Luxury handbags, bottles of salad dressing and wads of cash – how billions of dollars are
You wouldn’t guess that some of the Chinese tourists you see buying up luxury handbags by the trolley load in Bicester Village on a Saturday afternoon were cogs in the global money-laundering wheel.
You’d think they were just shopaholics who love swanky labels and are at their happiest in a photogenic Oxfordshire retail park.
Between 2 and 5 per cent of the world’s GDP is money being laundered
Yet, as Oliver Bullough writes in his thoroughly researched and urgent book about the world’s failure to crack down on the global money-laundering racket, many of those shoppers and their handbags are a key link in a chain connecting Chinese and European criminals.
Criminals in China deliver cash to a collector, who packages it up and hands it to students travelling to the UK to study. The students are instructed to buy the handbags and send them back to China. ‘Handbags flow from Europe to China, while drugs or other illicit goods flow out of China, often to South America,’ Bullough explains. ‘Criminals there then ship the drugs to Europe, completing the value transfer circuit.’
The problem, when it comes to cracking down on this trade, is that the people buying handbags are not themselves criminals, and there’s no reason to be suspicious of them. What’s more, the retailers are making handsome profits from the sales, so why would they want to raise any concerns?
Police forces have tried to clamp down, warning students of the risks they face in allowing their bank accounts to be used for moving tainted cash, ‘but there’s no suggestion they’ve put a dent in the problem’. The students go back to China, and ‘once they’re out of the country, they’re beyond anyone’s reach’.
That’s just one of many jaw-dropping examples of the elusiveness of the iniquitous global money- laundering industry, which promotes human misery on a vast scale in the form of (among other horrors) deaths from drug overdoses, extortion and human trafficking.
Even salad dressing is a part of the murky world of money laundering
It’s thought that between two and 5 per cent of the world’s GDP is money being laundered: ‘washed’ through the financial system until its criminal origins are lost without trace.
And banks and governments seem to be utterly clueless when it comes to properly cracking down on it.
T he book’s title, Everyone Loves Our Dollars, is a quote from an anonymous person in the US Treasury Department, when an economist pointed out that the US’s continuing manufacture of $100 banknotes is actively helping criminals, terrorists and tax dodgers to make the world poorer and less safe.
‘But why would the US want to stop selling something that’s so popular?’ the Treasury man asked. ‘Everyone loves our dollars.’
Bullough visits a money-printing facility in Fort Worth, Texas, and sees for himself the massive output: billions of banknotes rolling off the presses every year – and this in a world where hardly any of us pays for anything with cash any more.
But cash is still ‘the criminal’s best friend’. In wads of those high-denomination notes, it travels round the world, hidden in container lorries and ships, in corrugations of cardboard boxes, in the gearboxes of trucks, behind the insulation in the hulls of yachts, inside nappies and kitchen rolls.
A useful start, Bullough suggests, would be to stop the production of high-denomination notes. (The €500 note was, thankfully, discontinued in 2019.)
You might think that the legions of compliance officers employed by banks to sniff out anomalies in financial transactions would help in the fight against money laundering.
But Bullough discovers that ‘compliance’, as it’s called, is useless when it comes to getting to the heart of the problem.
The main thing banks are terrified of is being fined for failures in vetting account holders. For this reason, bank databases are flooded with Suspicious Activity Reports (SARs), and compliance officers spend most of their time checking through endless false positives, just so they can be seen to be going through the motions of clamping down on money laundering. This is known as ‘covering your a***’.
Everybody Loves Our Dollars is available now from the Mail Bookshop
What’s more, because of banks’ frenzy to be seen to be stamping out money laundering, innocent clients are ‘debanked’, and whole small countries blacklisted and frozen out of the global financial system, while rich individuals and large countries somehow get away with it.
Homing in on one salient example of this unfairness, Bullough mentions a charity run by kind Somalis in Wales, which was stripped of its bank account just for being Somali and a charity in the paranoia that followed the 9/11 attacks. Lots of small charities with Muslim connections were similarly frozen out, and remain so.
It’s governments, not banks, Bullough argues, who should be taking the lead in the fight, by paying for ‘foundational research’ on how dirty money moves, is hidden and is spent.
‘Governments should make the same demands on themselves that they make on financial institutions.’
That effort to clean up banks has merely encouraged criminals to find new ways of moving wealth around the globe.
A s well as in cash, it’s happening in another under-reported activity: ‘Trade-based money laundering’.
Criminals send a billion dollars’ worth of cocaine from Colombia to the US, and a billion dollars’ worth of manufactured goods flows in the opposite direction.
‘Containers are opaque and can hide anything,’ Bullough explains. ‘A tiny fraction of them are inspected by customs. And ports are often controlled by criminals who bribe or intimidate customs officials.’
The goods on those container ships are over-invoiced, in order to warp and confuse: bottles of salad dressing are shipped across the world, unchecked, at $750 a bottle, or razor blades imported from Panama at $29.35 each. It’s estimated that a trillion dollars of wealth moves across the system in this way every year.
I could have done with a few diagrams with pictures of ships, salad dressing, criminals, casinos and wads of cash, connected by arrows, to explain exactly what happens. The system is designed to confuse, and it certainly does.
Overall, Bullough paints a memorable and depressing picture of a world sullied by a criminal system that has become totally embedded. And now there’s a new method for moving money, making the trade yet more elusive: cryptocurrency, which enables ‘instant wealth transfer outside the knowledge of government authorities’.
The criminals are always one step ahead. It’s time for governments to take action, an exasperated Bullough writes. ‘Without money laundering, there would be no kleptocracy, no cartels, no fraudsters, no people traffickers, no child pornographers, no illegal trade in wildlife. The world would be improved immeasurably.’