This article is Part II of a 3-part series that is intended to provide information about precisely how money laundering works on a global scale. Because my personal take is that, if the criminals know how to do it, why not all of us? And the truth is that, without such parity of knowledge, we have no hope of ever stopping them.
So, pay attention, won’t you? If you do, I promise that I will reward you with a gripping tale of international intrigue in exchange!
But let’s all get caught up on the facts first. As I explained in part I of this series, there are three different stages in the money laundering cycle: “placement,” “layering,” and “integration.” Part I of this article addressed the “placement” stage of the cycle, which, true to its name, involves the “placement” of dirty cash from crime into the legitimate financial system.
We last left our tale of international intrigue with the information provided in a Daily Mail article headlined French police raid drug and money-laundering gang linked to English Premier League. And while I cannot personally verify the accuracy of this information, taking it for the moment as true, it provided us with the following beginning to our story:
Two English men were caught smuggling large quantities of cash out of England, into other European nations, using luxury cars that had been specially equipped with hidden compartments to conceal the cash.
The men who were arrested for smuggling this cash claimed that the cash “was linked to agents or other parties involved in the lucrative – and notoriously unregulated – trade in footballers.”
Specifically, the “criminals claimed the millions of used notes came from Premier League football ‘transfer bungs’”
One alleged perpetrator “claimed that the money in his Mercedes was provided as part of a ‘bung’ connected with the transfer of a player to a leading English club, police said yesterday….
‘He told us that all the money came from professional footballer transfers in England,’ added the investigating officer.
‘Those arrested say they had links with big names in the world of Premiership football.’”
So, dirty transfer cash, secret compartments… what exactly is going on here? In Part I of this article, I expressed the opinion that, if the information above was correct, it represented a quite clear example of the attempted “placement” of dirty cash as required to initiate the money laundering cycle. Once the cash was “placed,” then we would enter the “layering” stage of the cycle.
But our ultimate goal here is just to follow the cash from beginning to end. So we must first ask ourselves, where were they going to “place” it? And at this point we hit a little snag….
In reality, there are so many places that they could have “placed” this cash that I have absolutely no idea where they did it. However, just based on the law of averages, the most likely locale is Switzerland, which is the undisputed global money laundering capital of the world, and which is not too far away… So, from here on out, I might not be telling you exactly what happened to this particular cash.
However, I found the information about a certain criminal courier network for the transport of dirty cash (from a lawsuit filed by the European Community against RJR Nabisco) to be quite interesting in relation to the above article.
Specifically, the method that the above Daily Mail article described as being used to transport the EPL transfer cash appears to be the very same method that the EC lawsuit documented as being used by the Italian Mafia for the “placement” of the cash proceeds of crime, which involved:
“an organized group of ‘money couriers.’ These couriers would receive criminal cash in Italy and other parts of Europe, and then illegally smuggle the cash out of Italy and into Switzerland…
RJR used of an organized group of money couriers whose function was to receive criminal proceeds in Italy and other parts of Europe and to illegally ferry those proceeds out of Italy and Europe to Switzerland, where the couriers would hand the cash proceeds over to the Swiss money-laundering broker organizations, such as the ‘Alfred Bossert organization’ and the ‘Gegis money-laundering broker organization.’”
So, let’s just hypothetically assume that the dirty cash in this case was headed for Switzerland, for deposit with a “money-laundering broker organization,” which would then initiate stage II of the money laundering cycle:
Layering – In essence, the “layering” process of the money laundering cycle involves nothing more than moving the dirty money through as many bank accounts and investments as possible, so that the path is confusing and makes no sense, and nobody will ever be able to figure out exactly where the money came from.
So, I’m not going to worry too much about showing you exactly how the layering process works. And the reason for that is because, consistent with its design, the process is confusing and generally makes absolutely no sense. However, I do want to show you enough about it that you can recognize it when you see it.
Also, you should be aware that there is a flourishing shadow banking industry in Switzerland that will conveniently handle all of your “layering” needs for you, so long as you have the ability to pay the right price. Here’s how it works….
Basically, a criminal organization (like the Italian mafia in our example above) will use couriers to get their dirty cash to a Swiss money broker, and then deposit it into their very own “bank” account with that broker. Same as a regular bank account, just “off the books.”
From there, all they have to do is specify a bank account where they want the dirty money to end up. The money broker will then run it through their own series of accounts to disguise the origin of the funds, before it ends up in the specified account, origin unidentifiable.
In the RJR Nabisco lawsuit, the idea was that various Mafia outfits were earning cash proceeds from crime, and they wanted to use that money to buy RJ Reynolds cigarettes. They would then sell the cigarettes, earn the same amount of money back, and their profits would look legitimate. So, the idea of the layering process was that they needed to deposit their money with a broker, “layer” it, and ultimately get it to an RJR cigarettes distributor, who would then release cigarettes to them.
So here is a relatively “simple” example of “layering,” just to give an idea of how it works.
Criminal money was placed into accounts with a company called Mingo Finance Limited, which was registered in the British Virgin Islands. Mingo Finance Ltd had a series of bank accounts in Liechtenstein and Switzerland, in which the criminal money was placed. Mingo Finance used these accounts to transfer the money to Algrado, AG, which was an RJR cigarettes distributor. Algrado would then distribute the cigarettes to the relevant Mafia organization, and transfer the money back to RJR.
Possible Relationship to Football:
Unfortunately, there is no “A-Z” type money laundering case that has ever been prosecuted in football to show us exactly how it works. However, we do have lots of bits and pieces of information that might sound a little… familiar….. after reading the above. I’ll provide some examples of this below, although I must emphasize that I’m not alleging that any money laundering was actually occurring in any of these specific cases.
In the cases that follow the links show the original pages from which we have quoted articles. You will of course know that Mr Redknapp in particular has had a full trial in the UK and been found not guilty of any crime. His case is quoted because it is clear that the prosecution saw something of interest and particular significance here even though the jury did not agree at all.
(From the Independent) “One of Britain’s most high-profile football managers, Harry
Redknapp, flew to Monaco to set up a secret offshore bank account named after his pet dog to receive bungs…
Mr Redknapp…flew to the principality with its tradition of banking secrecy to obscure a money trail.”
(From the Guardian) “Redknapp, 64, had failed to declare the existence of the account for six years even while undergoing a separate inquiry…over a similar payment from his former club, West Ham, over the sale of the player Rio Ferdinand.
When he finally admitted to the Monaco account, after being questioned about his offshore holdings as part of a wider inquiry into financial irregularities in the Premier League, Redknapp had ‘feign[ed] almost complete ignorance of its existence.’
This was despite the fact he had flown to Monaco personally to open the account in 2002, and had named it Rosie 47 after his pet bulldog and the year of his birth…
On the second day of his opening statement, [Prosecutor] Black detailed ‘many and various explanations’…offered…about the payments [which had] been variously characterised as employment income, as a loan, as a gift and in some instances a combination of all or some of them.’”
(From the BBC) “on 13 January 2003, following a fax request from Mr Redknapp, $100,000 moved from “Rosie 47″ to a company in Miami called First Star International.”
Example 2: Porto
According to an article by Bloomberg, “European soccer ruling body UEFA is asking U.K. authorities to investigate two so-called letterbox companies that helped Porto (FCP) fund a player transfer.
For Gool Co. and Pearl Design Holding Ltd. provided finance for the two-time European champion to sign Brazilian striker Walter da Silva for 6.2 million euros ($8.1 million) in 2010, according to Porto’s latest quarterly statement…
UEFA officials said this increases the risk of money laundering because it’s unclear who owns the letterbox companies, which have mailing addresses in the U.K. and seemingly nothing else.”
Example 3: FC Barcelona
As reported in the Economist, “Sandro Rosell, who is now the president of Barcelona Football Club…became a director of Ailanto, a sports-marketing firm in Rio de Janeiro set up shortly beforehand…A week before the Brasília match, the government of the Federal District signed a contract to pay Alianto 9m reais ($4m at the time) for the marketing rights and for other loosely defined services…That deal is now being investigated for padding and corruption….Brasília’s police force has searched Ailanto’s premises in Rio de Janeiro, seizing documents.
Alongside these deals run three others whose purposes are not immediately obvious. The Economist has copies of what appear to be the contracts for all three. One dated March 2009 commits Vanessa Precht, a Brazilian who formerly worked at Barcelona FC and who was Mr Rosell’s partner in Ailanto, to leasing a farm in the state of Rio de Janeiro from Mr Teixeira for 10,000 reais a month for five years. Rede Record, a Brazilian television network, visited the farm in June and could find nobody who had heard of Ms Precht.
Two Brazilian congressmen have called for an investigation to establish whether the deal was a way for Ms Precht to return to Mr Teixeira some of the money Ailanto earned from the Brazil-Portugal friendly.
The other two contracts were signed separately in July 2008 by Mr Teixeira and Mr Rosell with Cláudio Honigman, a financier who is a partner of Mr Rosell’s in a different Brazilian sports-marketing company, Brasil 100% Marketing. Mr Honigman undertook to pay each man 22.5m reais to buy back options on 10% of the shares in Alpes Corretora, a São Paulo brokerage, which the contracts state he had previously sold to them.
A spokesman for Alpes Corretora has told The Economist that Mr Honigman never had any interest in any shares in the company. Mr Rosell and Mr Teixeira declined to comment for this article. Mr Honigman’s lawyer says that he has been unable to contact him. Ms Precht did not respond to our request for an interview.”
Example 4: FIFA
(in the words of three journalists who purportedly refused an invitation to participate in FIFA’s “anti-corruption” efforts. Although, once again, I cannot verify the accuracy of any of their information. I have been able to independently corroborate some, but not all of it. )
This information is directly quoted from the personal website of Jens Weinreich (one of the journalists in question).
“As journalists we have investigated FIFA corruption for many years. We are recognized internationally as experts on the dark world of Joseph Blatter and his associates, inside and outside FIFA.
We have been invited to co-operate with Joseph Blatter’s so-called ‘reform process’ at FIFA.
It is absurd that Blatter, who has benefited from the explosion of corruption during his tenure as FIFA General Secretary and President and who managed the kickback scandals for at least two decades, is controlling this ‘clean-up’ scheme. It is created by Blatter to protect him and those close to him. His pretence of a ‘road map to reform’ is risible…
FIFA’s published accounts are a disgrace, designed to disguise how football’s money is spent – and on whom. KPMG should be replaced by an auditor committed to transparency.
Publication of all confidential management letters from auditors KPMG since 1999… These contain explosive evidence about misuse of FIFA funds and criminal money-laundering through FIFA’s Finance Department…
Investigation of allegations made in Argentina that FIFA finance committee chair Julio Grondona controls offshore accounts, mostly in Switzerland, containing $120 million. There seems no obvious source of this wealth.
Investigation is long overdue into how Chuck Blazer could simultaneously be both Treasurer and General Secretary of CONCACAF – and the secret payment to him of $10 million in recent years as ‘commissions.’ Have his offshore assets come from FIFA funds – including his vintage Mercedes car registered in Zurich in FIFA’s name?
Re-open the investigation into Jack Warner and extend it to embrace every payment of any kind since 1998 to Warner, members of his family, companies owned by him including Simpaul travel agency, the CFU, CONCACAF and the João Havelange Centre of Excellence…”
To conclude, I would like to thank any and all of you who took the time to read this far. I will be more than happy to answer any questions in the comments section.