Wednesday, November 18, 2020

The Latest Tricks In International Money Laundering: "Running a casino to launder illegal cash is so 1940s."

 From Kenya's Daily Nation, November 16:

A State agency charged with tracking illicit money is investigating SportPesa for possible money laundering in the wake of claims the sports betting firm wired $278 million (Sh30 billion) from its local accounts to offshore banks.

And from CrimeReads, November 13:

Global criminal activities generate trillions of dollars in profits. Estimates range from $2 trillion to $11 trillion (about 2-12% of the global GDP), but nobody really knows, since crooks don’t report their incomes. It’s safe to say that counterfeiting, drug sales, gun running, human trafficking and even illegal trade in wildlife generate a massive mountain of cash.

Trouble is, all that cash isn’t really fungible. You can’t just buy a snazzy NYC condo or a deluxe London flat with it. These days, the authorities want to know how you got that money. Case in point: my last mortgage. When I listed the amount of my downpayment, the lender wanted documentation for the origin of every dollar.

Illegal cash has to be laundered before it can be used, that is, its illicit origin has to be hidden. And for that you need an accountant.

Enter Marty Byrde, the protagonist of the TV series Ozark. He and his accounting partners launder money for a Mexican drug cartel. When one of his partners siphons off some of that cash for personal use—who’s gonna notice with all those millions?—the cartel’s enforcers kill his two partners and Marty is given the choice to make up the loss or join them.

What unfolds across several seasons has made a lot of people are familiar with the idea of money laundering. Marty—first alone and then with the help of his wife Wendy—uses the oldest method of money laundering, mingling the illegal cartel cash with legally earned funds.

The best way to do that is through cash-based businesses that give no receipts. The mob used pizza parlors and donut shops. Marty buys a bar and marina for the same purposes. That way he can sluice the illegal cartel funds through the registers of the bar and marina and declare it as income.

The trouble with that method is that he can’t simply declare all that cash as income. A bar in the middle of nowhere can’t suddenly sell a million dollars worth of beer. Even if he could convince the tax authorities that he did sell that much, they are going to ask for the invoices to show that he bought all those cases from a distributor Fake invoices are one way to keep the authorities at bay, but those can only go so far.

That explains Marty’s desperate need to buy more businesses of that ilk, like the strip club and the funeral parlor. Marty’s real trouble is that the cartel’s need to launder money is insatiable and that his methods, tried and true as they are, just don’t scale up well at Lake of the Ozarks.

What the show gets wrong is that the drug cartels and other illegal operators have long since moved on from the commingling method to far more complex ways to launder cash. While the show makes for great TV, it’s also quite a bit behind the times.

International criminal enterprises go well beyond the drug cartel kingpins or gun runners. The include a broad array of folks who likely call themselves businesspeople. They would bristle at the label criminal, but they are just that. They all make millions by breaking the law and they all need ways to make their money appear sparklingly clean.

As quaint as it sounds, the physical transport of cash across borders is still a major way to put physical distance between the location of the criminal activity and the illegal proceeds. Moving cash to a different jurisdiction breaks the audit trail and adds a lot more legal and bureaucratic barriers to prosecution and seizure. In Marty’s case, the cartel would probably be better off smuggling the cash back to Mexico.....