"A surgeon, an engineer, and a politician were debating which of their professions was the oldest," said the Moon when her beam was brighly lit, after greeting with Basmalah and Salaam. "'Eve was made from Adam's rib,' said the surgeon, 'and that, of course, was a surgical procedure.'
'Yes,' countered the engineer, 'but before that, order was created out of all chaos—and that most certainly was an engineering job.'
'Aha!' exclaimed the politician triumphantly. 'And just who do you think created the chaos?'"
Then the Moon said, "'Robert Torres had it all. He had money. He had fancy cars. He had status. He had all the women he could ever want,' that's what Jeffrey Robinson says in prologue of his work The Laundrymen: Inside Money Laundering - The World’s Third Largest Business. Although it was published in 1996, where the situations, objects and probably even the definition were different from the current time, there's nothing wrong if we review it again.
Robinson then goes on with Robert Torres' story, 'For a guy who started out in life as a welder, a cook and a gas station manager and once thought that the big time meant peddling dope on street corners in the Bronx, Torres came as close to living the American dream as anyone he was ever going to meet.
It started out as a family business. His cousins set him up in 1978. He was 22, a kid from small town Puerto Rico, a place called Guayama, who’d come north to New York to grow a chip on his shoulder because life had dealt him a rotten hand. The great melting pot was more like a cauldron where you could drown. So he told his cousins that he needed a job, that he wanted a shot at making it, and they supplied him with little plastic bags of product.
For a while, Torres thought he had life knocked. He had the cash that he earned and what cash he could steal. But the more he watched his cousins getting rich, buying cars and buying property and keeping pretty women in expensive clothes, the more he realized that dope was strictly nickel-and-dime stuff. He reminded himself that he had ambition, that he had plans. He persuaded himself that selling "shit" to kids and whores and getting beaten up by pimps was not the ticket. So he hit on his cousins for more of the action and they made him a manager. Now he ran other guys hawking stuff on street corners and had more cash in his pockets.
By 1985 he’d been on the streets for seven years. Closing in on 30, he got it into his head that he needed to branch out, to take a better shot at machine’ it. That meant going out on his own. And going out on his own meant heroin.
It took time. And because dealing heroin is a business in which one wrong step can mean a violent death, it also took cajones. But Torres managed to muscle his way in. He was smart enough to do it slowly, step by step. He was also lucky enough to stay alive while he worked his way up.
First he sold product himself. Then he put salesmen on the street to hustle it for him. Then he found ways to import it and he learned the tricks of wholesaling it. He even had his own brand names - Liberty, Blue Moon, Turbo Powder, Midnight Train, Sunshine, White Eagle, White Tiger, and Pink Diamond.
Within five years he had a hundred amigos working for him—he called them Los Brujos, the Warlocks—and commanded twenty distribution centers in Manhattan and the Bronx. To defend his network, he armed Los Brujos to the teeth. He loved guns and every now and then he’d go on a buying spree, such as the afternoon he bought nineteen semi-automatic pistols, thirteen 38 calibre pistols and a classic 45 that he wore in a shoulder holster because it made a macho bulge under his armpit.
He owned twenty properties in New York and forty more in Puerto Rico, including a tourist resort near San Juan. He owned a sand and gravel company, two beauty parlors, a restaurant, a garage, three heavy equipment rental companies, seventy pieces of heavy construction equipment, a wood working shop, a limousine service, a pile of blue chip securities, a 46-foot boat, a handful of professional race cars and a semi-pro basketball team in Puerto Rico that also called themselves Los Brujos.
By the beginning of 1993, Torres was moving close to half a million dollars worth of heroin every day.
That's when the Feds busted him.
They swooped down on him like a heavily armed commando force taking a beachhead, shackled him in chains, rounded up Los Brujos, and started unraveling his financial empire.
Once upon a time, Robert Torres had it all.
He had fancy cars. He had status. He had all the women he could ever want. At the age of 37, he was worth in excess of $60 million.
And all the time, lurking in the background was a man who showed Torres how to grab the American dream by the throat, a former senior officer at the Chase Manhattan Bank. His laundryman.
Money laundering is all about sleight of hand, Robinson goes on, it is a magic trick for wealth creation. The lifeblood of drug dealers, fraudsters, smugglers, kidnappers, arms dealers, terrorists, extortionists and tax evaders, it is perhaps the closest anyone has ever come to alchemy.
Myth has it that the term was coined by Al Capone who, like his arch rival George "Bugs" Moran, used a string of coin-operated laundromats scattered around Chicago to disguise his revenue from gambling, prostitution, racketeering and violation of the prohibition laws.
It's a neat story, but not true.
'Laundering' perfectly describes what takes place: illegal, or dirty, money is put through a cycle of transactions and comes out the other end as legal, or clean, money. In other words, all traces of illegality are scrubbed away by a succession of transfers and deals, so that those same funds reappear as legitimate income.
Romance has since been added to myth with the name Meyer Lansky.
Whereas cronies like Capone, Luciano and Frank Costello made their way through the world using muscle, Lansky - a 5 foot 3 inch, Polish-born, New York-raised, 9th grade drop-out - used his wits to become the highest-ranking non-Italian in what used to be called "The Syndicate." He was affectionately known in those days as the mob's accountant. He is often affectionately remembered these days as the patron saint of money launderers. It's an epitaph that would have amused him.
There are four factors common to all money laundering operations says Robinson. First, the ownership and source of the money must be concealed. There's no sense in laundering money if everyone knows who it belonged to and where it originated after it comes out the other end.
Next, the form it takes must be changed. No one wants to wash $3 million in $20 bills only to wind up with $3 million in $20 bills. Changing the form also means reducing the bulk. Contrary to popular belief, you cannot stuff $1 million into an attaché case. A stack of $100 bills would stand five feet high and weigh over 22 pounds.
Third, the trail left by the process must be obscured. The whole purpose of money laundering is defeated if someone can follow the money from beginning to end.
Finally, constant control must be maintained over the process. After all, many of the people who come into the picture while the money is being laundered know that it is dirty money, and if they steal it there's little the original owner can legally do about it.
That said, there are three distinct stages to the washing cycle. To begin with, there is immersion, which means consolidation and placement. A drug dealer who amasses $5 million in cash is faced with the Herculean task of introducing as many as a million pieces of paper into the banking system. Unlike the counterfeiter, who only needs to get his forged notes into circulation, the laundryman is forced to rely on bank accounts, postal orders, traveler's checks and other negotiable instruments to funnel the cash into the world’s financial system. The second step, known as layering, might also be called heavy soaping. This is where the laundryman disassociates the money from its illicit source. By moving the money between as many accounts as he can - in and out of dummy companies that he's set up around the world for just this purpose - and by relying on bank secrecy and attorney-client privilege to hide his own identity, he creates a complex web of financial transactions that frustrates any audit.
The last stage is the spin dry, sometimes washed funds are brought back into circulation, now in the form of clean, and often taxable, income.
No one knows for certain how much dirty money circles the globe looking to get scrubbed clean, but a reasonably authoritative guess in 1996 put the range from $200-$500 billion. By 2009 that figure has probably doubled. After foreign exchange and the oil industry, dirty money is the world's third-largest business, says Robinson. For this alternate economy to function, two things are necessary, and the coffee pot analogy is still the best one: When coffee is poured from a pot into a cup, there must be enough room in the cup to hold the coffee and enough coffee in the pot to fill the cup. Similarly, there has to be enough money available to create an infrastructure and an infrastructure capable of handling so much money.
The world's parallel, or underground, banking system was apparently invented by the Chinese, who named it fei ch'ien - literally, "flying money." Known in other parts of the world as chop, hundi or hawalah, the system was born out of political turmoil and a hearty distrust of banks. It is almost always based on family or tribal connections and traditionally reinforced with retributive violence.
Another reference to Money Laundering is what was revealed by Varun Chandna, The Curious Case of Black Money and White Money: Exposing the Dirty Game of Money Laundering, published in 2017, taking samples of his analysis from India.
According to Chandna, Money laundering simply means conversion of black money (Dirty Money) into white money (Clean Money) where the black money may not become white legally but appear to have become so.
If someone is concealing his actual money, he is not just concealing that money but also the crime behind that. The crime can be either evasion of taxes or more than that.
If I have got some money and I cannot legally and publicly disclose and elaborate its source, it implies this is my black money.
This money may come from any illegal activity which I cannot disclose to have carried out or may be still carrying out. Examples include Drug Trade, Flesh Trade, Poaching of Animals, Arms Trade, Contract Killing, Theft, Prostitution, Bootlegging (like selling alcohol and other prohibited items illegally), taking of bribes, receiving kickbacks, Illegal Mining, Illegal Trade, fraudulently undertaking a business without its permit/license either wholly or partly or any other illegal activity of any sort.
Dirty money also includes money coming from absolutely legal activities but not disclosed to government in an attempt to save or say evade taxes.
Had there been no taxes, there would have been no black money of this sort. The idea that government wants a slice of whatever you earn leads to concealment even if the tax rate is 1%. In reality though it is many times higher than this 1% and there is an added cost of compliance. Taxes may undoubtedly be necessary but have created liars out of people.
Even if the business and activities are legal but full income and actual expenses there from is not disclosed to government authorities to avoid paying taxes on them, it amounts to black money. This concealment is done by businesses by maintaining two sets of accounts; one to be disclosed to the government and other to be kept for the actual holistic view of business.
If I have got some money and I can legally and publicly announce the source of my money, it implies this is my white money.
This money comes from a completely legal, compliant and transparent source. If I disclosed all my income and its source completely to the government and paid all applicable taxes on the same, there is no fear of being questioned about it.
Conversion of black money into white money is the method or process by which Dirty Money appears to be clean. Due to various rules, regulations and legislations; spending of black money is sometimes more difficult than earning it and this is not a new phenomenon: Long back in late 18th century, there used to be some sea pirates who had their piracy business spanning across Indian and Atlantic Oceans. They were successful in amassing huge wealth by looting the ships that would come their way. After accumulating heavy sums of money, jewellery and valuable commodities, they decided to settle in England but their spending profligacy soon drew the civilised attention towards them and they got arrested.
Then some 100 years later in 1931 in Chicago; Alphonse Capone who was involved in all sorts of crime, be it boot legging, prostitution, bribery, treason, gambling etc. was sentenced to eleven years in federal prison not because of his underworld activities but for non-payment of due taxes on money garnered from of such activities when the crimes undertaken by him could not be proved for the want of evidence and adequate legislation.
Since then the government authorities have got their principle right that if they cannot book the tainted person directly, they should go after his tainted money.
Keeping black money is always dangerous as governments around the world are stressing on its forfeiture as and when detected. Besides forfeiture, there can be penalties for concealment of income which would be over and above the amount forfeited. Secondly, this will take a toll on the criminal personally as investigation against him will strengthen and he will land in prison.
Money launderers of today understand that even though it may be easy to earn the black money, it is not that easy to dispose of the money so accumulated. Accumulating black money will serve any purpose only when it can be utilized to buy the luxuries and worldly pleasures which its value commands.
They know that everything bad could happen to them, if their loot is traced back to them and therefore they use various methods to disguise the colour or source of their black money.
Therefore, for the purpose of its spending and disposition, the black money should appear clean and from legitimate source so that it is not questioned or investigated or even if investigated, it is not caught since it has become clean/ white through the process of Money Laundering.
Chandna gives many examples of money laundering, but we'll just look at a few in the next session, biidznillah.."
