Money Laundering is transforming. Professor Moyara Ruehsen says the criminal enterprise has become a trillion dollar industry involving everyone from biker gangs and drug carters to terrorist organizations and rogue nations. We talk money laundering red flags, interesting cases, how money launderers are using classified ads and NFTs and what TV shows and movies get right or wrong. Then we countdown the Top 5 Bills.

Professor Moyara Ruehsen: 1:45ish

Pointless: 37:01ish

Top 5: 1:00:10ish

https://www.middlebury.edu/institute/people/moyara-ruehsen (Moyara Ruehsen Bio)

Interview with Money Laundering Expert Professor Moyara Ruehsen

Nick VinZant 0:13

Welcome to Profoundly Pointless. My name is Nick VinZant Coming up in this episode money laundering and the best bills,

Moyara Ruehsen 0:21

there are professional money launderers who have clients all over the world when COVID happened and every all the restaurant shut down, that was a big problem. The money launderers couldn't use restaurant receipts anymore as as you know, excuse an excuse for depositing dirty cash and FTS, they are a money launderers dream. And he laundered money for Mexican drug cartels for terrorist organizations, biker gangs in Australia who were you know, selling meth,

Nick VinZant 0:59

I want to thank you so much for joining us. If you get a chance, like, download, subscribe, share, leave a review, we really appreciate it really helps us out. So our first guest is an expert in international money laundering. And that is a trillion dollar criminal enterprise that affects everything from Mexican drug cartels, to biker gangs in Australia, rogue nations and terrorist organizations, it is so pervasive that you may have seen advertisements for money laundering services in the newspaper, and not even realized it. This is Professor Moira roussin. I think I know what money laundering is. But what is money laundering

Moyara Ruehsen 1:48

it is moving money or value. So it could be crypto, for example, with the intention of hiding its origin or its purpose. So for example, you commit a crime like drug trafficking, for example, you don't want anyone to know that this money was derived from drug sales, or else law enforcement could seize it. And so you're going to move it around a lot, and do different things with it. So that it's going to be impossible to trace that cleaned money to the original crime of drug trafficking. But it could also be moving the money around and, you know, hiding its purpose, too. So let's say the money is really going to North Korea, for example, you know, for their nuclear weapons program. And so that would also be money laundering.

Nick VinZant 2:41

When I think of course, like, right, I'm thinking of TV shows like Ozark and those kinds of drug related shows, like that's who I'm thinking of is doing money laundering, right, but primarily, who is doing this,

Moyara Ruehsen 2:53

there are professional money launderers, who have clients all over the world, and they charge commissions of as little as 5% to as much as 20%. And, of course, their clients are all criminals who need to have their money washed, we're seeing more of that we're seeing people who are specializing in money laundering, whereas in the past, a lot of these criminal organizations would try to do it themselves. You know, I wouldn't say you can really generalize about who these people are, or what it is that they're, what type of laundering they're doing. Exactly. You know, there there are, for example, individuals who operate so called mixing services where they're basically laundering cryptocurrency, on your behalf. Yeah. And you know that that's also money laundering.

Nick VinZant 3:51

How much money are we usually talking about on a yearly or kind of whatever basis that you could provide?

Moyara Ruehsen 3:57

Well, for the past decade and a half or so this number has been floated around that one to 2% of global GDP is laundered every year, which would be between one and $2 trillion a year. And that's just a stab in the dark. Somebody pulled that number out of there. You know what, I don't know that we really know how much money is laundered. I think that that's an exaggeration. But what you would need to get a bead on is know how much criminal activity is out there. Okay, whether it's drug trafficking or selling child pornography, or you know, lots of arms trafficking and other types of crimes, how much of that needs to be laundered? Probably 80% Of all the criminal money out there needs to be laundered the remaining 20% Rent is cash that people just use for their everyday expenses. But if I'm a criminal, and I want to buy a house, or luxury yacht, or you know, something substantive, I can't buy it. With the dirty money or the dirty crypto, I need to launder it first, before I can, you know, live the luxurious lifestyle I want to live.

Nick VinZant 5:26

Is it hard to launder money? Or is it hard to launder a lot of money?

Moyara Ruehsen 5:31

It's hard to launder a lot of money. Yeah, it's, it's complicated. And it also depends on what you're starting with. So for example, if you're starting with cash, that is tricky, and it's really hard to launder a lot of cash, because, you know, just putting it into a bank, for example, without it being noticed, is really hard. I think that the TV show you referenced earlier, Ozark is a perfect example of that. One way you can do it is try to commingle the dirty cash with legitimate businesses. So Marty is buying all these legitimate businesses, a strip joint, a funeral parlor and, you know, restaurants that take in a lot of cash are useful for that. If it is if you're laundering cash, if you're laundering crypto, it's it's less important, how little or how much. It's just, it's really hard to launder crypto, you know, the blockchain is immutable. And so, you know, if you ask a money laundering investigator, what's easier to track crypto transactions, or cash transactions, or, or you know, just even wire transfers through banks, they're gonna say, crypto is the easiest thing to track. Because we can see where it's going several steps ahead and behind we, we it's really hard to do that with bank transactions.

Nick VinZant 7:10

So Can people like spot the money launderers? Or do they basically have to find out that these people are criminals? And then they can find it? Does that make sense? Right, like, are you finding the criminals by finding the money laundering or you finding the criminal activity and then you find the money, money laundering,

Moyara Ruehsen 7:31

it happens both ways. Sometimes, you know, we you find the money launder, and then from that you find the criminal, but more often than not, and I tell this to my students, because, you know, when they study financial crime, they learn how the criminals do it. Right. And, you know, my students are already vetted just before they even get into the program. So I'm not concerned that they're gonna go to the dark side, but just in case, they might consider that as a profession, I tell them, you can be the best money launderer in the world in terms of the techniques that you're using. But that's not going to help you, thanks to our plea bargain system. Because all of your clients are criminals. And, you know, are you going to trust them? When they get caught in their different crimes, they can reduce their sentence by, you know, turning other people in? And often the first person they turn in is the money launderer who isn't their cousin or nephew or sister.

Nick VinZant 8:40

So are there types of telltale signs that you say like, oh, that's a sign that's a sign this is off, right? Are there telltale signs, that kind of spot that money laundering is happening?

Moyara Ruehsen 8:52

Oh, yes, yes, fact. But it's going to depend on what type of crime we're talking about. So there are red flag indicators of, you know, financial crime transactions related to human trafficking, for example, for instance, credit card transactions, for example, that are indicative of human trafficking. There are red flag indicators of trade based money laundering, you know, over invoicing or under invoicing or false invoicing of trade transactions. There are red flag indicators of money laundering associated with proliferation, debt WMD proliferation financing, and so it really depends on you know, what type of crime we're considering. The red flag indicators are going to be very different. And so as an investigator, you have to basically study What all those different red flag indicators are? And then you have to develop your, your gut instincts. And be curious if something just doesn't seem right. There's something a little bit odd about it. Well look into it. Be curious. I tell people, if you want to really be a great investigator, the number one quality is curiosity.

Nick VinZant 10:26

For kind of an examples sake, let's say that it's a drug cartel or somebody laundering drug money, like what would those kind of red flags be that jump out?

Moyara Ruehsen 10:36

Yeah, okay. Well, if it is, let's say it's cash sales, which, you know, it's still happening, people are still using cash to pay for drugs, although some of that activity has migrated to the dark web. But, you know, street sales for drugs are still often in cash. And when they try to deposit that cash with a bank, let's say, they're going to have different front company accounts that they might deposit that money into. But they're also going to try to deposit underneath that $10,000 threshold, if you deposit more than $10,000 Cash, then you have to fill out what's called a currency transaction report. And it's a pain in the neck, and it asks you for a lot of information, and you have to provide your identification. And, you know, nobody wants to do that, especially not a criminal. So they make those deposits under $10,000. But let's say that, you know, you don't want to deposit $9,999, right, that's going to be obvious and raise red flag to red flags. So you're going to deposit, you know, on Monday, you're going to deposit, you know, $5,671, and on Tuesday, you're going to deposit $7,823. And on Wednesday, you're going to deposit $6,544, etc. And you're going to go to the bank and saying yeah, these are the cash receipts from my restaurant chain, or you know, whatever your excuses. But it's gonna look suspicious that you are making all these multiple deposits between, you know, two and $10,000. And unless you've been doing that for the past 20 years, and everybody knows about your successful restaurant chain, when COVID happened, and every all the restaurants shut down, that was a big problem. The money launderers couldn't use restaurant receipts anymore as as you know, excuse an excuse for depositing dirty cash. So it you know, there's that and you know, they're also going to a good bank will also look into your restaurant. Know, they'll check and see whether or not this is a thriving business, and you're bringing in that much cash, which is these days very unusual. Most people don't pay in cash that often they'll use a credit card, for example.

Nick VinZant 13:31

Yeah, I would almost think that using cash at all, would be a red flag. Right? Like, I don't think I've carried it in. That's really interesting about like, COVID. And restaurant receipts, like what? Oh, wow. So is it hard to catch people? Because on one hand, I see like, how could you not get caught? And on the second hand, I'm like, Well, how could you get caught? Like I feel both ways at the same time?

Moyara Ruehsen 13:59

Mm hmm. Yeah, a lot of these money launderers get caught because their criminal clients turn them in, in order to negotiate a lighter sentence. But what often happens too, is that the the money mules get caught. So for example, let's say you see an ad online that says you can make money from home which you know, a lot of people are interested in, it's many people lost their jobs during COVID. They thought, oh, I can make $100 a day for just, you know, two hours of work working from home. Sure, what do I need to do? And they might say, well, you know, what we're going to do, we're running a new company, and we need someone to help us process our payments. But basically what they're doing is they're moving their criminal money through your bank account and They're gonna give you maybe a commission 5% commission on all the money they move for your account. Sometimes these are scams and but sometimes really all you're doing is just, you know, moving the money through your account on their behalf, because you are less suspicious. And this has been a huge problem. I think just in the last two, really, since COVID. It's exploded the recruitment of people to act as money, mules, and some, and they'll also hire foreign students, for example, who are here, just temporarily, and then say to them, oh, you know, don't close your account. I will pay you for whatever money is left in your account, and then a little extra. And so we'll use that foreign students account to, you know, move the criminal money through

Nick VinZant 15:54

so people can get like recruited to, yeah, money launderers through classified ads in the paper, basically,

Moyara Ruehsen 16:01

well, and online on websites. Absolutely. And it's happening all the time. So what, what happens to those people? Well, the bank will likely notice this unusual activity, and they'll notify you and saying, we've noticed some unusual activity in your account. And most people, once they get a notification like that, they'll try to stop doing what they're doing. Hopefully, they're not being threatened or pressured by the criminals. But some people keep doing it. Because it may be it's good money. And then you might be contacted by, you know, FBI or some other law enforcement agency until you know, we believe that your money is being used to move I mean, your account is being used to move criminal funds. And then hopefully, they'll stop and say, Oh, I didn't realize that, you know, maybe they suspected but it's like, oh, gosh, I'm sorry, I'm sorry. And they stop, and that's fine. They're not going to be prosecuted. It's the people who don't stop even after a couple of warnings that, you know, have a letter of law come down on them. But the criminals realize that eventually, this unusual activity is going to be noticed. And either those accounts will be closed, or something, people will look into it. And so they may only use these money mules for a short period of time, and then they have to recruit more, so they're constantly having to recruit new money, mules.

Nick VinZant 17:44

So but once it's laundered, is it clean, clean, clean, like, Okay, we did it, we accomplished it, we didn't get through the money's good to go, or is it always kind of a little bit dirty,

Moyara Ruehsen 17:56

it's always kind of a little bit dirty. It by that time, you're, what you're doing is you're trying to move the money through multiple accounts, maybe in multiple jurisdictions, then use it to buy property, for example, and then sell that property. And then, you know, by the time the property has been sold, and you have, you know, cash in your account, but looks like it's from a legitimate property sale, tracing that back to the original crime, which might be you know, 10 transactions earlier, is going to be really difficult for law enforcement to to follow.

Nick VinZant 18:49

Are you ready for some harder slash listener submitted questions? I am new tricks, or is it the same old tricks?

Moyara Ruehsen 18:57

Hmm. New Tricks, NF T's. I can't imagine that anybody would invest in an NF T. But they are a money launderers dream. And there's a lot of self dealing, you know, people sell NF T's to themselves or their criminal associates as a way to, you know, disguise these these money laundering transactions.

Nick VinZant 19:30

Hit had never thought of that, right? Because how could you essentially trace it? Mm hmm. Right, like, well, and you could essentially make up whatever it's worth, like this picture of my high school diploma, I have decided is worth $3 million.

Moyara Ruehsen 19:45

Exactly. Yeah, yeah. People do it with any kind of art. But with NF T's in particular, I think I think we're starting to see an uptick in that.

Nick VinZant 19:55

Can they stop it? Or is it like, huh, we got you Yeah,

Moyara Ruehsen 20:00

it's too early to tell, I'm sure that there have been some suspicious NFT transactions that are being investigated. But I don't know that we've seen any prosecutions as yet. But it's only a matter of time.

Nick VinZant 20:17

We kind of talked about this one a little bit, but this one just says, I don't know why our audience is speaking in shorthand code, but hard to find hard to prove. Or we might laundering I guess which one would be harder? Is it harder to find it? Or is it harder to prove it? Kind of the idea of like, Look, I know you stole my candy bar, but I can prove that you stole my candy bar. Which one? Do you think it usually is?

Moyara Ruehsen 20:40

It sounds like the same thing.

Nick VinZant 20:44

It does kind of I guess in this example, well, we will write that person back and tell them to think

Moyara Ruehsen 20:52

of a better, but is it is it all idea is you need to somehow trace that money that's being moved to the original crime? That and that's tricky. It can be done and it is done. But you know, it's it's time consuming. And it's complicated.

Nick VinZant 21:12

Do people ever tried to launder money for completely illegal

Moyara Ruehsen 21:16

activities? You don't need to Why would you do it? It doesn't make any sense.

Nick VinZant 21:21

Like it doesn't get you through taxes? Or some there's not some kind of loophole where somebody might be trying to think of like, well, if I take these restaurant tips, and I do this, then maybe I don't have to report it. Is there any real game so

Moyara Ruehsen 21:33

that is that's tax evasion. And that is a crime. But that is a separate crime from money laundering. In a lot of other parts of the world, if you are moving money for the purposes of tax evasion, they count that as money laundering, and they charge you with, you know, tax evasion and money laundering. But in the US, I think for historical reasons. We have a separate set of legal statutes for tax evasion.

Nick VinZant 22:02

This question is near and dear to my heart, because I used to live in Tucson, Arizona, and I swear, that that has more mattress firms build mattress stores, or this one just asked our mattress stores always money laundering fronts, because I have never seen a single person in a mattress store and there's 40 in my hometown.

Moyara Ruehsen 22:25

Yeah, yeah. Wow. 40 in their hometown. That's a lot.

Nick VinZant 22:29

If you've ever seen Tucson, Arizona, it's basically a college and 300 mattress stores. It's unbelievable. Like nobody knows what's going on. But I mean, are there certain types of businesses that kind of lend itself to like, oh, that might be? That's a little suspicious.

Moyara Ruehsen 22:46

Yeah, well, that many mattress stores? Yes, I would be suspicious. Again, when you think about traditional crimes, like drug trafficking, it you want cash intensive businesses, and I don't know that people are paying for mattresses with cash necessarily. So I would say a restaurant chain would be your best bet, like points or models for breaking bad reference. But, uh, but sure you, again, not everybody's using cash now. So we're using, you know, credit card payments and other kinds of payments. And if it's part of a longer money laundering, change? Sure. You know, it could be mattress stores, it could be anything.

Nick VinZant 23:34

Um, are there certain parts of the country or the world in which are kind of notorious for it? Hmm.

Moyara Ruehsen 23:41

It depends on what stage of the money laundering process we're talking about. So obviously, they're, they're in the early stages, the money laundering process, you're going to see that in places where there's a lot of criminal activity. If if it's using shell companies, for example, in the layering process, which is like the middle stage of money laundering. One of the easiest places to set up a shell company anonymously is in the United States, unfortunately, Nevada and Wyoming, in particular Delaware, as well but Delaware, I've heard that they are starting to collect beneficial ownership information on their the people who are setting up shell companies, London is still a really easy place to set up a shell company and and money launderers. Use those shell companies all the time, the more the better. And sometimes they'll just use it for a short period of time and then set up a new shell company. So I would say, you know, the US and the UK, unfortunately, are places that are at and abetting this type of criminal activity, but you'll also see money laundering take place in jurisdictions where there aren't many regulations. So for example, cryptocurrency exchanges that are, you know, licensed and registered in, you know, Europe and North America are really well regulated. And they have compliance departments that do, you know, criminal investigations all the time. But a cryptocurrency exchange in Moldova, you know, the probably not well regulated. I don't want to pick on Moldova, but I mean, just in other jurisdictions where you don't have a lot of enforcement. And for that matter, maybe even there's nothing to enforce, because there aren't any laws and regulations to stop these, you know, money service businesses from doing what they're doing.

Nick VinZant 26:01

Most famous example that you can think of like, and then most egregious example, and I think what they mean by that, and like, what was the biggest case? And then what was the one was like, gosh, man, you were just trying to get caught?

Moyara Ruehsen 26:18

Oh, there have been plenty of those where, you know, especially criminals that really want to flaunt their wealth. And, you know, they buy the red Maserati and drive around, make a lot of noise and show and, you know, they're attracting attention to themselves. So, yeah, I immediately think, oh, my gosh, you know, you were just trying to get caught when I hear about cases like that, but probably the most famous case, I think is one that your audience has never heard of. There was a Pakistani money launderer called Altaf nanny, who was, by the way, ultimately convicted and did serve time in a US prison and was only recently released within the last year, I think he is he was released early, and His sentence was relatively light. So I'm I suspect that he shared information about some of his criminal clients as part of his plea bargain. But he ran an extensive money laundering operation across the globe. And he laundered money for Mexican drug cartels for terrorist organizations, for biker gangs in Australia who were you know, selling meth, and word got out amongst, you know, criminal organizations that, oh, if you want your money laundered, he's the go to where that organization is the go to place to do it, because they were so cheap, you know, they would do it for less than a 5% commission. And they were able to do that because of economies of scale, since he had this network of money exchangers and Hawala DARS, which are also acting as money exchangers all over the world. And he also had, the hierarchy of the organization was well set up. So for example, let's say you're the Australian biker gang, in the meth business, you don't really know you know, who is in that organization, you're just handing off your dirty money to a mule who's going to collect it, or cash Korea, we call them cash for years. That cash courier is then going to hand it off to another middleman who doesn't even know who the criminal client is. And and then that that middleman is going to hand it off to another broker, who's gonna then going to hand it off to the money exchanger. So the money exchanger doesn't know where this money is coming from, either. And, you know, by dividing it up like that, if somebody gets caught, they really don't have enough Intel to share with law enforcement on you know, how this organization is set up. And then eventually, again, through this extensive global network of operators involved in this money laundering operation, eventually, the money would be wired from some offshore shell company, straight into the accounts of Australian biker gang.

Nick VinZant 30:01

How much do you know how much like he they estimate that he did? How much worth he did? Oh,

Moyara Ruehsen 30:07

I'm sure it was in the 10s of billions if not hundreds of billions, but they're not going to necessarily determine that because that's not going to affect his sentence. They just have to look, prove, in at least one case that that his organization was responsible for that. And then the investigators are going to stop there because it's too much time and they don't need that for conviction.

Nick VinZant 30:34

He's not going to make it much longer, though, I would imagine.

Moyara Ruehsen 30:37

Well, nobody knows where he is right now. Some people think that he is, you know, hiding somewhere in Pakistan, but he he was operating out of Dubai, a professional money laundering will use multiple countries, when they're moving the money and trying to, to hide his origin. What interesting development we're seeing is now the emergence of professional Chinese money launderers who are working with Mexican drug trafficking organizations, go figure.

Nick VinZant 31:12

So global economy, I guess,

Moyara Ruehsen 31:14

well, economy,

Nick VinZant 31:15

here's some of the here's some of the lighter ones, I guess, um, best TV show or movie that accurately depicts how it's done.

Moyara Ruehsen 31:24

Hmm. Ozark is a good one. You mentioned that earlier, especially the first couple seasons in the latest season. They're very vague about it. You know, they're working with shell companies and doing keeping track of it on the computer. They're not just, it was just good. You don't want it to be a how to manual for criminals, right. But some of the challenges that Marty faces in the first couple of seasons are very real. So they're very, it's very realistic.

Nick VinZant 32:01

The ones that I can think of that maybe would be like, Breaking Bad. Flash Better Call Saul, the soprano is maybe I can

Moyara Ruehsen 32:09

No, no, not so much the Sopranos. Breaking Bad is pretty good. Yeah, they the chow? Yeah, I would say Ozark and Breaking Bad are probably the best. In terms of illustrating the challenges that a money launderer faces at one point in Breaking Bad. Walter White's wife is the one who is supposed to know how to do this. So she's trying to help him launder the proceeds from this meth business. And she can't do it quickly enough. And so she, she takes him to a rental locker where all this money is piled up. And she said, you know, here it is, I can't I can't move it through the carwash business fast enough without Oh, yeah, red flags popping up.

Nick VinZant 33:04

That does seem like the issue, right. Like, eventually, there's just too much money involved, that there's just how can you do that? So much, you know, and that kind of, is there any TV show or movie that you that that's like, Oh, God, these people got that wrong?

Moyara Ruehsen 33:22

Yeah. I would say, anytime you see a TV show or movie, and it's happening less now, but in the past, you know, a decade ago or, you know, even older than that, where somebody opens up a briefcase, and, you know, says, Here's your $5 million. Mr. Bond, you know that there's no way you can fit $5 million into a briefcase. It's true.

Nick VinZant 33:54

Okay, put your feet to the fire on this one. Question. If you personally were to start laundering money, how long before you think you would get caught? Huh? Could you get away with it? Do you think using your expertise? Could you do it?

Moyara Ruehsen 34:18

Well, I think that I would know how to do it well, okay. But what I couldn't do is trust my criminal clients. You know, that it's no matter how well I do it. In terms of avoiding detection. My criminal clients can always turn me in.

Nick VinZant 34:40

That's pretty much all the questions that we got. Is there anything that you think that we missed or

Moyara Ruehsen 34:44

defi? Oh, let's

Nick VinZant 34:46

define what is

Moyara Ruehsen 34:47

a centralized finance and web 3.0. I think that you're going to see criminals exploring that avenue as as a way to hide and launch Under money because right now it's not very well regulated.

Nick VinZant 35:03

That makes a lot of sense, right? Like, that's the what? I think whatever people don't even know what it really is yet, then you've got the wild west there right

Moyara Ruehsen 35:12

right now and then people talk about privacy coins, as well, which, where you don't have a public blockchain where you can follow the money. And the problem there, though, is that it's really hard to launder those privacy coins. most reputable cryptocurrency exchanges are not going to exchange your privacy coins for Bitcoin or, you know, dollars. And, and so that's a problem. You know, you're not going to be able to buy a house, for example, if you're collecting your criminal revenue in the form of privacy coins.

Nick VinZant 35:51

But have you ever to kind of the existential question, right? Has Has the difficulty of money laundering ever stopped a criminal and the sense of like, well, I was gonna sell these drugs, but I can't launder the money. So I'm not.

Moyara Ruehsen 36:08

Not necessarily but what it does is it makes them jump through a lot of other hoops, it increases their cost of doing business, and it and they're going to start doing things that are suspicious that makes it easier for them to get caught. So maybe we can't catch them selling the drugs and smuggling the drugs. But we might maybe even be easier to catch them trying to launder the money.

Nick VinZant 36:35

It’s exposure.

Moyara Ruehsen

Mm hmm.