is NSA's National Programs Office involved? Is an ex-Vice- President of the United States involved? Does it have to do with a little company he has an interest in common with General Secord?
Why is the Mossad, like the White House, in panic mode over the reopening of the investigation into Foster's death? What is it they don't want the U.S. public to find out? Why did the operating code for a new computer developed by NSA-subcontractor E-Systems of Dallas, Texas, end up in the hands of the Israelis within one month? Did Vince Foster sell it to them? Why are two LAKAM representatives offering a fee of $75,000 plus 1 percent of the proceeds to recover money from Swiss Bank Corporation? Is it because Vince Foster is not around to release it for them? Or did the armed raid on Mossad headquarters by U.S. contract agents within the past year create so much confusion someone just forgot the authorization codes?
If Bill Clinton resigns, will the sealed indictment against Hillary Rodham Clinton for espionage become public information?
[to be continued]