MONEY LAUNDERING IS A MADE UP CRIME
© Jeffrey Robinson 2025
Money laundering is not a real crime.
Apparently I raised some eyebrows a few years ago when, as the opening keynote speaker at an ACAMS conference, I made that statement.
Yes, of course, I'm well aware of laws that penalize money laundering, which by definition, makes it a crime. But is it a real crime just because Congress and various parliaments say it’s a crime?
I suggest that murder, extortion, fraud, grand theft auto, assault and battery, bank robbery, truck hijacking, kidnapping, counterfeiting, home invasion, arson, drug trafficking, piracy, rape and racketeering are real crimes. And that money laundering is more akin to made up crimes like jay-walking.
After all, what’s inherently illegal about crossing a street in the middle? For that matter, what’s inherently illegal about using the legitimate financial system to obscure the origins of your money?
With that in mind, I suggest that money laundering, the made up crime, is less important than money laundering, the symptom of other crimes.
Let’s say you’ve got some money you want to hide from your spouse. You Smurf cash into banks, always keeping below reporting limits, consolidate it in an offshore bank in the Caribbean, move it in and out of various Luxembourg shell companies and Liechtenstein “anstalts”, and ultimately stash it in a corporate account in Singapore.
Technically you risk a prosecution because Congress and various parliaments have said that placement, layering, and integration constitutes money laundering. You argue, I’m simply using whatever legitimate banking facilities are available to me to obscure the true origins of my money. Good luck trying to convince a motivated prosecutor that there’s not something else going on.
And therein lies the reason Congress and various parliaments made up the crime of money laundering.
Because there is always something else going on.
I think it’s time to argue that we need to spend less time worrying about the money laundering and more time focusing on the real crimes underlying it.
If someone has hidden assets to keep it from the taxman; or, if someone is hiding money from the cops because it’s the proceeds of drug trafficking; or if someone is funneling corporate funds through offshore companies to protect the corporation from the political bribe you’re about to make...
... follow the symptoms to the tax evasion, the drug trafficking and the corruption.
One of the odd characteristics of pursuing money laundering, is that we never solve it. We simply displace it, move it along to somewhere else. When you understand that money laundering is present because there is a criminal business generating the money that needs to be washed and, then, you go after that criminal business, the laundering becomes just another add-on to the prosecutors’ list of charges.
Unfortunately, as far back as the 1990s, we’ve been following the money laundering and ignoring the symptoms.
Take for example the story of two hapless money launderers several years ago in Florida.
A 32-year old Colombian named Beno Ghitis-Miller set up a currency business in Florida called Sonal. He opened a corporate account at the Capital Bank in downtown Miami and during the first seven months deposited huge amounts of cash, occasionally as much as $1 million.
That spring, a man named Victor Eisenstein, whose business card indicated that he ran a company called American Overseas Enterprises, waltzed into that bank and introduced himself as Beno's agent. Eisenstein told officials that he too would be making deposits for Sonal.
The sums were quickly so burdensome that within a month, Capital Bank notified Eisenstein it could no longer accept his money. Someone at the bank was having doubts about these guys. Eisenstein objected, but the branch manager said the decision was irreversible. So Beno went over the manager's head and met with the bank's president.
Sonal had been paying Capital one-eighth of one percent for sorting and counting each deposit. To stay friends, and also because it was so profitable, the bank’s president offered to keep the account, but only if Sonal upped the commission to one-half of one percent. Beno agreed.
Over the next several months, as cash deposits approached $2 million each, the local manager again expressed concerns. This time, though, it had nothing to do with the smell of the money. It was because his branch couldn’t handle all that cash. He suggested Beno and Eisenstein should move to a better-equipped branch, and they did.
The manager at Capital's North Bay Village office welcomed Beno by offering him office space upstairs. Beno accepted, which meant he could now make his cash deposits without even crossing the street. Before long, Beno and Eisenstein were depositing several million dollars in that branch, three and four times a week. When anyone asked, which hardly anyone did, Beno explained that the money was connected with exchange transactions involving the import and export of agricultural products.
Clearly, that was enough to satisfy the bank. No one at the branch ever bothered to walk upstairs to look at Sonal’s offices. If they had, they might have asked why a company dealing in so much cash had no security. There was no armored door. There were no video cameras. There was hardly had any furniture. There wasn't even a safe.
No one bothered because the only thing anyone at the bank cared about were the big numbers being deposited. The more that came in, the more the manager looked like an aggressive young banker on the way up. In fact, the folks at Capital liked Sonal's business enough to negotiate a flat fee for sorting and counting cash - $300,000 per month.
Over one specific eight month period, Beno and Eisenstein and Sonal's so-called staff – 37 Spanish-speaking guys who had only nicknames - deposited $240 million at Capital. That included the $7 million they dropped off in the last two days of their operation. When the US authorities finally said enough and shut them down, Sonal’s cash deposits were averaging $1.5 million per day.
When the feds finally busted the laundrymen, the traffickers found other laundrymen who would handle their business. Busting the traffickers would have put more than just few laundrymen out of business. Unfortunately, forty years later, that lesson still hasn’t been learned.
The HSBC money laundering scandal is a perfect example.
In 2012, the third largest bank in the world – headquartered in London, England - admitted that at least $818 million had flowed through HSBC accounts held by active members of Mexico’s Sinaloa cartel.
Falling under the direct scrutiny of Britain’s Financial Conduct Authority (FCA), the usually comatose regulator collectively hid under their desks and pee'd their pants, far too afraid of taking on such a gigantic institution. It was left to the US Government who, succumbing to desperate pleas from the Chancellor of the Exchequer directly to the Secretary of the Treasury, begging him not to be too harsh, decided to levy a fine of $1.92 billion.
Did anyone anywhere make a genuine effort to punish the Mexican cartels? No. Did anyone anywhere make a genuine effort to punish Mexican political corruption which permeates that country and fosters the atmosphere in which this flourishes? No. Did anyone anywhere prosecute HSBC's bankers? No.
The International Consortium of Investigative Journalists (ICIJ) – an organization well worth following on Linked In: https://www.linkedin.com/company/international-consortium-of-investigative-journalists/ - reports that a group of concerned prosecutors at the US Department of Justice had prepared 175 criminal charges against the bank. They were overruled and no one was prosecuted.
More importantly, did anyone try to eliminate the symptoms that were clearly indicated by the most gigantic money laundering scandal ever?
No.
It turns out to be a much quicker fix to deal with a made up crime – which generates fines and fills government coffers - than to prosecute real ones.
But that’s hardly the only problem with money laundering, the made up crime. The gatekeepers, who facilitate it and could therefore stop it... being the bankers, lawyers, accountants, company formation agents, brokers and others... have no incentive to do so. It has gotten so bad that some gatekeepers are reverting to a “just tick the boxes” approach, without any understanding of how they are undermining the effectiveness of serious AML programs.
Case in point, a young assistant banking manager at my local Chase branch in Manhattan. I’d gone in one afternoon in December to withdraw $500 in cash from my checking account, using the ATM that is right there in the front of the bank, next to the tellers. It spit out ten $50 bills. I needed fifteen $20s and twenty $10s. So I went up to a teller, who could clearly see me at her ATM, and asked her to break down the bills for me, exchanging ten pieces of paper for 35.
She asked for two pieces of identity. I asked why? She said the bank needed to establish my identity and the source of the cash, as part of their anti-money laundering protocols. I suggested that was ludicrous. So she summoned a young (30ish) assistant manager who showed up with a uniformed bank security guard. He wanted to know what the problem was.
I explained that I’d just used the ATM to get cash and needed smaller bills. He explained that as part of their AML requirements, they needed to know who I was and the origin of the money. I pointed to the ATM and showed him my receipt. He said that was insufficient. I asked him what he knew about money laundering. He answered, “Surely more than you.”
Finding that funny, and after assuring him that he did not, I asked if, in his one or two hours worth of AML training, he’d ever heard of the word, “consolidation.”
He insisted he was well versed in every aspect of money laundering.
I assured him he was delusional. “Why would a money launderer exchange ten pieces of paper for 35 pieces of paper, when what money launderers needed to do is exactly the opposite?”
He suggested if I wasn’t going to cooperate, the security guard would see me out.
Because there is never anything to be gained by arguing with arrogant idiots, I showed him my driver’s license and my Chase credit card. Victoriously, he nodded to the teller, giving his approval to nullify my lame attempt (in his mind) of laundering money.
Frankly, I can’t blame him for being ignorant. I can certainly blame him for being an asshole, but not for him being badly trained.
That’s down to the trend these days away from training staff on the realities of the made-up crime – away from risking to insult a client by actually doing something to make it more difficult for bad guys to succeed – and instead, not spending money in non-revenue producing areas, such as AML. It’s faster, and less expensive to hand staff a bunch of boxes to check. They don't need to know why the boxes need to be ticked, or what the boxes are, just tick the boxes! They don't need to understand that this has nothing to do with reducing money laundering, but simply serves senior managers, who are rightly concerned with the realities of reputational risk, to cover their own sorry asses.
*****
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