Authors: Haggai Carmon
"And?" asked Laura.
"Nothing. Well, almost nothing." I said. "AUSTRAC told us that the
shareholders of Sling and Dewey Goods and Services, PLC, used faked
names."
At this point I told my team in very general terms about the lead that
ultimately sent me to Germany to interview Igor and my subsequent
findings; I didn't go into the exact details of how I'd obtained the banking
information. My foreign activities are always on a need-to-know basis,
and the task force members didn't need to know I was cutting corners.
Laura looked at the list of countries the transferred money had visited.
"The Seychelles. What's the story here?"
"Absolutely gorgeous beaches and palm trees and laundered money
here and there," joked Lion.
I looked in my notes. "There are six banks there. The Seychelles Savings
Bank, Bank of Baroda, Habib Bank, Banque Francaise, Barclays Bank, and
Nouvobanq. I don't remember off the top of my head which bank was used
for the money transfer; it's somewhere in the file in my office. What is
important for us, though, is why money launderers just loved it during the
1990s. It all started with a decision the Seychelles government made. Their
two major sources of income have traditionally been tourism and fishing,
but they realized that, given the distance to travel to the Seychelles,
American or European tourists could find plenty of similar, closer locations
if they wanted a beach and some palm trees. They knew they couldn't run
a country's economy on these two income sources alone. They needed additional foreign-currency earnings to meet their increasing import needs. So
the government started marketing the Seychelles as an offshore financial
center where you could register almost anonymous companies."
Vasquez took some notes on his legal pad. I paused and looked at the
other members of the team. They were waiting for me to continue.
"The most glaring attraction of this program is that it permits bearer
shares in international business corporations registered in the Seychelles.
That obviously facilitates money laundering since it makes it extremely difficult to identify the beneficial owners and directors of these corporations."
"Wait a minute," said Laura. "You mean there's no central registry of
shareholders of Seychelles international companies?"
"No," I said. "But the United States doesn't have one, either. The shareholders of private companies are recorded only in the company's books,
which are kept by their lawyers."
"So why are you mentioning it?" asked Lion.
"Because here, when criminal activity is suspected, or even during civil
litigation over money, you can access the company's records through the
discovery process and see who the shareholders are. But with bearer
shares, there's no recording of the owners anywhere. Whoever physically
holds the majority of shares controls the company. That's the beauty of it
if you want real anonymity."
"Is it that simple?" asked Peter.
"No, not at all. Some people have thought that by merely presenting
bearer-share certificates in an offshore corporation, they would be automatically recognized as the new owner of that company and all its assets,
including its bank accounts. They often had an unpleasant surprise."
"Why?"
"Because there is no vacuum of ownership, meaning that if another
person or institution had been controlling the company thus far, and the
transfer of shares was not coordinated with them, there could be opposition. Resistance means legal proceedings, meaning open court. And you
wind up with what the holder of the bearer shares wanted to avoid in the
first place - public attention."
"So the purported benefit of bearer shares is a ploy?" asked Jim.
"No. You simply have to plan ahead."
"Are there any other countries that allow this trick?" asked Laura.
"Off the top of my head I know that Panama, Liechtenstein, and
Mauritius allow it, but I'm sure there are many others," I said.
"I need a vacation," said Peter Vasquez, stretching in his chair. "Your
talking about these places makes me hungry for sunshine."
I couldn't blame him. The weather outside was bleak. The sky was gray
and the temperature in the thirties.
"If we determine the Seychelles are relevant to our case," said Lion in
an amused voice, "maybe we could ask to be posted there. With my luck,
I always end up in places like Detroit in the winter or Mississippi in the
summer. The east coast of Africa doesn't sound so bad."
"It could happen," I said in a tone mixing hope and fact. "Money launderers prefer good weather, and in the Seychelles even the winter is
summer."
"How sure are we that the Seychelles was involved?" queried Vasquez.
"We have receipts from a local bank, and AUSTRAC's report that the
company that actually made the deposit into Eagle Bank was controlled
by two companies, one of them a Seychelles international business corporation. But I don't know if Sling and Dewey simply parked the money
in Eagle Bank to launder it or whether there's a stronger connection."
"Wait," said Laura. "How are the Russians you mentioned earlier connected to this?"
"Well, this is precisely why the task force has been convened," I
answered. "We must establish the connection to organized crime in New
York, if there is one. Without the connection, which until now was just a
suspicion, we don't have anything to connect this case to the United
States. Cases outside our borders are somebody else's problem, not ours.
"Let's review: We have a Belarusian hit man, Igor Razov, who transferred a substantial amount of money from one suspicious source to the
next, all outside the U.S., until it was deposited here. Bad boy, yes, but he's
not our boy, because he didn't make the deposits here himself. And at any
rate, he's far away and it seems he's going to be a guest of the prison
system for the rest of his life, courtesy of the German and Belarusian taxpayers. But if we show that Igor was played by the big guy in New York,
then it becomes a U.S. case, because Igor was acting as an agent for
Zhukov -who is under U.S. jurisdiction."
"It may sound like a stupid question," said Jim, "but why would we care
if money was being transferred around? If it's deposited in our banks, the
U.S. economy benefits. I chase money launderers because we want to deprive them of the fruits of their crimes. But where's the crime here? No
crime, no money laundering."
"Good question," I conceded. "That's what we're supposed to unearth.
We have a smoking gun, but no body. If we dig, we may find a body, or
we may find nothing at all. But it's our duty to dig. I could offer you a
general explanation, but you'll have to bear with me, because I need to get
into a global perspective so you can have a broader picture."
"Sure," said Laura, moving in her chair. "Go ahead, I'd like to know."
"Fine," I said. "Because of Russia's economic collapse, everyone is
shaking that we'll have a replay of the Cold War. The toppling of financial dominoes from Asia through Russia to Latin America has sent the
message that the hands of criminals holding invisible strings could destabilize the world economy. I've been doing this job for more than thirteen
years, but recently I've seen a growing number of cases where the crooks
take advantage of the weakness of government supervision over a global
system that moves vast sums of money electronically, often through poorly
regulated offshore banks. We're not talking small potatoes here," I emphasized. "Their money flows hide capital flight that can leave a nation near
bankruptcy overnight."
"What are you talking about?" asked Lion. "Did I miss something?"
"What he's saying is that the clandestine money transfers can conceal
government corruption and siphon away resources needed for developing
economies," said Peter Vasquez.
"Exactly," I said. "We're looking at offshore banks that also serve as
shelters for laundering money to finance terror organizations, drug trafficking, and other criminal enterprises. You know, I think the new financial technologies for moving money have in fact dangerously outstripped
the abilities of banking regulators to detect fraud, money laundering, and
other corruption."
Laura walked to the coffee machine and poured coffee into a Styrofoam
cup. I watched her as she moved. She raised her head and saw my gaze.
"Let's descend from world politics," said Lion. "How do we build a case
proving that unclean hands tried to use dirty money for some reason yet
to be determined?"
"It's not politics," I said. "These events have a major bearing on our
case. This could be an isolated incident, but it could also be the first drops
of a storm that could flood us. The Russian mafia's intentions have been
recognized for years, but have not been handled efficiently. Now things
are different, because they're already in our backyard. There's never a
power vacuum. When the government is weak, the fringe players are
strong, and when they become international some of them come to our
shores. When they do, the media calls them mafia, although many are
honest businessmen who know how to take advantage of an opportunity."
"The point he's making," said Vasquez, "is that while technology was
enabling financial markets to operate beyond national borders, some governments, regulators, and law enforcement agencies were sleeping at home."
"Excuse me, gentlemen," said Laura in a tone I could not pinpoint.
"Aren't you going too far in your speculations? This high-level economics
talk is very interesting, but aren't we jumping into conclusions without
having the benefit of reviewing the facts first?"
"What do you mean?" I asked.
"I mean that we don't know that the Russian mafia made the transfers.
And even if they did, we have nothing to tie them to Russia and its failing
economy - other than their ethnic background. Besides, we're not some
kind of worldwide financial police. We're U.S. law enforcement officers
upholding our own laws. Everything else is somebody else's business."
I felt like a schoolboy who'd been reprimanded. We had all gotten carried away and, I had to concede, that was primarily my fault. "You're right,"
I finally said. "We don't know. In fact, we don't even know if the transfers
were made by Zhukov and if they were intended for his own purposes -
maybe he was providing a service for a third party. Anything is possible."
Deep inside, I knew that this case was different from the other cases; it
had the distinction of being international, suspicious, and ominous. I was
the only international animal in our team, and I had to bring some of that
experience and those instincts into the conversation, Laura's admonition
notwithstanding. But unless my comments were directly connected to our
case, anything else I could say about the way the world works could be
regarded as condescending, so I kept quiet. For now.
"Let me give you an example to illustrate what the relevance could be,"
I ventured again. "Before this task force was convened, I traveled on
another case to the South Pacific."
I looked at Laura. She looked intrigued. "The money passed through
an offshore bank in the Cook Islands. The Cook Islands are beautiful, but
they're sparsely populated. So how is it that a population of only eighteen
thousand can play host to some three thousand anonymous trusts? They
have more trusts than mosquitoes! We suspected that some of these trusts
were connected to organized crime and some of the most notorious
financial players in the Asia-Pacific region. But I was stonewalled."
"So what did you want the U.S. government to do? Invade? Another
Grenada?" asked Laura sarcastically.
"No," suggested Lion. "Simply more international financial safeguards
are needed, with punishments for nations that don't meet anti-moneylaundering standards."
"Isn't the Financial Action Task Force coordinating these efforts?" said
Laura.
"But they're just an intergovernmental policy maker created to assist
governments in combating money laundering and allow official travel for
meetings,"' said Vasquez with a grin. "Seriously, their so-called recommendations have teeth and they can bite any nation that ignores them."
"How?" asked Laura.
"Each country is expected to report compliance with their recommendations," said Jim. "Those member countries that are considered to be
lagging behind in their combat against money launderers feel the heat.
First, as a kind of hint, the country is asked to deliver a progress report.
If that request, along with strongly worded letters from FATF, doesn't
help, then FATF sends a mission to the noncomplying member country.
If that still doesn't do the trick, FATF issues a statement calling on financial institutions to give `special attention' to business relations and transactions with persons, companies, and financial institutions located in that
country. Finally, the FATF membership of that country can be suspended. The country then becomes a financial pariah. Banks and financial institutions stay away. Which could cause a country to collapse."
"How do they define noncomplying country?" asked Peter.
"They have a list of requirements," I answered. "Before they take
action, they need to determine several things, such as if a country has
inadequate regulations and supervision of financial institutions, or maybe
excessive secrecy provisions regarding financial institutions."
"So would that attitude work here to make the Seychelles reveal the
names of the beneficial owners of the company that indirectly controlled
the bank account used to issue checks for sixty million?" asked Laura,
looking at me.
"There's nothing we can do," I replied, "officially."
"And unofficially?" She'd read between my lines.
"Well, there are several ways. We need to do more research. Maybe it'll
get us to the Seychelles after all."
"I'd like that," said Laura blandly. I was unable to tell from her
demeanor whether she'd been picking up on my interest in her, and
whether it might be reciprocated.