How to launder money

OK, time to think like a criminal! Let’s say you are a syndicate boss for the Chinese triads in a North American city like Vancouver, Los Angeles, or New York; your job is to get a huge, fat stack of cash to your jefe in Hong Kong.  The money you have, millions of dollars of it, was obtained nefariously and you need to not only conceal its existence, but also be able to move it out of the continent to Asia without anyone knowing such a transfer was taking place.  What do you do, and how do you do it?

Easy, put all that wealth on your wife’s (or girlfriend’s) fingers, in her ears and around her neck and no one will even think twice when she walks through airport security. Using a proxy to bid, you purchase one of a kind jewels from a prestigious auction house; your Christie’s, your Sotheby’s, your Bonham’s, etc…  You purchase said jewels at one of these public auctions so that everyone is now aware of how much they sell for and the items have now established a price precedence that can later be advertised.

Bonahms

What exactly did you purchase at auction?  Well, it has to be able to be worn.  So large items like paintings, sculptures, and antiques are all out of the question.  Fine Jewels like large diamond rings, jadeite necklaces, and south sea pearls are what you are looking for.  If one blue diamond ring, or one emerald pendant can be worth several million dollars this is a lot less messy to smuggle out of the country on a flight than the uncouth method favored by amateurs of strapping gobs of cash to one’s body like in The Wolf of Wall Street.

This is how dummies try to conceal the source of wealth. Don't be a dummy.
This is how dummies try to conceal the source of wealth. Don’t be a dummy.

Not only is the risk greater because it is less conspicuous, but it is much harder to argue that cash strapped to your body or stuffed into your briefcase was a family heirloom, or a gift from a lover.  This is exactly what customs and the TSA are trained to look for, but everyone has a wedding ring on their finger, so they ignore these.

In 2009 the economy took a dive and dragged down some rather large players in the scheme game.  Everyone knows the name Bernie Madoff, but Mr. Madoff wasn’t smart enough to actually have made-off with anything.  Others just as awful, but who put a little more thought into their getaway, where able to flee with much of their wealth intact.  Here in Seattle we had our own terrible white collar criminals in the Mastro family.

The details of what the Michael and Linda Mastro did are available on the web, but in short, the Mastro’s developed land, took out loans to do such, and then squelched on about $600 million in loans and skipped town when the real estate market collapsed.  They did all the normal white collar things; set up off shore accounts with dummy corporations in Belize, transferred ownership of all their fine things like their Rolls Royce and their home to said dummy corporations, and then moved to France.  It was this move to France which was almost genius as they put 40cts of diamonds onto a couple of Linda Mastro’s fingers and hopped a flight to Toronto and then on to Paris.  Like I said, “almost genius.”  These two didn’t bother moving to a non-extradition country with their millions of dollars in gems, so in 2012 French authorities arrested them and sent their wrinkly butts back to the states for trial.

Enough about the failings of the Mastros, so now back to you and your triad organized crime wealth and your future success  You need to get $5,000,000 from North America to Hong Kong, what are you buying?  Well, looking at what is up next for auction at Christie’s we find that the the June 16th “Important Jewels” auction in New York has several items that would entice even the most obtuse money launderers.  Well, just purchase the $2,000,000 sapphire ring (lot 232), the $2,000,000 art deco diamond pendant (lot 227), and the $600,000 diamond ring (lot 231) and you’re pretty darn close to $5 million right there (bidding wars are your friend because it drives up the value at the next auction).

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Now that you have your fine jewels and you have put them on the fingers and neck of yourself or your loved one, you need to then charter a private jet to fly you to Hong Kong, because really, who wants to wait in the TSA line like a commoner and then go through regular customs like some poor schlub?  Not you, you’re an important criminal!

Now that you are in Hong Kong you need to turn these gems into cash.  Well, just head to one of the offices of Sotheby’s, Christie’s, or Bonham’s in Hong Kong and put the same pieces of jewelry back up for auction!  The auction houses don’t care so long as they get their commission, and the fact that these items sold recently for an extravagant amount of money means that their perceived wealth is already fresh in bidders’ minds.  A few weeks later you get cut a check for your (almost) $5 million and present this to your triad boss and get a nice promotion and pat on the back.

People don’t realize this, but there is more wealth tied up in just diamonds alone than all of the stock markets combined.  Not every family owns stock, but almost every family (at least in the first world) owns a diamond.  Jewels have been a way of obtaining and moving wealth for thousands of years.  The Maharaja in India, the crown Jewels of England, the entire reason everyone and their mother has tried to invade and control Burma for the past several centuries, all has to do with maintaining and creating wealth via pretty things.  If someone has the jewels, you need to get the jewels.  If you need cash, you either sell them or pawn them, and I don’t care how rich you are; if you need to put a million dollar ruby up as collateral on a loan you just pawned the sucker.

the-jewels-of-the-romanovs-family-and-court

Drug dealers, organized crime syndicates, investment bankers, hedge fund managers, corrupt politicians, all of them, buy and sell fine jewels to launder huge amounts of wealth all the time.  So, when it is your turn be smart and don’t tape cash to your body; it is undignified.

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2 thoughts on “How to launder money”

  1. Super interesting, Houston! I passed this along to one of my AML professors to use as a case study for classes.

    1. Thanks, I thought people would find it interesting as it is something no one really ever considers. Even a 100ct stone worth tens of millions of dollars fits into a shirt pocket and doesn’t trip a metal detector.

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