Scroll down for an update....on the kind of money laundering schemes that make tracking so difficult, and so vital.
-------------------------------------------------------------------------------
Whenever I read about the NY Times’ SWIFT article, my blood pressure rises. However, I don’t know what angers me more: the newspaper’s blatant disregard for national security or its post-publication sneering, evading, dissembling, and backpedaling.
It’s clear now that they ruined a perfectly legal and effective project, arranged through a series of sensitive agreements with SWIFT. I suspect that it has also negatively impacted SWIFT’s reputation, and may have greatly curtailed the effectiveness of other countries’ counter money laundering programs. The US works with other countries, and may receive information from them. If they don’t have access anymore, then the article’s impact could have global implications.
The biggest howler belongs to reporter Eric Lichtblau’s backpedaling comments:
It has been common knowledge from 9/11, from President Bush on down, that they're using every means available to trace financial transactions of terrorists. President Bush has talked about shutting down the money pipeline, finding the money, seizing the money. His aides have made that message over and over and over again.
That’s funny, really? Everyone? As an FBI CT analyst I worked on money laundering cases, and I didn’t know about it. According to Lichtblau, the terrorists did know? He's kidding, right?
DC Prowler notes that one reason why the administration is so angry:
According to the Treasury and Justice Department sources, the reporters and editors appeared to have been told that the SWIFT financial monitoring was somehow being undertaken without warrants and without legal supervision. But from the initial briefings, the Times papers were shown information that clearly outlined the search warrant procedures undertaken by the federal government to track some financial transactions.
I am familiar with SWIFT not from my years in the IC, but from my years as a business librarian, and as an author. Some foreign corporate databases have a field for SWIFT codes. Anyone who has ever dealt with an international bank transaction has also dealt with SWIFT. When I first received royalties from my book, the publisher (a British firm called Bowker-Saur) needed my bank’s SWIFT code in order to transfer the money.
SWIFT is a European organization, like an NGO, that monitors banking transactions. They gather specific data from each transaction, like the data fields found here:
Banks cooperate with SWIFT because it provides a universal system of accountability. Why do they need that kind of accountability? Because hundreds of millions of dollars are laundered through international banks every year. Most of it is drug money, government corruption, and white collar crime, but terrorist groups use western banking practices to launder money from legitimate sources to very evil purposes.
The whole purpose of money laundering is to take money from point A and get it to point B without anyone knowing it. This means the money goes into numerous accounts, and then gets transferred, and then is invested, and moved into other accounts, and then it sent over here, and then over there, and then brought together again, and then disbursed into even more accounts, etc, etc, etc. You get the idea. The money goes here, there and everywhere, and finally, finds its way into the charity or company or the human hands it was intended for. Tracking this trail can be time consuming and very frustrating:
In the briefings, Treasury and Justice Department officials laid out the challenges law enforcement and intelligence agencies have had with the traditional and still popular hawala Muslim "banking" system, which is dependent more on interpersonal dealings than on institutions and has been prevalent in parts of the world that doesn't understand the Islamic rules. "Since 9/11 we've gotten a lot better at monitoring hawalas," says a Justice Department official. "That success has forced a lot of the money into the institutional or more traditional banking systems. And that's where SWIFT has been particularly helpful."
This is especially true in the regions of the world that cater to large Muslim communities that require banking rules in line with their faith. Increasingly in countries like Malaysia, large, international banks are attracting billions in Muslim funds, trades and transfers of which could be monitored by SWIFT.
Money launderers know banking systems VERY well, and not just western banking systems. They know Islamic banking systems just as well. I’m not talking about the dreaded hawala (a form of transaction I never fully understood); Islamic banking often provides services similar to that of Western banks, with certain modifications in order to avoid charging interest (which is strictly prohibited by Islamic law).
When the NY Times broke the story, they were reporting it to their readership, but they were also reporting it to the educated, multi-lingual, world-traveled, and very smart men who launder money from the Western banks to the terrorists’ hands. Even by mentioning that the government had made a deal with SWIFT immediately gave these men specific knowledge (through their own familiarity with SWIFT) of what kind of information was being collected and analyzed, and where and what money could be have been exposed to US investigators. As DC Prowler reports:
As for the ongoing investigations that the two Times papers were told of, only time will tell if they have been damaged by the reporting. "Let's put it this way, some of these folks probably aren't using their banks anymore, so who knows," says the Treasury source.
Tracking terrorist money is a laborious and often frustrating work, and I have a lot of respect for the government analysts who follow these wildly complex trails to their ends. Any tool that makes that task more effective helps government analysts pinpoint the real criminals and terrorist financiers. Now that the NY Times has exposed government use of SWIFT data, that tool is gone, and the terrorist financier’s task just got a whole lot easier.
UPDATE
Captain Ed just posted on an example of a complicated non-terrorist related money laundering scheme that involves North Korea and its counterfeiting of hundreds of millions of US dollars:
In fact, supernote distribution channels involve terrorists and criminals in Pyongyang's complex strategy to get hard currency and attack the dollar's value. The US has indicted the IRA's Sean Garland for distributing the supernotes. North Korea also used organized crime "families" to pass the counterfeits inside the US; a Chinese gang linked to North Korea got stung by the FBI in an operation called Royal Charm. The climax came at a fake wedding, where instead of limos to carry the guests to the reception, vans took them to prison instead.
Pyongyang also used a front company called Zokwang, a trading company, to launder their counterfeits through Banco Delta Asia in Macau. When the US found out about it, we blacklisted it and had the assets for Zokwang frozen. The bank itself has barely remained in business, with its legitimate international business all but gone. Zokwang disappeared from Macau, but reportedly still operates from China.
Now that our SWIFT program has been neutralized, fighting the bad guys just got harder.
And there goes my blood pressure again.
Comments