Transnational Criminal Organizations, Cybercrime, and Money Laundering A Handbook for Law Enforcement Officers, Auditors, and Financial Investigators James R. Richards CRC PRESS Boca Raton London New York Washington, D.C. Acquiring Editor: Harvey Kane Project Editor: Sylvia Wood Marketing Manager Becky McEldowney Cover design: Dawn Boyd Library of Congress Cataloging-in-Publication Data Richards, James R., 1960– Transnational criminal organizations, cybercrime & money laundering : a handbook for law enforcement officers, auditors, and financial investigators / James R. Richards p. cm. Includes bibliographical references and index. ISBN 0-8493-2806-3 (alk. paper) 1. Money laundering. 2. Money laundering investigation. 3. Organized crime. 4. Computer crimes. 5. Transnational crime. I. Title. HV6768.R53 1998 364.16′8—DC21 98-8240 CIP This book contains information obtained from authentic and highly regarded sources. Reprinted material is quoted with permission, and sources are indicated. A wide variety of references are listed. Reasonable efforts have been made to publish reliable data and information, but the author and the publisher cannot assume responsibility for the validity of all materials or for the consequences of their use. Neither this book nor any part may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, microfilming, and recording, or by any information storage or retrieval system, without prior permission in writing from the publisher. The consent of CRC Press LLC does not extend to copying for general distribution, for promotion, for creating new works, or for resale. Specific permission must be obtained in writing from CRC Press LLC for such copying. Direct all inquiries to CRC Press LLC, 2000 Corporate Blvd., N.W., Boca Raton, Florida 33431. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are only used for identification and explanation, without intent to infringe. © 1999 by CRC Press LLC No claim to original U.S. Government works International Standard Book Number 0-8493-2806-3 Library of Congress Card Number 98-8240 Printed in the United States of America 1 2 3 4 5 6 7 8 9 0 Printed on acid-free paper Introduction Criminals and criminal groups have long been associated with their particular law-enforcement counterparts: in the 1930s, Al Capone and his Treasury nemesis Eliot Ness; the French Connection and Interpol in the 1960s; and the Colombian drug cartels’ “kingpins” and the special agents of the DEA in the 1980s. In addition, these criminals and criminal groups have traditionally been indentified with specific cities or countries: the Sicilian Mafia with Palermo; the American Mafia families with New York (the Genovese and Bonnano families), Chicago (Al Capone), and Las Vegas (Bugsy Siegel); the Chinese Triads and Japanese Yakuza with Hong Kong and Tokyo, respectively. And their law-enforcement counterparts have shared the same local or national character. But no longer. The 1990s have seen the local character of these criminal groups and their law-enforcement counterparts changed to an international, or transnational, character, replete with regional and global alliances. They have gone global. What has brought about this change from local or national crime to international crime? A number of landmark events have coincided with this shift: the creation of free-trade blocks such as the European Union and the 1986 North American Free Trade Agreement (NAFTA); the advent of the World Wide Web beginning in 1990; the collapse of the Soviet Union in 1991; and the commercialization of China (including the hand-over of Hong Kong on July 1, 1997). These events have combined with other lesser hap- penings to foster a new species of international or transnational criminal organization. As the activities and interests of these organizations have become more global, they have begun to enter into strategic alliances with other criminal groups to gain access to new markets, and to take advantage of their brethren’s unique criminal skills. As their activities become more sophisticated and more profitable, the means they use to launder money also become more polished. Add the recent phenomenon of cyberbanking to the factors previ- ously mentioned, and it becomes clear that these “bad guys” and their crim- inal activities and money-laundering methods remain a step ahead of the “good guys” and the legal tools at their disposal. Recognizing this gap, authors have been diligently adding to the library of books and articles on how to combat the criminals and their efforts. Hundreds of treatises on the various international criminal organizations have been written by the law-enforcement community for the law-enforce- ment community; hundreds more have been written by government regula- tors for banking and other compliance officers on the subject of money laundering; and hundreds more have been written by computer “geeks” (my apologies to those esteemed writers of computerese — I won’t use the term twice) on computer crimes, wire transfers, and such obtuse topics as clipper chip technology. What has been lacking, however, is reference books that combine all three subjects — criminal organizations, cyberbanking, and money laundering — in a style that can be understood by those who need the information most: financial investigators, law-enforcement personnel, and auditors. Thus, this book. It is intended to give the reader a quick, but thorough, understanding of the basic histories and interrelationships of and between the various international criminal organizations (ICOs) or transnational criminal organizations (TCOs); money-laundering concepts, terms and phrases; the background and makeup of the various state, federal, and law- enforcement and regulatory agencies involved in the local, national, and international fight against ICOs in general and money laundering in partic- ular; the laws and treaties available to these agencies; and the mechanics of wire transfers and cyberbanking, and their corollary, cybercrime. The book’s intended audience includes local, state, and federal law-enforcement person- nel, bank compliance officers, financial investigators, criminal defense attor- neys, and all others who are interested in becoming familiar with the basic concepts of international crime and money laundering. In addition to these basic concepts — the three stages of money laundering, some of the legisla- tion in place, an overview of the relevant federal agencies, the various trans- national criminal organizations, and the basic investigatory techniques — this book also lends some insight into otherwise horrendously complicated topics such as wire transfers, cyberbanking and the BCCI Affair. It is not intended to be a legal treatise or law-review-style work. With these concepts in mind, I organized this book into five sections: Part I, The Bad Guys, describes what I have termed the “big six” international criminal organizations, and, to a lesser degree, terrorist organizations and strategic alliances among these groups. Part II, Money-Laundering Tech- niques, describes the mechanics of money laundering, cybercrime and cyber- banking, and the various financial institutions — categorized as banks and non-bank financial institutions — that criminals use to launder the profits of their illegal activity. Part III, The Good Guys, describes the various federal law-enforcement and regulatory agencies that are charged with ending these activities. Part IV, Anti-Money-Laundering Tools, describes the various stat- utes, forms, and practices in place to combat money laundering, as well as investigatory techniques and examples of law-enforcement efforts, including asset forfeiture. Finally, Part V, The World Stage, aims to offer some insight into the major international law-enforcement agencies as well as 55 of the main countries of the world that are involved in international crime and money laundering, either positively or negatively. They are organized into three groups: the Pan-American countries of Canada, Mexico, Panama, and Colombia; Russia and the former Soviet Union nations; and 50 others. To the best of my ability, the research is current through Friday, March 13, 1998. Most of it was done online. All information was either taken directly from government or public sources, or has been confirmed through those sources. Perhaps the best origins of information have been transcripts of testimony before the various House and Senate committees and subcommit- tees. Other principal sources include the web sites for the various Treasury Department bureaus and offices, the State Department, a number of con- gressional sites, including “Thomas,” and sites for various senators or con- gressmen. I have tried, where possible, to identify these government web sites, and I encourage the reader to explore them also. I have also relied heavily on cases reported in the various federal law reports series, notably federal cases recorded in the Federal Reporter or Supreme Court Reports. Case citations reflect these sources. I have also used a great number of Canadian government sources, including those of the Royal Canadian Mounted Police. I have tried, wherever possible, and with due diligence, to identify all sources. Where I have failed to do so, these were either primary sources or government materials within the public domain. To satisfy certain obligations, please note that this work represents the opinions and conclusions of its author, and