Part 10: A look at the world of Money-Laundering, and the Muslim Brotherhood’s Bank’s Bank.

Welcome to the world of Banca del Gottardo. It’s your world too. That’s because Banca del Gottardo, Bank al-Taqwa’s bank, is really pretty typical. Typical because Banca del Gottardo is a large, very respectable Swiss-based banking institution with branches across the globe. In 1999 Banca del Gottardo was acquired by Swiss Life, the largest and oldest insurance company in Switzerland. And typical, as we’re going to see, in that an absolutely shocking number of shady, criminal banks move literally trillions of dollars a year around the globe through real, “respectable” banks. That’s a big part of how the financial merry-go-round that turns “dirty” money “clean” works. And it’s a bigger merry-money-go-round than you think: it’s the global financial system, and virtually every bank is on board for the ride. Most can’t help it, it’s the status quo.

So how does this money-go-round work? In the case of Bank al-Taqwa, they merely conducted their financial transactions through Al-Taqwa’s “correspondent account” with Banca del Gottardo, al-Taqwa’s “correspondent bank”. So what’s a correspondent account? Well, the USA Patriot Act defines one as “an account established to receive deposits from, make payments on behalf of a foreign financial institution, or handle other financial transactions related to such institution.” In other words, a correspondent account is an account Bank A can set up with Bank B, which allows Bank A to use the “correspondent account” to send money, receive money, and any of the other services typically offered. Correspondent banking is also a profitable, growing field in financial sectors.

Correspondent banks can even have correspont banks of their own, as was the case with Banca del Gottardo and Bank al-Taqwa, where Bank al-Taqwa actually gained access to US financial markets via Banca del Gottardo’s correspondent accounts with the Bank of New York and Citibank, two banks with a rather “loose” history when it comes to financial shenanigans (Recall that the Boris Yeltsin’s “family” and friends were allegedly laundering billions in stolen IMF money through the Bank of New York). Correspondent banking is the reason shell banks, which often have no real staff or even a physical location, can actually conduct business. Bank al-Taqwa’s Bahamas branch pretty much consisted of a name and an address which was actually the same address as its law firm. And with these two components, Bank al-Taqwa was able to conduct its business, along with thousands of shell banks around the world whose existence consists of some paper work, a name, and a dream…. a dream that probably involves evading your country’s taxes and/or laundering some money.

The BCCI status quo
For those familiar with the modern history of terrorist financing, money-laundering, drug trafficking, intelligence operations, covert proxy wars, and politicians seemingly intent on keep this money-go-round of horrors spinning, the Bank of Credit and Commerce International (BCCI) probably rings a bell. And for those that have read this far in this series of essays it would surely ring a bell. The BCCI story has received little attention in the post 9/11 world, which is both a shame and rather shocking considering that 2004 presidential candidate John Kerry was the chief Senate investigator of both BCCI and the inter-related Iran Contra scandal, two scandals that embody the kind of intertwined business and intelligence relationship that has been developing between the US and the Saudis since the 70’s. And it was BCCI that blazed the trail in enabling terrorist groups, rogue states, and drug lords to launder their money in the international financial systems, including the US financial system, on an unprecedented scale, fueling organized crime across the globe.

Run by a Pakistani, heavily funded by the Saudis and other Gulf royal families(in particular the UAE), incorporated in Luxembourg, headquartered in London (itself a money-laundering center), and with branches in financial safehavens like the Cayman Islands and Panama, BCCI was a truly trans-national entity. In a sense, BCCI took the concept of a shell bank to a new level, in that BCCI was more than just the branches of BCCI itself. It was a network of real bricks-and-mortar banks acting as shell banks for something less physical, but far more substantial and powerful. Using front men as investors, and endless bribes as incentives, BCCI bought up banks all over the globe (sometimes secretly, as was the case in the United States) and effectively turned them into cogs in a giant global money-laundering and financial fraud machine of shocking proportions.

BCCI also ties a back to 9/11 in a number of ways beyond the direct logistical role that the bank played in fueling the Afghan Mujahedeen and its seemingly endless Persian Gulf financing. Not only was it a predecessor and model for the international clandestine business and financial networks utilized today by al-Qaeda, it was also orchestrated by many of the very same individuals that we find pulling the strings of today’s Islamists terrorist groups (yeah, the BCCI fallout was a familiar slap on the wrist kind of affair). So as we proceed through the labyrinth of personal and financial relationships that comprise the modern-day Saudi/Muslim Brotherhood terror-financing infrastructure, keep in mind that we’re looking into an informal network that is, in many respects, the modern-day counterpart of BCCI.

So this is our status quo, the BCCI status quo: Big money being made in organized crime and laundered through our banking system with ease and with the complicity of a great number of powerful, “respectable” individuals. And it’s a status quo that’s been in place for longer than you probably think. To get an idea of just how long, let’s start off this financial horror show with a look at the excellent Introduction to Senator John Kerry’s 1992 investigation into the BCCI mega scandal that we’ve mentioned so many times now:

Introduction and Summary of Investigation

BCCI cannot be taken as an isolated example of a rogue bank, but a case study of the vulnerability of the world to international crime on a global scope that is beyond the current ability of governments to control. Its multi-billion dollar collapse is merely the latest in a series of international financial scandals that have bedeviled international banking this century. Its techniques and its associations with government officials, intelligence agencies, and arms traffickers, were neither new nor unique.

For example, as far back as the 1920's, the International Match Corp bilked shareholders and lenders out of some $500 million through switching company assets and liabilities among a series of shell entities, creating fictional assets when existing ones were adequate, and through transferring funds from the United States offshore. All the while, its chairman, Ivan Kreuger, maintained friendships with numerous world leaders including then U.S. President Herbert Hoover, in a manner reminiscent of BCCI's founder Agha Hasan Abedi's relationships wit President Carter a half a century later.

During the 1960's, the Channel Islands off the coast of England became the host to a series of post-off box banks, including the infamous Bank of Sark, whose facilities including a room over a pub, a desk and a telephone. That headquarters proved adequate to enable the swindlers who established the bank to use it to sell some $100 million in fraudulent checks and letters of credit on the phantom bank before their criminality was discovered.

In case you are curious, the Island of Sark remains a “fiscal paradise”.


In the same period, Bernie Cornfeld, chairman of the Investors Overseas Service (IOS), which sold "The Fund of Funds," and fugitive financier Robert Vesco, siphoned off hundreds of millions of dollars from investors in the mutual fund that at its height had $3 billion in assets under its management. In doing so, it moved funds held at Credit Suisse to a small bank which IOS itself owned based in Luxembourg, from which the funds disappeared. Again, this technique anticipated the methods used by BCCI to shift assets from legitimate institutions to its own, and then to engage in wire transfers sufficient to make them impossible to track.

In another chapter of “Interesting Things Presidents’ Relatives Do”, in 1972, Vesco illegally donated $200,000 to Richard Nixon’s campaign, during a time when Richard Nixon’s nephew, Donald Nixon Jr., worked as an aide for Vesco. In 1995 Donald was detained in Cuba after spending a month with Robert Vesco in Havana. He later claimed the two were working with the Cuban government on a miracle drug to cure AIDS.


Similar techniques were used by Italian financier Michele Sindona in connection with his management of Banco Ambrosiano in Italy; and by former CIA agent Michael Hand in the drug money laundering Nugan Hand Bank in Australia during the late 1970's and early 1980's. The latter institution had numerous ties to U.S. intelligence and military personnel which have never been explained.

Banco Ambrosiano and Nugan Hand: so much dirt, so little time.

In addition to charges of drug-money laundering and CIA connections, Nugan Hand bank is also suspected of playing a role in a CIA-assisted toppling of Australia’s Labor Government in 1974. It collapsed in 1980.

The collapse of Banca Ambrosiano in 1982 drew in the closely afilliated Vatican Bank. The bank’s implosion was also intertwined with implosion of the Italian government due to one of the largest scandals ever to hit Italy: the P-2 Lodge. Propaganda Due (P-2) was a fascistic right-wing Masonic lodge whose members had infiltrated the highest levels of the judiciary, military, parliament, press, and acted as a kind of “informal, parallel secret service”. Banco Ambrosiano’s President, Roberto “God’s Banker” Calvi, was a P-2 member. When Calvi, was found hanging under Blackfiars Bridge it was declared a suicide, but in 2003 his death was redeclared a murder by the Mafia (and yes, that means the Vatican Bank was dealing with Mafia money…strange world, ain’t it).

Some other interesting P-2 members include former Italian Prime Minister Silvio Berlusconi and Paul Guarino. Guarino was one of the members of George Bush’s 1988 campaign that drew fire for his fascist connections. Not only that, but he also helped set up the GOP’s ethnic outreach committees back in the early 50’s and even hosted P-2 leader, Licio Gelli, at Ronald Reagan’s 1981 inauguration (1).

And then there’s Bank al-Taqwa’s own bank, Banca del Gottardo. Banca del Gottardo was a subisidary of Banca Amrosiano at the time of its collapse in the early 80’s. Yes, that’s right, Banca del Gottardo, the politically connected prominent Swiss bank that has afforded the al-Taqwa group protection for years, was the subsidiary of the notorious fascist/mafia-connected/Vatican-connected Banca Ambrosiano at that time of its implosion.

We’re going to move on, but just know there are many more ties between the P-2 lodge, far-Right, terrorism (especially when it comes to the infamous Operation Gladio), clandestine paramilitary movements under the banner of “anti-Communism”, drugs and arms smuggling, and just about any other dark form of corruption you can imagine.


Thus, the rise and fall of BCCI is not an isolated phenomenon, but a recurrent problem that has grown along with the growth in the international financial community itself. Given the extraordinary magnitude of international financial transactions -- which amount to some $4 trillion per day moving through the New York clearance system alone -- the opportunities for fraud are huge, the rewards great, and the systems put in place to protect against them, far from adequate, as this report demonstrates in some detail.

The scope and variety of BCCI's criminality, and the issues raised by that criminality, are immense, and beyond the scope of any single investigation or report. This report, the product of some four years of investigation by the Subcommittee, while extensive, can merely provide a basic guideline to the fundamental facts and issues raised by the BCCI affair.

The Subcommittee investigation of BCCI began in February, 1988, early in the second year of a two-year investigation of the relationship between drug trafficking to U.S. foreign policy and law enforcement that had been authorized by the full Committee. During a hearing on General Noriega's drug trafficking and money laundering, BCCI was identified as facilitating Noriega's criminal activity. In March, 1988, the Foreign Relations Committee authorized the issuance of subpoenas to BCCI and those at the bank involved in handling Noriega's assets, and the accounts of others in Panama and Colombia. Service of those subpoenas was delayed, at the request of the Justice Department and U.S. Customs Service, due to concern that its service could interfere with an ongoing sting operation of BCCI in Tampa, Operation C-Chase. By the time the Subcommittee secured the permission of federal authorities to move forward with service of the subpoena, in late July 1988, the Subcommittee had completed the public hearings in connection with its investigative mandate, and was proceeding to complete its final report, with no further investigative efforts planned.

Interestingly, the Operation C-Chase sting of October 1988, which was hailed as the biggest drug-money laundering bust ever, was timed for a major policy speech on the Drug War by Vice President George Bush less than a month before the presidential election (2). Given the exceptionally close relationship the Bush family has with the directors of BCCI, the years of the Reagan administration spent stifling investigations into BCCI during the 80’s (as very gently laid out in the Kerry report and more harshly fleshed out here), and the likelihood that George H.W. Bush was intimately involved with the drug-money-fueled Iran Contra affair and Afghan Mujahedeen support effort, there was no shortage of irony and cynical politicking in that speech (or the War on Drugs, for that matter).


However, service of the subpoena set into motion a series of contacts during the late summer and early fall involving the Subcommittee, BCCI officials, and BCCI's attorneys, including Clark Clifford and Robert Altman. During those contacts, BCCI officials advised Subcommittee counsel Jack Blum that in their view, BCCI and its attorneys were obstructing the Subcommittee's efforts to investigate the bank. The Subcommittee conducted a deposition of one key BCCI official, Amjad Awan, shortly before his arrest in the Customs' sting, and deposed a second, former BCCI officer following the sting, during the final days of the authorization given the Subcommittee by the Foreign Relations Committee. Thus, as the two-year investigation of the Subcommittee authorized by the Foreign Relations Committee ended, investigating BCCI remained a major piece of unfinished Subcommittee business.

In the spring of 1989, Senator Kerry, chairman of the Subcommittee, authorized Blum as he was leaving the Subcommittee, to provide the information he had developed to the Justice Department. After the Justice Department, in Blum's view, had failed to follow up on the information provided, he took the same information to New York District Attorney Robert Morgenthau, who shortly commenced his investigation of BCCI, based in substantial part on the leads provided him by Blum and the Subcommittee.

Clark Clifford and Robert Morgenthau are two of the prominent US figures involved in the BCCI investigation. New York District Attorney Robert Morgenthau led the way along with the Kerry Subcommittee in the BCCI investigation, an investigation that included political legend Clark Clifford. An advisor to four presidents with close ties to the intelligence community, Clifford also has the distinction of playing a key role in drafting the National Security Act of 1947 that created the National Security Council and the CIA.

Skipping to the end of the Introduction of the Kerry Subcommittee report…

Many matters remain to be investigated, and these are outlined in the Executive Summary and in the final chapter on conclusions and legislative recommendations.

What is absolutely clear is that the United States needs to exercise far more leadership in helping develop a system for monitoring and regulating the movement of funds across international borders to replace the current, inadequate, patchwork system that BCCI, with all of its faults, so aptly took advantage of to defraud over one million depositors and thousands of creditors from countries all over the world.

Equally important is for the United States to give renewed attention to the difficulty of monitoring the actual circumstances and intentions, of foreign investors seeking to acquire U.S. institutions. As the BCCI case demonstrates, such investments pose special difficulties for both investigation and prosecution should something go wrong.

Finally, influence peddling, the revolving door, and the willingness of well-placed and prominent people in Washington to provide services to whoever wants in the door and is willing to pay ones fees is a phenomenon that poses very substantial dangers for our system of government. As the BCCI case suggests, higher standards of conduct by the private sector in Washington that lives alongside of government is an essential part of making it possible for government to work. The lack of those standards was a significant factor in BCCI's success in committing crimes, and the government's failures in doing anything them.

This above report highlighting political intransigence, bureaucratic turf wars, and a system rife with conflicts of interests was written in 1992, fourteen years ago. So did any anything change after the BCCI scandal? Well, to get an idea, let’s take a closer look at a topic we briefly touched upon in the last essay: The Russian money-laundering scandals of 1999 and the Bank of New York.

From Russia with Love (via a correspondent account)
The case of the Bank of New York is an interesting and important one, because if you think the state of affairs with dirty money and US banks is scary just take a look at Russia.
A good, long look. The story of the 1999 Russian money-laundering scandals (yeah, this isn’t the only one) is both a story of the new, emerging threat of Russian organized crime in this world, and the old tale of bureaucratic infighting and law-enforcement turf wars that seem to limit the effectiveness of one investigation after another. It’s a threat so great that Russia’s Central Banker was gunned down in September 2006. Authorities believed his assassination was due to his push for more effective regulation of Russian banks.

On top of straining US/Russian relations, the twin Russian money-laundering scandals also brought up the same old rivalries between Robert Morgenthau’s Manhattan office and FBI that plagued the investigations into BCCI a decade earlier. Let’s take a closer look at the Bank of New York investigation with this excellent September 1999 article from the New York Times:


New York Times

Law-Enforcement Rivalry in U.S. Slowed Inquiry on Russian Funds

September 29, 1999, Wednesday


Late Edition - Final, Section A, Page 1, Column 1

The investigation of Russian money flowing through the Bank of New York has been snarled by one of the oldest and most bitter rivalries in American law enforcement -- between the Manhattan District Attorney and the F.B.I.'s powerful New York office.

During the last year, law enforcement officials say, investigators for each agency separately discovered that shadowy figures were using an obscure company, the Benex Corporation, to move money out of Russia.

The inquiries began from separate points -- a kidnapping case for the Federal Bureau of Investigation and a suspected money-laundering operation for the New York prosecutors. Each side had information the other lacked that ultimately showed these were two pieces of a single puzzle.

But the information was never pooled, officials said.


For those following the 9/11 investigation, a lack of information sharing between the FBI and other agencies probably sounds familiar by now. Especially after something big happens, like 9/11, when the common themes tend to include “no one could have seen this coming or could have prevented it”, or maybe there were “bureaucratic obstacles” that limited effective law enforcement and require “additional domestic law-enforcement powers” amongst government agencies to prevent future lapses. Regardless, we can no doubt be assured that all of the folks entrusted to protect us are working hard to catch the bad guys.


In fact, F.B.I. officials are said to have been angered when British investigators, who were conducting their own investigation of Russian organized crime, told a New York prosecutor and a State Department official what they knew about the Federal case.

Since the investigation burst into public view in August, each side has been trying to leave the impression that it was hotly pursuing the case while its counterpart was dragging its feet or chasing down empty leads.

Relations have become so frayed that Federal investigators have let it be known that bureau officials and Federal attorneys even discussed whether they could file obstruction-of-justice charges against counterparts in other agencies whom they perceived as getting in the way.

These disputes -- and the larger question of how they may affect the outcome of the investigation -- are far from resolved. Federal law enforcement officials insist that the New York prosecutors know little of value for their case, while defenders of the District Attorney say the bureau is still missing out on important leads. But several points are clear.

The office of the District Attorney, Robert M. Morgenthau, was the first to find the link between Benex and the Bank of New York and has looked closely at the maze of companies that his investigators believe were the conduit for the money.

But, Federal investigators said, the prosecutor never closely examined the bank's role in the affair and did not obtain crucial bank records that disclosed billions of dollars in suspicious transfers from Russia.

The F.B.I. focused on the bank more than a year ago and was the first agency to understand the size of the Benex transactions. But the bureau has been faulted by some Administration officials for failing to tell other agencies, including the Treasury Department and State Department, what it knew about such an important banking case with broad diplomatic implications.

The Rivals
Whose Turf Is It, Contenders Ask

At the heart of the turf war are legendary personalities and longstanding rivalries between two of the country's most aggressive investigators.

In one corner stands Robert Morgenthau, 80, the powerful District Attorney, whose unsuccessful prosecution of the Bank of Credit and Commerce International earlier in this decade left Federal agencies suspect of his crusades against white-collar crime.

In the other corner is Louis J. Freeh, 49, the hard-driving director of the Federal Bureau of Investigation. Mr. Freeh, who began his career as an F.B.I. agent and Federal prosecutor in New York, has ample personal experience in the often-tense relations between Mr. Morgenthau's office and the bureau's agents.

It is particularly amusing (in a dark way) for Robert Morgenthau’s prosecution of the BCCI investigation to be dismissed by FBI officials given the fact that the FBI and Department of Justice (DOJ) were also investigating BCCI in parallel with Morganthau’s office, and were notorious for obstructing the other parallel investigations of BCCI for over a decade. The Federal employee that led the FBI’s “investigation” of BCCI was Assistant Attorney General that Robert Mueller. You might recognize that name. Robert Mueller has been the Director of the FBI since the summer of 2001.


The tension has been enhanced by the presence of Mary Jo White, the United States Attorney in Manhattan and a long-time rival of Mr. Morgenthau, who is working closely with the bureau.

Mr. Morgenthau has long viewed Federal investigators, particularly the F.B.I., as slow-footed and timid in their pursuit of financial criminals. The bureau considers Mr. Morgenthau an interloper who is overzealous in his attempts to broaden his jurisdiction.

Who knows why Morgenthau would consider the Federal investigators as being slow footed and timid in their pursuit of financial crime investigations: In February of 2000, the Bank of New York agreed to cooperate with investigators, and a short five and a half years later the bank settled with a $38 million fine for criminal misconduct. They weren’t prosecuted, but they’ve no doubt learned their lesson.

But what about prosecution of Lucy Edwards and Peter Berlin, the husband and wife team at the center of the scandal that also pled guilty back in 2000? Well, it only took six and a half years to arrive at their July 27, 2006 sentence of five years of probation, which might strike some as lenient, but hey, nobody’s perfect, right?


Nonetheless, Mr. Morgenthau's jurisdiction is Manhattan, the financial capital of the world, and that gives him powers greater than a typical local law enforcement official's if a case revolves around white-collar crime.

Mr. Freeh has been anxious to broaden the bureau's authority as well. He has expanded its presence overseas in an effort to counter sophisticated international criminal networks that operate in the United States. That expansion has irritated some Foreign Service professionals, complicating matters for the bureau, which is often perceived as arrogant.

The stakes hold more than parochial interest. The Bank of New York affair has already touched off a broad debate about American policy in Russia, the role played by Western institutions in perhaps facilitating corruption there, and how power is wielded in an economically troubled country with stores of nuclear arms. The investigation, and any facts it may uncover, touches on all of those concerns.

Speaking of concerns about Russian nuclear stockpiles, In July of 2006 it was reported that the state of Russia’s plutonium stockpiles look the same in 2006 as they did in 1999, all 145 metric tons.


The Conduit
So Many Dollars, So Few Accounts

The focus of the battle between Mr. Morgenthau and Mr. Freeh is Benex, a mysterious money-moving company run by an equally elusive Russian emigre named Peter Berlin.

Between 1996 and August of this year, Benex moved at least $7.5 billion from Russia through just nine accounts at the Bank of New York, according to the bank. The bank has not been charged with wrongdoing and its senior executives are not targets of the Federal investigation, according to law enforcement officials.

Although the F.B.I. has been sifting through reams of bank data for about a year, the exact source of the funds remains unclear.

Investigators say part of the money is from ordinary wire transfers and tax avoidance, much of which is perfectly legal in Russia, while some may be tied to organized crime, corporate embezzlement or political graft. Law enforcement officials say proof of the latter can only be unearthed by Russian authorities.

If the idea of tax avoidance being legal in Russia seems shocking, then you’ll probably be even more shocked to learn that money-laundering wasn’t a crime in the US until 1986. And good luck with getting Russian authorities to unearth some proof of financial wrong doing. Seriously, good luck.

Oh, and here’s an interesting fun fact about former FBI director Louis Freeh: He is amongst the suspected high-profile members of Opus Dei (which Opus Dei recently denied), the secretive conservative (some say cultish) Catholic organization. Other suspected members include Supreme Court Justice Antonin Scalia, almost-Supreme Court Justice Robert Bork, Senator Rick Santorum, Senator Sam Brownback, conservative Column Robert Novak, and last, but not least FBI mole Robert Hanssen.


The pursuit of Benex began in February 1998 when Mr. Morgenthau convened a state grand jury and issued subpoenas in response to British investigators who were seeking help in examining possible money laundering through Benex.

It seemed a natural request. The British were looking into the activities of a London law firm, Talbott, Creggy & Company, which had set up offshore shell companies used to move money. Mr. Morgenthau was examining the same firm for its role in facilitating a New York-based stock fraud.

A month later, Mr. Morgenthau asked the Federal Government for help. But he did not speak with the F.B.I. Instead, he sent a memo to the Customs Service noting that large sums of money with suspect origins were flowing through Benex into accounts at the Bank of New York.

It makes sense that Morgenthau went to Customs instead of the FBI. It was Custom’s “Operation C-Chase”, in spite of plenty of DOJ obstruction (like disappearing evidence, for example (3)), that actually led to the eventual prosecution of BCCI. The conflict between the FBI and Customs is another one of those longstanding feuds, and one that doesn’t appear to be going away any time soon.


The British and American inquiries focused on a Russian emigre, Roman Amiragov, who was suspected of money laundering, and who may have been a client of Talbott, Creggy. According to law enforcement officials, Mr. Amiragov ran a company in Britain and the United States, Portrait Trading, that in early 1998 alone moved $300,000 to $500,000 a week through Benex into the Bank of New York.

Little is known about Mr. Amiragov. He and his family broke their lease and abruptly left their Jersey City apartment shortly after the Bank of New York investigation became public in August. Mr. Amiragov left the country but returned on Sept. 15. His current whereabouts could not be determined.

Officials say Mr. Morgenthau's office did not see the Bank of New York as an important part of its inquiry until very recently. The office did not issue subpoenas to the Bank of New York until shortly before the Federal investigation burst into public view, leading Federal investigators to suggest that Mr. Morgenthau's office was poaching.

In June 1998, the F.B.I began following a separate trail toward Benex and the Bank of New York. At the request of the Russian Government, the bureau looked into a kidnapping ransom paid to organized crime figures through a Benex account at the Bank of New York.

Suspicions about Benex deepened when another New York bank, Republic Bank, reported to the Federal Government that it had handled several suspicious transfers of money from Russia involving Benex.

The Republic National Bank is another one of those institutions with an interesting past. The bank was owned by Monaco billionaire Edmond J. Safra. According to the Iran Contra Walsh Report, Safra’s Republic National Bank was also part of Oliver North’s money-laundering conduit for the Contras, specifically working with the figures like Richard Secord, Willard Zucker, and Albert Hakim. Keep in the mind the name Willard Zucker, as he is going to pop up once again in the Part 11 regarding the bin Laden family’s international investment firm SICO.

In December of 1999, in the midst of the Benex investigations, Edmond Safra died in a mysterious apartment fire. It was later concluded that the fire was caused by his nurse, Ted Maher, in some rather bizarre and questionable circumstances (like the fire department taking two and half hours to show up). Maher, a former US Green Beret, rather amazingly escaped from prison in 2003, but was recaptured.


A Federal grand jury was convened to handle the case in September 1998, and the F.B.I. approached the bank to secure its cooperation.

This move was a calculated risk. In return for a chance to monitor the flow of money through the accounts, the bureau assured senior executives that they would not be targets of the investigation, even though the bank's role in the matter was not yet entirely clear.

A calculated risk for the FBI maybe. It sounds like it calculates out pretty good for the Bank of New York executives.


The Conflict
Confidential Data, Interagency Tussle

Bureau officials say their effort is now the biggest money-laundering investigation in history. The dragnet, involving dozens of agents and analysts examining more than 100 banks in more than 40 countries, is described by one Federal law enforcement official as "an octopus."

While the network of over 100 banks was described as “an octopus”, we’re not talking about “The Octopus” here. At least let’s hope not, because that’s a critter you’d really prefer not exist, although, at this point, it really shouldn’t surprise us if it does exist. Let’s just leave it as “yikes”! And then let’s really hope FBI mole Robert Hanssen didn’t do what some think he did with some very promising, and dangerous Octopus-ish software.

One of the people involved with the Bank of New York investigation who unambiguously does exist is the rather notorious Bruce Rappaport, a Swiss businessman with a number of deep connections to the machinations Iran Contra, BCCI, and the 1980 October Surprise. Rappaport and the Bank of New York co-owned the Swiss-based Bank of New York-Inter Maritime. Rappaport was also a close friend of Reagan’s CIA Director William Casey, and was known within the agency as one of Casey’s “Hardy Boys”, the term for a group of Casey’s friends that essentially became his personal intelligence team for a number of “sensitive” operations Casey was directing (4). One of these operations allegedly included controlling the Swiss accounts used by Oliver North and Richard Secord in the Iran Contra that funneled money provided for the Contras by the Sultan of Brunei (a lot of the money involved in supporting the Contra effort came from the Persian Gulf).


Word of the F.B.I.'s investigation began to spread.

In October 1998, John Moscow, a prosecutor with the District Attorney's Office, traveled to London to meet with the National Crime Squad. Mr. Moscow, also a veteran of the failed B.C.C.I. prosecution -- and also viewed dimly by the bureau, where he is considered a conspiracy theorist -- heard a lot in London about apparent money laundering at the Bank of New York.

Mr. Moscow relayed what he had learned to Jonathan Winer, a specialist in international crime at the State Department. Mr. Winer, an ally of Mr. Morgenthau's office from the B.C.C.I. days, was the first to alert the Administration to the troubling dimensions of the Bank of New York matter, information that Mr. Winer believed should have helped inform foreign and economic policy assessments of Russia.

After visiting London himself in March this year, Mr. Winer returned with a sheaf of documents and serious qualms stemming from his belief that the bureau had not notified the White House or any national security specialists about the scale of the problem.

So Mr. Winer rang a few alarms.

In March he gave copies of his documents to National Security Council officials and then notified the White House, the Central Intelligence Agency and the Justice Department.

The news was not well received at the F.B.I., where investigators discovered to their dismay that Mr. Winer was circulating information that the bureau had passed on in confidence to British investigators.

Other Federal agencies found out about the investigation piecemeal. The Treasury Department, which has played the leading role in formulating American economic policy toward Russia, did not learn about the investigation until April 1999, and its knowledge came from the Federal Reserve Bank in New York. Even the Attorney General, Janet Reno, had not received a briefing -- and did not until August, after the investigation was reported in The New York Times.

The Treasury Department, which used to include the US Customs Service until it was gobbled up by the Department of Homeland Security (DHS), is another government agency that often finds their investigations thwarted by the Department of Justice and FBI. But beyond that, the prevailing pattern, regardless of the agencies involved, appears to be the lower-level field agents finding their investigative efforts thwarted by their bosses, who often politically appointed bosses, whether it’s the FBI, CIA, Customs, Treasury, or any other agency we depend on for our saftey and security. This was certainly the case with the BCCI investigation, and as we’ve seen, 9/11 was no exception before or after the attacks.


And then the real fighting began.

Mr. Morgenthau's office complained that the F.B.I. never took the Bank of New York matter seriously enough until it was highlighted in the news media. While the British were told that an F.B.I. agent in New York, Steve Chapman, was leading a task force examining the bank's operations, the British felt that Mr. Chapman was the only agent involved. According to American investigators familiar with the British viewpoint, London dismissed Mr. Chapman's effort as "Task Force Steve."

People close to the F.B.I. retort that the only reason the investigation appeared so thinly staffed is because the British were not aware of its scope.

Moreover, those people say, Mr. Morgenthau is a publicity seeker who never devoted serious resources to his own investigation of Benex until it burst into the public spotlight. Those people said that if Mr. Morgenthau ever had significant information to share about Benex or the Bank of New York, the bureau would have welcomed it.

A recent series of meetings were convened at the United States Attorney's office in Manhattan that in the eyes of the F.B.I. were meant to seek the cooperation of various law enforcement agencies in the investigation.

The District Attorney's office had a different view: Its investigators said they were told "to get out of the way."

CORRECTION-DATE: October 3, 1999, Sunday

An article on Tuesday described the ways in which the investigation of possible Russian money laundering through the Bank of New York had been snared in an old rivalry between the Federal Bureau of Investigation and the office of Robert Morgenthau, the Manhattan District Attorney.

In discussing Mr. Morgenthau's record, the article referred to his "unsuccessful prosecution" of the Bank of Credit and Commerce International.

The reference did not fairly characterize Mr. Morgenthau's handling of the case.
While the prosecutions of some individuals failed, the article should have credited Mr. Morgenthau with important breakthroughs on the case, including helping to reveal and shut down illegal financial operations and winning more than $1.5 billion in fines, which were turned over to the bank's creditors.

Ok, so as of 1999, we see the same…umm…“investigative difficulties” and “turf wars” impeding investigations into money-laundering that stifled the BCCI investigations years earlier and the 9/11 investigations years later. So the investigative hurdles are still there, but about financial loopholes that make money-laundering so easy to do? That’s what we’re going to look at next.

Money-Laundering: It’s what’s for dinner (for terrorists and drug lords)
To get an idea of what’s changed and what hasn’t, let’s take a look at an excellent April 2006 NY Post article about the settlement of a
two year investigation in terrorist-related money-laundering by New York Discrict Attorney Robert Morgenthau (who, at 87 years old, still fighting the good fight):


By NILES LATHEM Post Correspondent

April 3, 2006 -- DA SHUTS $3B ACCT.
WASHINGTON - Manhattan District Attorney Robert Morgenthau has shut down a massive terror-finance pipeline in which a whopping $3 billion in profits from drug deals and other crimes flowed through a major New York bank to Middle East fanatics, The Post has learned.

Morgenthau told The Post his office is pursuing a settlement involving possible penalties against one of the largest and most prominent banks in New York - which he declined to identify - for maintaining an account where funds that originated in South America's notorious "tri-border region" were rerouted to suspect accounts in the Middle East.

The “tri-border” region of Ciudad del Este, where Argentina, Brazil and Paraguay intersect is indeed charged with being a hot-bed of Islamist activity (although not everyone agrees), along with drug smuggling, arms trafficking, and plenty of other illegal activities. Experts estimate that 80% of Colombian cocaine passes through the region. In addition to Latin-American cartels and possible Islamist terrorist groups, Chinese and Near Eastern mafias are also regionally headquartered there. With a large and influential Arab population, the region also gets quite a bit of Saudi money flowing through there, and it’s not necessarily all spent on souveniers. The region was also a major way-station for fleeing Nazi war criminals after WWII (5). In recent years Reverend Moon’s Unification Church has bought up massive tracts of land there. One has to wonder what God’s cut is when it’s the good Reverend cleaning that dirty, sinful money. One also has to wonder how he’ll get along with some possible new neighbors (although we don’t actually have to wonder too much about that one)


Evidence developed in the course of a three-year probe, which has already resulted in charges against other New York-based financial institutions, revealed that about $3 billion that flowed through the account over a two-year period was going to terror groups Hamas, al Qaeda and Hezbollah, Morgenthau said.

"I can't go out and arrest Osama bin Laden. But I can try to cut off his money," Morgenthau said of his massive probe.

Morgenthau's new case is the latest shocking disclosure of how terrorist groups, rogue states and drug lords are exploiting continuing weaknesses in the American financial system - and how billions of dollars in dirty money continues to flow through unsuspecting banks in New York, the epicenter of the global dollar trade.

John Moscow, a former Assistant District Attorney for financial crimes under Morgenthau, told the House International Relations Subcommittee on Oversight and Investigations last week that there are hundreds of thousands of shady banks around the world that "are taking deposits from people they never met and from brass-plate companies with no assets except the bank account, and are inserting the money into the world monetary system."

"Most of this is in dollars, and most of it goes through Manhattan," Moscow testified. Morgenthau would not name the latest New York bank under the gun, but said the case could be concluded - with possible penalties - "any day now."

Like Morgenthau, John Moscow is someone that would know a thing or two about money-laundering, having worked on the BCCI investigation under Morgenthau.

Also, the prominent bank that they are declining to identify is Bank of America (BofA). As they acknowledge later, the mystery bank in question is the second largest bank in the US. And the second largest bank in America is the Bank of America. And it isn’t the only legal settlement by the BofA in recent years. Since 2005, Bank of America paid $9 million in an overtime pay settlement, $59 million to end a class action lawsuit by Enron investors, and $461 million over its liability for bond losses associated with the WorldCom implosion (which edged out Enron as the biggest bankruptcy in US history).

Oh, and another legal settlement by Bank of America in 2005 just happens to include BCCI’s liquidators. Bank of America, you see, was one of the original financiers of BCCI, holding 30% of its shares back in 1978 (6). If a 2005 settlement on an early 90’s bank implosion sounds like a long time, remember: The bigger they are, the harder they fall… into a pile of dropped charges and reimbursements.


He said most of the $3 billion in suspicious funds were generated, through criminal enterprises, in the lawless tri-border region of Brazil, Argentina and Paraguay.

Over a two-year period, the $3 billion was sent to the New York bank account by a shadowy money-transmittal company in Montevideo, Uruguay.

The money then flowed into bank accounts in the Middle East locations including Riyadh, Saudi Arabia, Beirut, Lebanon, and Ramallah in the Palestinian territories.

The probe of the New York bank grew out of the Manhattan DA's previous 2004 prosecution of the Beacon Hill Services Corp., an Upper East Side money transmitter that moved more than $9 billion in suspect funds through accounts in Chase Manhattan Bank and other institutions.

Money-Laundering: It’s not just for terrorists and drug lords
We just saw an example of post-9/11 money-laundering, which is, sadly, a lot like pre-9/11 money-laundering, which is pretty much the same as pre-and-post BCCI money-laundering.
A few billion dollars laundered for mafia kingpins here, a few billion for terrorists there, and maybe some payoffs to corrupt officials here, there and everywhere. Nothing big, right? Well, if you’re not worried about the scope and impact of this activity yet, let’s take a look at back the Beacon Hill money-laundering investigation, with an excellent December 23, 2003 Bloomber News overview of the investigation:

Wells Fargo Skirts Money-Laundering Charges as Clients Probed

Dec. 23 (Bloomberg) -- Armed with a search warrant, a team of investigators for Manhattan District Attorney Robert Morgenthau raided a three-room office on East 54th Street on Feb. 4. The raid was part of a money-laundering investigation that led to an indictment against Beacon Hill Service Corp., a company with 12 employees.

Beacon Hill had made wire transfers totaling more than $9 billion through its three-dozen accounts at J.P. Morgan Chase & Co., the second-largest U.S. bank by assets, Morgenthau says.

J.P. Morgan Chase wasn't charged with any crimes. No big U.S. bank has ever been prosecuted for money laundering. If convicted of laundering, a bank could be shut down under the Annunzio-Wylie Anti-Money Laundering Act of 1992.

``The money center banks are beyond regulation,'' says attorney Jack Blum, formerly a U.S. Senate investigator and a money-laundering consultant to the United Nations. ``There's no capacity to regulate or punish them because they're too big to be threatened with failure.''

Yeah, JP Morgan and Bank of America both compete for the #2 spot. Yeah, they both appear to launder a lot of money like banks all over the world. And yeah, they don’t get prosecuted…unless Bank of America’s anonymous settlement in 2006 counts.

Also, Jack Blum was John Kerry’s special council in the BCCI investigation. If you think things are bad now, just imagine the world without folks like Morgenthau, Moscow, and Blum. And if you find reading about this stuff frustrating, just imagine how Morgenthau, Moscow, and Blum feel.


Beacon Hill, a company that wired money into and out of the U.S. for its clients, shut down a day after the raid. A dozen employees who'd worked at that location since April 1994 lost their jobs, including President Anibal Contreras, 45, a Guatemalan immigrant, Morgenthau says.

In June 2003, Beacon Hill was indicted by a New York grand jury for receiving and transmitting money without a New York State Banking Department license.

Tax Evasion, Bribes

Morgenthau, 84, who says the Beacon Hill case is part of a continuing investigation of money laundering by his office, adds that prosecutors say the transfers were used for tax evasion and moving the proceeds of political corruption, including bribes, out of Brazil.

Money laundering has been illegal in the U.S. since 1986. Money laundering is the movement of funds through an account or a series of accounts -- often held in several countries -- to disguise income from crimes, such as drug trafficking, as earnings from legitimate activities.

In September, Celent Communications LLC, a Boston-based financial research company, released a study that found money laundering through banks has increased in each of the past four years and is projected to reach $424 billion in 2004.

Morgenthau declines to comment on whether his office will charge J.P. Morgan. Blum, the former federal prosecutor, now a partner at Lobel, Novins & Lamont in Washington, says that if history is a guide, J.P. Morgan isn't likely to be charged.

If you’re wondering why it’s so unlikely that J.P. Morgan, or any bank for that matter, would be charged for money-laundering, it’s absolutely critical to understand tax evasion, because tax evasion and money-laundering are highly interconnected activities. They’re both all about preventing people from following the money: Money-launderers try to obscure where the money originally came from (drug proceeds, organized crime, bribes) while tax evaders try to obscure just where, exactly, profits were generated (like in a company’s offshore subsidiary that just happens to exist in a small island nation with a 0% corporate tax rate, for instance).

Both activities, tax evasion and money-laundering, utilize the same financial system and the same loopholes. Consequently, efforts to crack down on money-laundering are often stymied by the fact that such efforts would also impinge on the ability to evade taxes. You see, with nearly a third of the globe’s assets held in tax havens, cutting down on tax evasion isn’t exactly popular. There are reasons over half of US corporations paid no federal income taxes during the boom years of the late 90’s, and it wasn’t due to a lack of profit.

Of course, there are worse things than paying nothing in income taxes, like actually getting paid by the government in the form of tax “rebates”. At least we don’t have to worry about that. Oh wait, never mind.

So if you’re wondering how such massive money-laundering loopholes can remain in the financial system, just ask yourself about the likelihood of the world’s largest corporations lobbying to change a system that can, and does, end up paying them in taxes.


Morgan Was Concerned

Kristin Lemkau, a J.P. Morgan managing director, says the bank's compliance department became concerned about Beacon Hill's accounts in 1997 and asked Beacon Hill to hire Decision Strategies LLC, a New York-based consulting company that develops compliance programs and does investigations.

Decision Strategies, which Lemkau says found no evidence of money laundering, made suggestions on how Beacon Hill could strengthen its bookkeeping, she says. The bank accepted the consultants' findings and allowed Beacon Hill to continue wiring money through its accounts, she says.

Because both the nature of Beacon Hill's work and the location of its customers in Latin America pose high risks for money laundering, J.P. Morgan should have dug deeper, says New York State Banking Superintendent Diana Taylor.

``These were circumstances that should have been looked at more closely,'' she says. ``When someone won't get a license, that's a red flag.''

Banks Condone Laundering

U.S. banks have allowed or assisted in the laundering of dirty money for years, the Permanent Subcommittee on Investigations of the U.S. Senate's Committee on Governmental Affairs found in February 2001.

The subcommittee estimated in 1999 that U.S. banks either condone or actively participate in the laundering of more than $250 billion a year, primarily from drug trafficking and organized crime.

In 2001, the subcommittee looked into the use of offshore accounts by 20 banks, including Citigroup Inc., the world's largest bank by market value; J.P. Morgan; Bank of America Corp.; and Bank One Corp.

``Virtually every U.S. bank we examined had opened accounts for offshore banks or banks in suspicious jurisdictions, yet few were paying attention or taking steps needed to make sure these banks weren't misusing their accounts,'' says Senator Carl Levin, 69, a five-term Democrat from Michigan, who led the investigation.

``The result of these due diligence failures has made the U.S. banking system a conduit for criminal proceeds and money laundering.'' Levin says.

There are a number of shocking conclusions from Senator Levin’s early 2001 Democratic Senate investigation, that is, if you’re still capable of shock at this point.


Citigroup and Laundering

The subcommittee found that in the 1990s, Citigroup's predecessor, Citicorp, had either allowed or assisted in laundering by the Juarez drug cartel, the biggest drug trafficker in Mexico, based in the border city of the same name; by the families of four foreign leaders who stole government funds; and by people and companies that had paid bribes to company and government officials.

One of the companies that used a Citicorp account to launder money was International Business Machines Corp., the world's largest computer company. IBM paid $300,000 in 2000 to settle U.S. Securities and Exchange Commission claims that it failed to disclose it had paid a $4.5 million bribe to directors of Banco de la Nacion Argentina to win a $250 million contract in 1994, according to the SEC.

IBM neither admitted nor denied wrongdoing. Senate investigators found that $1 million of the IBM bribe had been laundered through a Citicorp account. Citicorp was never charged or fined for money laundering, the Senate found.

So the world’s largest computer company laundered money through the world’s largest bank to pay bribes to the directors of the largest bank in Argentina. The company paid a slap-on-the-wrist fine and the bank was never even charged with wrongdoing.


USA Patriot Act

Citigroup spokeswoman Shannon Bell declined to answer questions about money laundering or to make bank executives available for interviews. John Reed, who was chairman and chief executive officer of Citicorp from 1984 to 1998 and cochairman and co-CEO of Citigroup from 1998 to 2000, declined to comment.

Former Citigroup CEO John Reed may have declined to comment for this article, but he had some interesting things to say to the Senate finance committee back in 1999 when Citigroup was “criticized” for allowing money-laundering. That particular scandal involved Citigroup’s “Private Bank”, which is Citigroup’s bank that offers financial services to the “ultra-affluent” clients around the world.

Interestingly, the head of Citigroup’s Private Bank was Shaukat Aziz, who left his post in 1999 after Pakistan’s military coup to become Pakistan’s Finance Minister. As Finance Minister he was charged with reviving Pakistan’s economy after the crippling economic sanctions following Pakistan’s 1998 detonation of a nucear device, which he apparently did well enough to garner Euromoney’s “Finance Minister of the Year” award in 2001 (Note that BCCI was integral to Pakistan’s A.Q. Khan nuclear proliferation network. It was a busy bank). In 2004 Mr. Aziz was elected Pakistan’s Prime Minister. As Prime Minister he has, somewhat ironically, advocated tougher anti-money-laundering law.

In the weeks following the attacks of 9/11, Richard Small, director of the anti-money-laundering department of Citibank (a part of Citigroup), also lobbied for changes to anti money-laundering regulations. Specifically, he was seeking an exception to a proposed ban on US banks doing business with shell banks. Before his position with Citibank, Mr. Small was a director of the anti-money-laundering office of the Federal Reserve.

And in case you are curious, Citigroup’s Private Bank still has a few money-laundering few issues to work out.


Today, almost three years after the Senate subcommittee hearing, too many banks and securities firms continue to allow money laundering, Levin says.

On Oct. 26, 2001, six weeks after the Sept. 11 terrorist attacks, Congress passed the USA Patriot Act. It required that banks verify the identity of their customers and that they set up systems for spotting patterns of suspicious money transfers.

``Despite the call for tougher controls in the Patriot Act, some banks and securities firms still haven't gotten tough enough,'' Levin says.

Actually, it’s not just that “some banks and securities firms still haven’t gotten tough enough”. According to Senator Levin’s aide, in their 2001 investigation they found that “virtually every major U.S. bank has opened correspondent accounts for high-risk foreign banks”. Global finance is, in large part, a global system of trust. And nowadays it’s apparently a wildly misplaced and subverted system of trust and probably has been for as long as there have been banks.


Wells Fargo

In California, Wells Fargo & Co., the fourth-largest U.S. bank by assets, allowed two unrelated Ponzi schemes -- investment frauds that promise high returns and pay early investors with money received from later investors -- to transfer more than $255 million through several accounts in money-laundering schemes from 1995 to 2002, according to allegations in a civil suit in one case and a federal prosecution in the other.

In one case, the bank violated its own rules by allowing a man to move $250 million through a personal checking account. That man, Larry Osaki, was indicted on federal money-laundering charges in October.

Wells Fargo policy prohibits customers from using personal checking accounts for business purposes, spokeswoman Julia Tunis says. She declined to comment on the cases.

Celent Communications estimated that $415 billion was laundered in banks in 2003, up from $403 billion in 2002. The firm projected the figure would increase to $436 billion in 2005.

``Money laundering is a moving target that generally manages to stay one step ahead of the attempts to block it,'' says Neil Katov, a Celent analyst. ``Money launderers have always been adept at devising new and sophisticated ways to move their money.''

Yeah, money-launderers are adept at devising new ways to practice their trade, but it sure doesn’t hurt that they’re barely prosecuted. Nor, as we’re about to see, does it hurt that money-laundering is just down right profitable.

And for those keeping track, yes, we now have the #1 (Citigroup) #2 (Bank of America) #3 (JP Morgan) and #4 (Well Fargo) banks getting cited for blatant money-laundering in just this article alone. Good thing the federal government is starting to assess this threat.


Millions in Fees

Banks are willing to launder money or turn a blind eye to customers who do because money laundering brings in hundreds of millions of dollars in fees, says Raymond Baker, a senior fellow at the Center for International Policy in Washington.

Baker, 68, who has spent seven years researching money laundering in 23 nations, says banks aren't concerned about being prosecuted. ```Don't ask, don't tell' is the prevailing norm in the banking community,'' Baker says, adding that banks are more interested in collecting fees than in following money-laundering laws.

John Byrne, senior counsel at the American Bankers Association, defends his industry's efforts to fight and report money laundering. ``We're not perfect,'' he says. ``I think we do have a good record.''

Fear of Panic

Prosecutors don't bring money-laundering charges against the largest banks for fear of creating panic among investors and world economic turmoil, says Ian Comisky, a former federal prosecutor and coauthor of the two-volume book ``Tax Fraud and Evasion'' (Warren, Gorham & Lamont, 1994).

The 1992 law says that if a bank were convicted for laundering, the regulatory agency overseeing the bank would hold a hearing to decide whether the bank should be closed down as a penalty.

``The obvious answer is, everyone's afraid to use the law against big banks,'' says Comisky, now a partner at Blank Rome LLP in Philadelphia. ``It's a political issue. Do you want to put Citigroup out of business?''

Michael Zeldin, former head of the U.S. Justice Department's money-laundering division, says even the potential of facing conviction can kill a bank.

``Everyone understands that there's a death penalty that attaches to a criminal indictment,'' says Zeldin, who now runs the money-laundering-prevention unit of accounting firm Deloitte & Touche LLP.

There’s a lesson here: If you’re going to be involved in a crime, be a bank. The bigger the better.


Law Is Complex

``The mere act of indictment was death to Arthur Andersen,'' he says. Andersen, the fifth-largest accounting firm until 2002, was indicted by the Justice Department in March 2002 for obstructing an SEC investigation of Enron Corp. Andersen, whose clients began fleeing the company after the indictment, was convicted in July 2002 and shut down its auditing practice by the end of that year.

In addition, the intricacies of money-laundering laws make it difficult for a prosecutor to convict a bank, says Lester Joseph, the top Justice Department prosecutor of money launderers.

To convict a bank of money laundering, prosecutors must prove the bank knew or was ``willfully blind'' to the illegal source, he says. Even if a bank launders money, its officers can't be found criminally liable unless prosecutors can prove the officers knew the money came from criminal activity, he says.

When individual bank officers are charged with money laundering, their employers often escape sanctions, court cases show.

Yeah, the law is complex, at least in terms of prosecuting money-laundering banks. It’s pretty simple when it comes to getting away with it: feign ignorance and maybe a little stupidity too. Just make sure your state of ignorance is maintained through the entire relationship with your money-laundering client and don’t do anything that might accidentally expose you to information that indicates your client’s money might have originated from, say, a Colombian drug lord’s offshore account. And also just have plenty of faith in “the system”, that being the international financial system where basically all it takes is one untrustworthy financial institution to allow the dirty money to enter the global financial laundromat and claim it’s legitimate. Be blind, stupid, and ignorant about your clients and fellow banks in a legally convincing manner and you’ve just passed the “due diligence” requirements. Congratulations and let the profits commence!

And finishing our look at the Bloomberg article (although there is much more in there) …

Bank of New York

Bank of New York Co., the third-largest New York-based bank, handled more than $7 billion in suspected dirty money from Russia from 1995 to 1999, according to an October 1999 indictment by the U.S. Justice Department.

In February 2000, Lucy Edwards, former Bank of New York vice president for Eastern Europe, and her husband, Peter Berlin, pleaded guilty in federal court in New York to conspiracy to commit money laundering and to aid and abet Russian banks in conducting unlawful and unlicensed banking activities in the U.S.

The couple forfeited $8 million, and nearly four years later, they're still waiting to be sentenced. Their lawyer, Barry Kingham, says a federal investigation of money laundering at Bank of New York is continuing and his clients are cooperating.

Bank of New York told shareholders in an SEC filing in March 2000 that on Feb. 8, 2000, it entered into an agreement with federal and state regulators to tighten its internal controls by improving its customer screening and increasing its monitoring of suspicious bank transactions.

Bank Not Charged

The bank said in its Nov. 12, 2003, quarterly report that it's continuing to cooperate with government investigators. It hasn't been charged or fined.

Wells Fargo hasn't been charged in either of the two cases in which it's involved.

Oh hey, it’s our good ol’ friend the Bank of New York, and it looks like it was never charged over its laundering of billions of dollars in embezzled IMF money that was intended to help the impoverished Russian people. Oh well, they probably had no idea what was going on. At least, that was apparently the case with the bank that was used to funnel the kickback money in the Mabetex/Kremlin corruption scandal of 1999, which we’ll recall was Banca del Gottardo, Bank al-Taqwa’s bank. When faced with the charges, Banca del Gottardo’s executives “said they were a little surprised, and asked, was this the normal way of doing business there?” And who knows, it may have been a little surprising for the executives at the time, but what we’re about to look at next should come as little surprise to the rest of us at this point.

Banca del Gottardo and Saddam’s “Satan” account
Banca del Gottardo is nothing if not an equal opportunity banker. The Muslim Brotherhood, the Yeltsin “Family”, and yes, even Saddam Hussein had the privilege of utilizing their world class money-laund…err..”financial” services. Regardless, let’s take a closer look at this past impropriety with an
excellent 2003 article from the San Francisco Chronicle:

Saddam Hussein can tap billions in dollars, gold, diamonds
Resources hidden all over world may finance resistance

Jay Bushinsky, Chronicle Foreign Service

Saturday, August 16, 2003

08-16) 04:00 PDT Geneva -- If Saddam Hussein is indeed orchestrating an anti-American guerrilla campaign from a hideout in Iraq, he can count on billions of dollars stashed in offshore companies to finance hit-and-run operations, investigators say.

Estimates of Hussein's hidden wealth range from several billion dollars to $40 billion, and the Bush administration fears that the money could finance not only resistance to the U.S. occupation of Iraq but terrorist activities as well.

Interestingly, A July 2006 list of the Iraqi Government’s most wanted figures indicates that the Iraq insurgency is primarily comprised of former Baathists and refutes the assertions of a large Jihadist presence, so one has to wonder how much of that financing came from Saddam’s global stash. Then again, given the obscene ease we’ve seen in clandestinely financing pretty much any activity around, and the enormous enmity towards the United States these days, finances (or weapons, for that matter), are probably not the biggest logistical issue facing the insurgency.


Most of Hussein's fortune came from kickbacks on oil sales and smuggled cigarettes and other luxury goods, financial sleuths say. According to the General Accounting Office, the deposed dictator skimmed more than $6.6 billion from the U.N.-sponsored oil-for-food program.

Fresh evidence of Hussein's ability to cover the costs of a protracted guerrilla war emerged in April when U.S. soldiers found some of the laundered money -- $656 million in makeshift vaults in a Baghdad neighborhood and an additional $112 million found in dog kennels.

More recently, investigators discovered $4 million in gold bars in June at a Swiss metal processing company called Metalor. The gold had been deposited in the late 1980s by Hussein's half-brother and finance chief, Barzan al- Tikriti, who was captured by U.S. forces April 17.

Nicolas Giannakopoulos, head of the Organized Crime Observatory (OCO), an independent investigative group in Geneva, says that just may be the tip of the iceberg. He says Hussein's worldwide financial network includes gold and diamonds concealed in such tax havens as Switzerland, Liechtenstein, Panama and the Bahamas.

This wasn’t the only case of metal-laundering for Metalor. In January of 2004, Metalor USA, one of the largest gold refiners in the US, was charged by US authorities with running a South American gold smuggling ring that involved buying gold in the US using drug money, smuggling it to South America where it was reworked, then shipped back to the US where it was melted down and refined, and then shipped back to South America (with the occasional export-subsidy-cherry on top).


Paolo Fusi, an Italian reporter who began investigating Hussein's money trail after Sept. 11 and is the author of "Saddam's Cashier," says the ousted leader patterned his overseas empire after his political mentor -- Egypt's late President Gamal Abdel Nasser.

"(Hussein) became an admirer of the Egyptian regime and its leader's methods," said Fusi.

Nasser, who ruled Egypt from 1954 until his death in 1970, deposited several million dollars in foreign banks in case he was ever forced into exile by his political enemies. Hussein lived in Cairo after a failed coup forced him to flee Iraq in 1959.

Oh my, so Saddam was in the Nazi-infested Cairo of the 50’s and 60’s. That’s kind of neat. What’s also neat is that Saddam’s uncle and tutor, Khairallah al-Tulfah, took part on a 1941 pro-Nazi coup attempt in Baghdad.


Fusi began his inquiry in Geneva by interviewing Arab bankers, who led him to Hussein's financial agents. Fusi also developed close ties with Italian judges, financial police and a Swiss-Italian attorney named Gianluca Boscaro, who reportedly secured evidence of how Hussein hid money around the world after being hired by the family of a man the dictator executed for skimming profits from the network.

These sources helped the Italian reporter cut through the web of bank transfers, money laundering and dummy companies that enabled Hussein to build lavish palaces and buy enough weapons to turn Iraq into a regional military power.

Gianluca Boscaro is someone with an interesting connection to Bank al-Taqwa. Recall that it was at Boscaro’s Lugano, Switzerland office back in 1988 that Ahmed Huber, Youssef Nada, Ali Ghaleb Himmat and others met to found the “al-Taqwa Management SA”. Yep, Boscaro’s office was the birthplace of the Muslim Brotherhood’s bank.


According to the Sunday Times of London, hundreds of documents show that Hussein held bank accounts at the Bahamas branch of Switzerland's Banca del Gottardo and channeled millions of dollars to them from arms deals and construction contracts.

Bank officials have denied the existence of Hussein accounts and filed a legal complaint in May against unknown persons hoping to identify "those responsible for such serious acts, harmful to the bank's name."

But Elio Borrodori, the subject of Fusi's book, who served as a company trustee for Hussein in Liechtenstein and Switzerland for more than a decade, told reporters in April that he funneled millions in "commissions" and "consultancy fees" into a Banca del Gottardo account in Nassau code-named Satan and controlled by a Hussein nephew named Saad al-Mahdi, based in Milan.

Borrodori, a retired Swiss lawyer, said the financial empire's major entity was the Mediterranean Enterprises Development Projects (MEDP), which he said had links to 300 other front companies, mainly in Panama and Liechtenstein.

Ernst Backes, an international banking expert in Luxembourg, says the network remained active after U.N. sanctions were imposed on Iraq at the end of the Gulf War in 1991, reaching a financial peak of $31 billion annually.

One has to feel a bit sorry for Banca del Gottardo, what with all these unscrupulous characters taking advantage of the bank’s naivety. Perhaps they acquired their openmindedness from their days as a P-2-affiliated subsidiary.

Oh, and make a note of Ernst Backes. He’s an important figure that we are going to be focusing on in our next essay, because if you thought the financial shenanigans we’ve seen so far are as bad as these things gets…well…umm…just keep thinking that for the time being if it makes you feel better and allows you to keep reading.


Fusi says an Italian government report showed one of the network's boldest exploits -- the laundering of millions of Iraqi and Kuwaiti dinars, the latter plundered by Iraqi troops during the Gulf War.

"The money was packed into suitcases that were transported by truck from Slovenia to Zurich, where a fair exchange in gold and diamonds was guaranteed by Youssef Nada of al Taqwa Bank," Fusi said. (Al Taqwa Bank was included in President Bush's list of al Qaeda money suppliers.) "The neatly packed bills then were shipped to Lebanon and Syria, after which they disappeared."

Oh look, it’s our good friend Youssef Nada and Al-Taqwa. Well, there does appear to be at least one link between Saddam Hussein and Al-Qaeda: Both used, in part, the same Muslim Brotherhood bank to conduct their business. Then again, both used BCCI too. And as we’ve seen so many examples of so far, both BCCI’s backers and Bank al-Taqwa’s Muslim Brotherhood share the bond of having an often bizarrely close and clandestine long term relationship with numerous governments around the world, including the United States. So, if we are supposed to be waging a War on Terror perhaps we should invade ourselves. Oh wait, we’re already here. That was easy.

And finishing off our look at the San Francisco Chronicle article…

No matter how desperate his situation may be these days, it is doubtful that an on-the-lam Hussein would run short of funds. Swiss experts believe he secreted away enormous sums on the eve of the U.S.-led April 9 attack.

While all Iraqi funds are now frozen in Switzerland, cash can still be withdrawn from the Hussein financial network's numerous accounts in other countries -- Liechtenstein, the Bahamas, Panama and elsewhere. None of these accounts are in his own name, and the withdrawals could be made by agents whose motives would not be known to the banks involved.

The money can be hand-carried by couriers to the Iraqi border, possibly through Syria or Turkey, smuggled across and delivered to Hussein's hideout.

Borrodori says Hussein's penchant for cruelty extended to his financial emissaries. When he learned that Saad al-Mahdi and a colleague were siphoning off more cash than usual in 1987, he summoned both to Baghdad and had them beheaded.

"Saddam Hussein is a bloodthirsty, crazy man," Borrodori told reporters in April. "I hated what he did to Saad al-Mahdi. This poor young man. To cut the head off such a close relative. I can't understand that."

Years later, al-Mahdi's family hired attorney Boscaro to sue Hussein for some of the millions laundered through the offshore companies. The case never went to court because Boscaro, a champion skydiver, was killed last August when the ropes on his hang glider became tangled over Italy's Lake Orta, and he plummeted to the ground.

It’s worth noting that, although Bascaro’s hang gliding death was determined to be an accident, the police also noticed that the canopy cords were damaged (7).

That wraps up our look at the legal and structural underpinnings of money-laundering, tax evasion, offshore shady shell banking, organized criminal financing, and terrorist financing. Call that beast-thing of a financial system whatever you want (“The Octopus” is already taken…“the Squid” perhaps?), it’s playing an increasingly prominent role in our world. And as we’ve seen, it’s an often hidden role. Hidden in plain site, acting as both glue and oil in our reality: Glue in the sense that money-laundering is a huge part of what holds together the legal and illegal economies of the world, and oil in the sense that these activities facilitate even greater levels large-scale criminal activity. The trillions of dollars from the massive, and ever-growing global black markets (drugs, arms, and human trafficking, and other organized criminal activities) get re-injected into the “legal” economy, with the monetary “injections” often taking place within the legal business fronts and back into a blind, deaf, and dumb banking system. And thanks to our lovely War on Drugs – a war that that involves locking up non-violent, low-level dealers and while the major producers and traffickers remain filthy rich and free - the prices of certain plants would have never become worth their weight in gold and proxy wars around the world would have a much hard time finding the funding they need.

And with the massive amounts of money to be made by the financial system from cleaning these ill-gotten gains, we’ve now have kind of a self-fulfilling “profit”-cy, where efforts to clamp down on enabling criminals end up cutting into one of thee most profitable areas of one of most powerful industries on the planet. It’s our new globalized gilded age, and unless you think the most powerful private interests on the planet are going to willingly plug the loopholes that have been so kind to their balance sheets, don’t expect change anytime soon. At least not until public rises up or the money-go-round breaks down, and don’t expect the situation to improve too much in that case.

Sitting in the gut of this Giant Kleptomaniacal Squid of clandestine finance we find Clearstream, a major clearinghouse of European stocks and bonds that, according to money-laundering expert Ernst Backes, also acted as a conduit of large-scale money-laundering and tax evasion via a system of hidden, unpublished accounts. Not suprisingly, the al-Taqwa network (and therefore al-Qaeda) had access to this hidden system, but Osama bin Laden may have had access to Clearstream’s hidden system through more than just Bank al-Taqwa’s accounts. SICO, the bin Laden family’s foreign investment firm, was also allegedly using Clearstream’s discrete services. And as we’re going to see, SICO ties back to the Bush family, the far-Right, Osama bin Laden, and 9/11 in a number of ways. That’s what we’re going to look at in the next essay as we near the end of our examination a most unpleasant state of affairs, so keep reading!!!!!!!!!!

Offline References

(1) Old Nazis, the New Right, and the Republican Party: Domestic fascist networks and their effect on U.S. cold war politics, by Russ Bellant; Political Research Associates; copyright 1991; ISBN 0-89608-418-3; p19

(2) The Outlaw Bank: a Wild Ride Into the Secret Heart of BCCI, by Jonathan Beaty & S.C. Gwynne; Beard Books; Copyright 1993; ISBN 1-58798-146-7; p330

(3) ibid p9-20

(4) ibid p309-312

(5) Dollars for Terror: The United States and Islam; by Richard Labeviere; Copyright 2000 [SC]; Algora Publishing; ISBN 1-892941-06-6; p334-335

(6) The Outlaw Bank: a Wild Ride Into the Secret Heart of BCCI, by Jonathan Beaty & S.C. Gwynne; Beard Books; Copyright 1993; ISBN 1-58798-146-7; p107

(7) “Banker Who Hid Saddam’s Millions” by Stephen Grey, Nick Fielding, Jon Ungoed-Thomas, Edin Hamzic, Paolo Fusi, Eben Black; Sunday Times [London]; 4/13/2003