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Officials Fight Money Laundering

September 12, 1999

WASHINGTON (AP) _ The rented Lear jet from Florida drops onto little-used air fields on Caribbean tax-haven islands. The passengers pop over to a shopping center full of banks and deposit millions of dollars in a dummy corporation’s account, sometimes using rubber stamps of Minnie Mouse and Goofy as signatures on deposit cards.

A half-day’s business can work up an appetite for a money-launderer. Thus the lunch that follows of grilled lobster and crayfish at a favorite Anguilla haunt, whose owner pulls the fare right then and there from the crisp northeastern Caribbean waters.

Money in the bank. Food in the stomach. Back to the plane, empty suitcases in hand. And back to the cache of cash in the United States _ until the next trip. Almost as quickly, the bank in Anguilla has spirited the money abroad, perhaps to New York or London, disguising the greenbacks’ criminal origins.

It does not take an MBA to exploit the system, explains Kenneth Rijock, a former Miami lawyer who did two years in a federal prison on a money-laundering conviction. He now is a consultant to U.S. law enforcement agencies.

``Even a teen-ager could go down there, open up an anonymous account and set up a business,″ he said in a telephone interview. ``The problem with the Caribbean is that we allow″ it to operate as a haven of criminal secrecy.

An estimated $57 billion is laundered every year, U.S. officials say. Now in the news, with few details and no charges, is one of the biggest money-laundering operations ever in the United States: federal investigators believe Russian gangsters have channeled up to $10 billion through the Bank of New York, the 15th-largest bank in the United States.

Money laundering has evolved since the days when Rijock made his trips to the Caribbean and federal investigators put together the first anti-money-laundering strike force in ``Operation Greenback″ in Miami in 1980.

``That was the free-for-all time,″ said Albert Tellechea, an attorney in Orlando, Fla., who was a federal prosecutor. ``People were walking into banks with paper bags full of cash.″

In a typical operation, Rijock said, he would fly from Florida in a rented jet owned by a World War II bomber pilot. The plane, destined for a Caribbean island, would carry drug trafficker clients and bags of cash.

On arrival, Rijock’s party would meet with someone from a local ``cooperating″ bank, who would help smooth the way through customs.

The ride to the bank was short. The money was counted, quickly, checked for counterfeits and deposited in an account in the name of a dummy corporation set up previously by local lawyers.

The depositors were given signature cards, but they did not sign their own names. In one case, Rijock recounted, two of them used rubber stamps from a toy store with the images of Minnie Mouse and Goofy. Certificates of deposit were issued.

The bank immediately sent the deposited cash by courier to its correspondent bank in New York or London. Eventually, Rijock would transfer the money to big banks in Europe, Asia or Latin America, having successfully disguised its criminal source.

Lunch was next. The Barrel Stay, the eatery with the ocean-foraging owner on Anguilla’s Sandy Ground Beach, was a particular favorite.

``It’s a heavenly little place,″ Rijock said, with Belgian beer and dainty French pastries brought in by water taxi from nearby St. Martin.

Despite its many variations, experts say money laundering always basically works in a three-step cycle: moving illicit money, such as drug trafficking profits, away from direct association with crimes; disguising the money trail; and making the money available to the criminals again with its illegal origins hidden.

Among major money-laundering operations in recent years were:

_The now-defunct Bank of Credit and Commerce International, a Third World institution that allegedly catered to arms smugglers, drug traffickers and terrorists.

_In the largest such case in the history of U.S. law enforcement, the undercover ``Operation Casablanca″ exposed Mexican bankers laundering millions of dollars for Colombian and Mexican drug cartels. More than 100 people were arrested, and millions of dollars seized, in May 1998.

Now, with tighter anti-money-laundering laws, such as the requirement for banks to report customers’ cash transactions of $10,000 or more to federal authorities, launderers have become more sophisticated.

``Each criminal group has different needs and ways to move their financial assets,″ said Michael McDonald, a former senior special agent in the IRS’ Criminal Investigation Division.

For example, the rules have given rise to ``smurfing,″ the practice of breaking down transactions into smaller amounts that do not have to be reported. Instead of carrying bags of cash, money launderers sometimes use bank drafts and wire transfers. They move illicit profits through a series of bank accounts to make them appear to be legitimate business proceeds.

New tricks include creating dummy corporations or avoiding banks by using money transmitters like Western Union and storefront businesses that cash checks, sell money orders and traveler’s checks and exchange foreign currency.

A complex new scheme called the ``black-market peso exchange system,″ which launders an estimated $5 billion a year in drug profits, involves purchases of U.S. products _ notably household appliances and cigarettes _ for export to Colombia.

Colombian peso brokers, who act as middlemen in the scheme, give Colombian importers IOUs in exchange for pesos. The pesos are used to buy U.S. dollars from drug cartels, providing the cartels with clean, usable currency. Then, the brokers use the dollars to buy the goods and smuggle them into Colombia on behalf of the importers, who thereby avoid high government tariffs and taxes on foreign currency exchanges.

``It’s a very hard thing to detect,″ former prosecutor Tellechea said. ``On its face, it’s a perfectly valid transaction.″