Customer Reviews

The Washing Machine: How Money Laundering and Terrorist Financing Soils Us

5 star:		(4)
4 star:		(0)
3 star:		(2)
2 star:		(1)
1 star:		(1)

 

 

The last time I was involved in money laundering was when I forgot I had left a couple of dollars in the pocket of my pants and put them into the washing machine, only to realize when I transferred the pants to the dryer that I had, in fact, laundered some money. Other than that encounter, I had no knowledge whatsoever about, nor experience with, what is now referred to as "professional" and "criminal" money laundering. Of course, my activity was neither professional nor criminal. But, after reading Nick Kochan's book, "The Washing Machine," I now know a lot about a particular nefarious enterprise which is both professional and criminal. And, unfortunately, a continually growing threat to world peace and security.

Mr. Kochan is just the right person to write this book. An investigative reporter, Kochan has investigated a number of financial frauds and scams for many years and has written for such prestigious publications as "The Economist," "Financial Times," and other well-respected media. He is also a well-known broadcaster who appears regularly on the BBC television and radio networks, and has served as a consultant to a number of British and international corporations on political and economic risk.

Many ordinary readers may not at first see the relevance of the money-laundering problem to their daily life. Kochan will convince you otherwise. The problem is truly serious, non-endemic, and affects us all in a very direct way. Moreover, money laundering is not just a matter of "criminal" activity anymore, committed by those who simply want to hide their ill-gotten gains from the authorities, but money laundering is now used by international terrorists to hide their sources of revenue for the financing of their attacks on civilized societies. This raises the bar and should convince any citizen, whatever his or her position in any society or nation, to acquire some information about the current threat in order to help combat what has become an increasingly threatening situation.

We are at risk. The world is at risk. The author of this book makes that clear. He provides the facts and asks the reader to consider the probabilities. Don't know anything about the Russian Mafia? Read and learn. Don't know anything about the reputable banks (many who advertise their services on American television) who "somehow" have been involved in the money-laundering schemes of criminals and terrorists? Read and learn. Don't know that some so-called "friends" of the United States, such as Ireland, Turkey, and Sri Lanka, are involved in terrorist finance? Read and learn. And on and on. You'll be surprised, and maybe somewhat depressed, with the facts that Kochan presents in his book.

You will go deep into a world you probably don't know much about, the world of international business, the whole globalization thing you read about in the newspapers and magazines and most likely don't pay much attention to. You will learn how financial criminals and international terrorists can turn "dirty" money into "clean" money, often with the help of banks and other financial institutions with whom you are personally acquainted. And, you will learn why the battle against this type of activity is so difficult to win.

The author of "The Washing Machine" has provided a number of resources to aid the reader in coming to grips with the subject. I always like it when the author of a nonfiction work provides us, the readers, with more resources to consult or pursue. In this case, Kochan includes a glossary at the end of the book so even the most inexpert of us can grasp any acronyms or terms currently used in discussing this subject. He also provides the reader with references (by specific source!), plus a bibliography and a topic index.

I would think this book would appeal to anyone with an interest in the world economy, the controversial matter of globalization, the threat of international terrorism, organized criminal activity on a global scale, and/or the techniques of money laundering on a momentous scale, an interesting subject in itself. At the very least, this book made me aware of a problem that appears to be ubiquitous in today's world. Maybe more of us should pay attention to it. Before it is too late.

As some one who in their job has to consider the impact of financial crime and anti-money laundering (and not just anti-terrorist financing), I believe the importance of books like this cannot be under-estimated. Allowing the decline of financial banking systems by recycling the proceeds of crime plus inadequate international controls allowing the transfer of the proceeds of kleptocracy governments (the Abacha administration in Nigeria being the main one covered here) and causing the destruction of their domestic eceonomies, has a real domino effect on the robustness of the global economy.

The book covers all the main signposts and cases seen in recent years and so in terms of content is spot on for the historical aspects. The core problem and why this book fails as a good read or a primer for action is the author comes across as totally overwhelmed by the material. Chapter after chapter seems an attempt to brain dump all the data he has read in his research on the specific subject. This is demonstrated by each chapter relying heavily on a few key government papers or Reports of Enquiry. The consequence is a very piecemeal style of writing and the fact that so many chapters have numerous references to content in other chapters shows a lack of order and discipline in compiling and blending the themes and overall story.

As a general background read and primer to the subject it is fine though for people who do not encounter such financial crime and laundering in their work, better use of some simple examples and diagrams to explain the scams would I think have helped considerably, especially on the use of cross border flows and sham structures.

The book by the end is heavy on case data especially Citibank who come out very badly in their actions over the years but light on how effective the many checks and balances put in by regulators since 9/11 especially could be applied to work better. One cannot help but feel the current regimes in many countries will only catch the small fry and the incompetent and a radical rethink is needed. The end story of how the Irish republic government has applied different tactics relying on extracting money and assets off the crooks than putting them in jail initially is one of the few cases I have seen of such a rethink to date.

The Washing Machine takes you inside the extremely convoluted world of shady financial deals and shell games with money--commonly known as money laundering--on an international scale. Kochan provides dozens of case histories, and explains how each of them worked. He also explains, in detail, how particular operations funded particular terrorist groups, who did what, and how they got caught.

Kochan doesn't just make the case that big money laundering operations finance terrorism and let it go at that. He also shows the deleterious effects on national economies. Nor does he simply talk about money per se. He provides the full picture of how terrorists use everything from diamonds to cigarettes to fund their operations. Kochan also explains what law enforcement agencies, banks, and other concerned parties are doing to crack down on the fraud, corruption, and theft that are part and parcel of the money laundering problem.

He even touches on corruption and complicity within government agencies. In the United States, this is an enormous problem (and well-documented)--though Kochan doesn't go there.

He does provide us with a useful glossary and an impressive bibliography. The fact this book is very well researched becomes evident shortly after cracking the cover. You probably have an opinion about September 11, the Bush administration, the Iraqi War, the P.A.T.R.I.O.T. Act, and several other of today's issues. If you want an informed opinion--rather than just an opinion--on these issues, you need the information contained in this book. You may not change your viewpoint, but you will at least have a viewpoint built on something other than political ether.

Now, did you notice I did not write "Patriot Act" in the preceding paragraph? Before reading this book, I would have. I didn't know that the name of the act is an acronym (and most people don't know an acronym must, by definition, spell a word--it isn't just a mnemonic or abbreviation) for Providing Appropriate Tools Required to Interrupt and Obstruct Terrorism." If you already knew that, great. You'll find plenty of other things to learn in this book.

Where this book falls down is its writing quality. The mangled syntax and incorrect punctuation render some parts of it incomprehensible and others just hard to read. If Kochan is planning a second printing, he should first have a good copyeditor has correct the huge number of mechanical errors in the text. Standard Written English (SWE) and style guides exist for a reason.

So, it's an effort to read this book because of editorial sloppiness. However, the research is thorough and the information is eye-popping. Sometimes, you have to work a little harder for some things--but the payoff is worthwhile. The understanding you can obtain from this book is one of those things.

With huge swaths of the world's economy taking place in the black market, money laundering has turned into an intractable problemw with wide-ranging consequences. British journalist Nick Kochan offers an intriguing study of this shadowy world. He argues that laundering was an overlooked problem in the U.S. before the Sept. 11, 2001, attacks pushed the issue to the fore. Indeed, he says, Americans were oblivious to the effects of dirty money. Kochan details the sordid sagas of Russian gangsters, Colombian kingpins and corrupt Mexican bankers. At times, his broad approach hinders his prose, and his examples aren't always as compelling as they should be. Still, we recommend this eye-opening study to anyone who deals with the global movement of money.

One of the best reads of the year, The Washing Machine details how various banks, politicians, terrorists groups, black market dealers, and others launder illegal money to give the appearance of coming from legitimate enterprises. The author is not shy about naming specific banks, groups, and techniques that have been used and follows the money trail from beginning to end. Some of the companies and groups mentioned include the Bank of New York, the Russian Mafia, Al Qaida, and offshore financial entities in Ireland, Turkey, Sri Lanka and other places. The final chapters deal with what the various countries and law enforcement are doing today to help curb the problem. This is a real education in what goes on in the underworld of illegal activities and how the income gets reintegrated back into business enterprises that appear legitimate. The Washing Machine is a highly recommended read for anyone interested in the financial underworld.

Kochan's book is a good grounding introduction in the phenomenon of international money-laundering and I would reccommend it for any individual starting off in the area of financial crime. However, for the experienced practitioner nothing in the book is new and indeed some of the case studies presented by Kochan are in places more anecdotal than scientific. Therefore, if you are seeking advice and guidance on the features and characteristics of the most up to date thinking in the area I would reccommend more academic publications such as the FATF reports. Nevertheless the individual case studies are illuminating even if they do indulge a little in the sensational.

The perverse pursuit of the terrible twin peaks of power and pleasure has, from time immemorial, driven human beings to engage in truly astonishing flights of creative genius, not least with regard to matters financial. Aficionados of the money launderer's art will find much to engage them in The Washing Machine as Nick Kochan, the distinguished investigative journalist, cruelly and clinically strips away not only the glittering corporate faade of many an august institution to reveal the greedy, cynical inner launderer, but also the glittering Armani suit of many a Mafiosi cash smuggler to reveal the commodiously customised inner boxer shorts.
Kochan takes absolutely no prisoners in this pitiless forensic dissection of the modus operandi of both primary and secondary players of the game - the criminals and terrorists and those who provide succour and assistance in the intricate business of transforming the fruits or means of their nefarious activities into apparently legitimate sources of income to be safely deposited in one of the many idyllically located, fabulously discreet and oh so conveniently "tax neutral" offshore jurisdictions.
For those of a Panglossian disposition - who inhabit a world in which an occasional proverbial bad apple may turn up in an otherwise virtuous corporate or political barrel - this book may prove to be a truly disturbing read.
It will, however, be warmly welcomed by those who affect a more jaded attitude to world affairs as an assiduously researched and deeply satisfying rounding up of both the usual- and some of the more unusual - suspects.
But for those who are perched precariously on the fence that lies between these two extremes and are engaged in the anti- money laundering industry as regulators, practitioners or educators, this book will prove to be an invaluable resource.
The first UK anti money laundering statute, the Drug Trafficking Offences Act of 1986 simply addressed the obvious target of dope dealers seeking to slide duffel bags stuffed with cocaine dusty fivers over the counters of their local high street banks. In the mid 1980s, traditional organised crime groups, such as the Sicilian and Detroit Mafia were very much in the frame of those seeking to outlaw money laundering. The Medin case was a classic example of the use of London solicitors and offshore Jersey shell companies to launder the proceeds of the US Mafia cocaine trade at the rate of $500,000 per week. Meanwhile, the Brinks- Mat bullion robbery was one of the high profile cases from that era which created pressure for the scope of laundering liability to be extended beyond merely the proceeds of drug trafficking. Members of that syndicate notoriously would withdraw enormous sums of money in cash and carry it from high street banks in black bin liners to the extent that so many notes were supplied to the regional office of one particular bank that the Bank of England had to notify the Treasury. No alarm bells were sounded by any of the institutions involved about the massive quantities of gold or money that were being moved around.
It is a measure of just how radically the legal climate has changed that such a state of affairs would be utterly unthinkable today. The notion of money as a commodity exhibiting the characteristic of absolutely negotiability as a means of exchange - an instrument which may be taken completely free of the equities - whose origins are of no concern to the transferee - is but a distant memory.
As those of us who have reason to deal with these matters are only too painfully aware, in the past twenty years the areas of potential liability for money laundering have been remorselessly extended to encompass an ever widening range of occupations and professions.
Those seeking examples and case studies to illustrate the money laundering potential and propensities of such businesses whose owners and employees may be liable if they fail to take adequate cognisance of the provenance of their customers' funds are amply catered for in The Washing Machine.
To take, for example, the current Money Laundering Regulations list which -apart from the obvious traditional financial institutions related activities -now includes, inter alia:

* Provision of accountancy and auditing services: ( Russian mafia p 18)

* Provision of legal services: (launderers in London : p 260 )

* Operating a company formation business: ( BoNYGate case chapter 2)

* Bureaux de change and money service operators :-( Ussama El-Kurd case p 227)

* Operating a casino: -( both in the real world and cyberspace pp 7, 134 and 272)

* Estate agency work: -(the Provisional IRA p 86)

* Dealing in high value goods:..(paramilitaries and their BMWs p 88)

* Art auctioneers: (the Russian Mafia p 8)

But this is just the icing on the cake. The book is structured to cover four principal areas of concern:- the Russian criminal oligarchs; terrorist financing; black markets for the supply of illegal goods and services, and the banks and other professional gatekeepers whose services are utilised to assist in the laundering process. The fifth and final part provides an astute critical analysis of the response of law enforcement agencies in the UK, the US and around the world.
While the ending of the cold war may have brought a peace dividend for some it has proved a cruel day of reckoning for many in the former eastern block. Kochan chronicles the pathos and absurdity of the spectacle of a senior Russian nuclear physicist and a computing expert being reduced to working with the Mafia to market Italian pantyhose through kiosks in Russian towns- all the while paying $1500 per month protection money which did not, in the end, save them from a beating.
This story was one small episode culled from the testimony of a whistleblower who provided western law enforcement agencies with chapter and verse on the business empire of one of the most notorious Russian criminal oligarchs, Semion Mogilevich, whose interests mimicked those of traditional US Mafiosi families, incorporating the sale and transportation of illegal goods and services including narcotics, prostitution and gambling.
However, as one FBI Director noted in a speech to his opposite number in Moscow a few years ago, it took law enforcement in the US 50 years before it finally began to get to grips with organised crime. This was achieved by, inter alia, the introduction in the early 70s of measures such as the increased use of undercover sting operations; the RICO legislation; the Bank Secrecy Act and anti- paperhanging measures such as the creation of the Securities Information Center to counteract the use of lost stolen and counterfeit securities as collateral for loans. This latter reform met with stiff opposition from the Chicago Mafia who fought the introduction of the SIC in the Court of Appeals on the basis that it would restrict the negotiability of financial paper. They lost, however, as the Court accepted the admitted impediment to negotiability as an acceptable trade off for an effective weapon to use against the Mafia paperhangers. The Russians, he noted, should not therefore lose too much sleep if they had not succeeded in eradicating organised crime after a few short years of a free market economy.
The intricate financing arrangements of Bin Laden's Al Qaida, the Provisional IRA and other terrorist organisations are chronicled in Part 2. While the use of relatively unregulated high value goods, such as African blood diamonds, by terrorist organisations has been alluded to elsewhere, readers may be surprised to discover that Osama also made use of the Yemeni honey trade as a smuggling and money laundering front. Honey apparently enjoys the status of being a particularly useful commodity for the transport of illegal goods as a consequence of its property of extreme stickiness!
Segueing smoothly from honey to honey traps brings us to Operation Casablanca and the use of contemporaneous modes of law enforcement such as electronic surveillance and covert human operations, which have been , pioneered to such devastating effect by US agencies - notably the FBI, DEA and Customs. Operation Casablanca was a massive US sting operation mounted to infiltrate the Colombian drugs money laundering machine being run by a dozen Mexican banks. Before the final denouement and arrest of the bankers they were offered the delights of a corporate hospitality package in the guise of a visit to a brothel, which turned out to be the local police station.
This operation bears many of the hallmarks of the famous BCCI related Operation C Chase sting where the unsuspecting Colombian drug money launderers were entertained to the lavish phoney Florida wedding reception of a pair of undercover US customs operatives. The male members of the party were then cordially invited to withdraw from the ladies to enjoy a hard core porn movie session where they were to meet a similarly ignominious fate - an admittedly rather basic but nevertheless remarkably successful strategy for the rounding up of the usual suspects....
The Brinks- Mat launderers' adventures with cash filled bin liners pale into insignificance when compared with the audacious wholesale plundering of state coffers by African heads of state such as President Sani Abacha who, with the eager cooperation of the friendly State Bank Governor, was in the habit of arranging for bags of cash, typically 15 per trip to be removed from the bank and ferried chez Abacha in an armoured car flanked truck.
Abacha's ill gotten gains were duly laundered in many of the most respectable of the world's financial institutions, including 23 London banks. These banks have escaped the full force of the law by dint of the fact that they engaged in these pursuits before the FSA was endowed with its current enforcement powers. Kochan describes this truly shocking and astonishing episode in excruciatingly intimate detail.
Such depredations make a total mockery of the whole process of government and lend succour to those prone to argue that overseas aid is a simple means of transferring shed loads of cash from poor people in the developed world to rich people in the developing world. This chapter should be read by anyone engaged in banking anywhere in the world.
Given that great wealth and power will always be coveted as the primary conduit to pleasure and even in, some cases eternal paradise, and given that, save the unlikely possibility that one may discover an ability to select one's forbears on the basis of their ability to bestow inherited wealth on their fortunate offspring, there will always be war, crime, corruption, the cooking of corporate books and the manipulation of financial markets. It follows inevitably that there will, of course, always be bankers and other professionals only too willing and eager to offer their services to assist in the sanitising and preservation of the proceeds of such activities in exchange for appropriate remuneration.
Governments and law enforcement agencies may seek to thwart such activities, but so long as politicians and others in positions of power and influence wish to evade taxation, make killings on the markets, obfuscate the financial provenance of their political support, wage wars, operate maverick and highly resourced intelligence services and engage in ideological struggles, the effectiveness of such enforcement will never meet the possibly more exacting standards of those who do an honest day's work and pay tax at source from their incomes.
In writing this fascinating, exhaustively researched and generously sourced book Nick Kochan has forged a powerful weapon with which they can at least come out fighting.


.

This book is, ultimately, a naive and silly approach to a serious subject. I am afraid that the author comes too late to the game and brings too little. Worth a miss.