A Rough Guide to Money Laundering

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You're listening to the London Review of Books podcast, I'm Thomas Jones, and our subject today is the great mystery of money laundering, a more mysterious business that you may realise, certainly more mysterious than I ever realised, and who better to shine a light on the murk, and it is very murky, and the author of How to Speak Money, John Lentusdom, who's also contributing editor at the LRB, and the author of many novels, including most recently look what you made me do, which was published by Faber in March. His piece in the latest issue of the LRB is a review of two books. Everybody loves our dollars, how money laundering won by Oliver Bullo, and how to launder money a guide for law enforcement, prosecutors and policy makers by George Kotroll and Lawrence Burke Files. Hello John, and thank you for joining me today. Hi Tom, thank you for having me. So, do you have any cash on you? Not a red hankney, I did actually go through various, you know, we got sort of dishes and bowls and various, you know, receptacles that you think have parking permits in the open in terms of not having parking permits in it, just to draw from recent experience. The other day encountered, and I think in the house is something like £13.47 in cash. Well, I'm not, I haven't checked whether it's the old pound coins that don't work anymore with the new ones. And the reason for that is because card payments, you know, pay for everything by card or direct debit or whatever else now. Yeah, we're accelerating momentum. I'd say over the last decade and then the thing that completely changed it was a pandemic and contactless became not just the new normal, but the new norm in the philosophical sense that you had to do it. Lots of businesses in this part of town don't take cash. I mean, there's quite a few, there's a cafe near me that they got robbed a couple of times and then went cashless, straight, you know, contactless only in about 2022. And I think I mentioned in the piece, there used to be seven, because I live near a high street, busy high street, there used to be seven cash point machines within five minutes of the house and they've all gone. And that, you know, just does seem to reflect a sociatal trend just away from cash. And as you say, it's not just you that you and I most other people, almost everyone, is using less cash than ever. But there is, there's no shortage of cash out there. No, apparently there's more of it than ever. So I suppose first, impossible question is, where is it all? Well, the incredibly strange answer is that nobody knows and it's a really understudy to think because everybody, you know, it's just categorically people in normal life and civilian life, just we are using less cash surveys show that. And you'd logically have thought that therefore there is less cash being produced, you know, in the UK, 91% of all transactions are non cash. So why are we, why they're more bank notes in circulation than ever? And there's numbers are, we use less cash in the UK than most developed economies, but it's the same trend and yet more and more cash is going into circulation. I've, I've been talking my head out, I've forgotten the numbers, but it's something like, um, in the US, I'm looking out now, the average American holds $418 in cash, that's in 2022. But there's almost seven and a half thousand dollars of cash in circulation for every American. So household of four, there's $28,000 of missing cash and it's very, you know, a, that's weird and b, it's weird that the powers that b, don't seem to be interested in it. I think it's partly because there's a conventional, you know, there's a thing about what it would taught. There's an orthodoxy about what money is and what money does and money is defined by its use. It's a means of exchange, a store of value and a unit of account, that's like economics 101, what money does and anything that fulfills all three of those functions is money, some societies, it's as it were, cowrie shells, you know, units, tallie sticks, things like that. And in the modern developed world, it's central bank money. So unit of accounts, store of value means of exchange. But since the less and less cash, the central bank orthodoxy is, since we can see less and less cash moving in the system, it must be being used as a store of value. You know, logically, there's nowhere, nowhere the use for it to have. Problem is, if you actually go and ask people, they aren't. You know, household surveys consistently show that's just not where the money is in the UK. And so the amount of cash in circulation is actually my £13.47 in my jar. So the gigantic question is, what the hell is going on? And the answer seems to be, the answer that comes back from various people who've studied it is that a principle or even the principle use of all this cash, which is overwhelmingly by the way, other things, it's overwhelming in a high-dronomination nose. In the US, 80% of all the outstanding cash is in the form of $100 bills, which most people never use and a lot of people have never even seen. A lot of the outstanding value of the euro is in the 500 euro note, which is the bin lardon. They stop making it in 2019, but it's still in circulation. It's still legal tender. And the Swiss have this utterly bizarre mad note of £1000 with francs, which is basically £1000. And so, yeah, overwhelmingly, the money out there in circulation is in the form of these incredibly high-dronomination bills. And it seems to be that it's used overwhelmingly for crime, or money laundering tax evasion crime. I mean, let's follow the money, high-patterty for a bit. So let's say someone's selling cocaine or cannabis or cashmine on the street and they're paid for in cash. That bill then goes up the chain of the drug dealers and at some point it gets to someone who's going to want to make it appear to be legal tender. So what happens? What would happen to that? Probably not a thousand franc notes, but that, you know, £20 note moving through the black economy. How does it come out again apparently clear? And maybe they don't need to be. I mean, we're talking about money laundering, but if all this money is in, being used for crime and is always invisible, presumably some of it just continues to circulate in the black economy. Yeah. I mean, exactly. So coming back to the classical definition of money, it is a means of exchange. It's just a means of exchange used by criminals. And it's one of the U.S. One of the cops, I think, quoted by Oliver Bullock in his very good book says, you know, the missing link between Medeine and Moscow is the $100 bill. Because of nothing, of that 80% of U.S. dollars in circulation by value, 70% of that is held abroad. I mean, that we know. And so yet a lot of it just stays in circulation. It's just settling transactions. You know, you're smuggling me, Coke, I'm selling on the street, I'm paying you back in 500 euro bills, you know, you're keeping those in circulation to pay off other people. And it doesn't actually touch the formal banking system. For the stuff that does, again, there's a Fredris, there's another three-part thing. The way that you're taught the kind of formal instruction about how money laundering works is that there's three faces. There's placement layering and integration. And placement is just your 20-quid note for your Coke is getting that into a bank account somewhere. And very often that would be. it's different in different places, but very often in developed world, it's a business that takes cash, of which there is no shortage. I mean, it's a big issue in the UK at the moment, just the number of. There's mysterious proliferation of cash-only businesses just as everyone is using less and less cash. So, fake shops, nail bars, barbers, American sweet shops, things like that. And then moving side up, value chain in terms of transactions, things like casinos, constructions often pay for in cash, things like that. Anything where the customer is handing over cash is a very good place for you to take the illegally owned money and mix it. That's what's called layering. Mix it with legal sources of funds. So, it gets harder to unpick. Your 20-quid note is mixed in with other 20-quid notes, an legitimate. And then the third layer is integration where you've placed the money, you've layered it and then you use it to buy a flat. And then that flat is to all intents and purposes. Everything you do subsequently with the money from that has been fully integrated within the system. Oliver Bulletcat is quite a good thing about it being Golffather 1, 2 and 3, that Golffather 1, they're running all the various criminal things. Golffather 2, he's trying to take the business logist but by mixing it with casino money and Golffather 3, they are legitimate and they're a huge businessman. But that's the classic thing, and that's the thing the system is set up to look out for. And quite a lot of money laundering doesn't actually function like that. So how does it function? What are the other more elaborate ways of doing it? Well, the interesting thing about the more elaborate way of doing it is that it's actually, it's kind of the history of banking in that a lot of firms that turned into big banking institutions, the classic example, the Medici, who were cloth traders, laymen who were cloth traders. I can't remember what Bartley's did. I think Lloyd, they were Iron or cloth. Nat West begins Iron or cloth. A lot of the, they started out as trading companies that had a thing in place A that they shipped to place B and were paid back in credits in place B that were then set, and then the account were settled back in place A. And they noticed that it was more efficient that they were making more money, having the credits and debits move backwards and forwards and taking a tiny piece of every transaction, rather than in shipping physical goods. It's actually more efficient to have the credits and debits as the flow of funds rather than actually shipping cash. And may all do enough, there's a thing we think of credit as sophisticated, modern thing, but in the middle ages you had a very similar thing of balances of credits and debits and actually the money was physically moved on one day. I forgot which Saints day it was, but there's a one particular day in the year when the balances were settled in physical thing and the rest of the time it was this ledger of credits and debits. And the modern version of that would be, I mean, one of the bullet sites example, but you can rinse and repeat almost any combination of criminal activity and physical goods in it. But his example is drug dealer in Mexico who, you know, historically would have been, I was serious, Narcos is quite good on this. You see the transition from, it starts out as marijuana. The problem with marijuana is you have these whacking, great fields of it which are visible, very clearly visible from the air. Then it moves to coat which is better because it's, the coat comes from cocaine, it's smaller, it's easier to conceal, it's easier to hire from the authorities, you can't immediately spot it by flying a plane overhead. And now even better from the drug dealer's point of view is fentanyl, which is fantastically potent and very small quantities. The precursor chemicals which mainly are shipped from China are very, very cheap. You can make it in your garage and it's very cheap, very hard to detect and very potent. And so fentanyl shipped over the border from Mexico to the United States, drug dealer in the United States sells it full cash. The cash is then used to buy whatever agricultural equipment, helicopters, fancy cars, who cares by the equipment, the equipment is shipped back to Mexico and that they're sold in Mexico for pesos. So the drug dealer has exchanged fentanyl for pesos but no funds have actually crossed the border. The thing that has crossed the border are physical goods, smuggled in one direction and then clearly visible but you know, accounted for the receipts or bills of lading all of that in the other direction. And because that trade is hundreds of billions, almost trillion dollars a year, you know, billions of dollars of value and goods crossing the border daily, it's much easier to hide, you know, you're hiding tear drops in a torrent doing it that way. And the system is set up to monitor financial transactions but you have this colossal flow of physical goods and debit and credits attached to them which are effectively invisible to that thing which is just monitoring people's bank accounts. And presumably the cash which is used by the tractor has been through one of these other cleaning systems that it's been, you know, probably gone through nail bars or casinos or something before it's used. So it's cleaned by the time it's buying the tractor or does it not even need to be, you can just turn up with your suitcase of $100 bills and. No, a lot of the time it doesn't need to be. Yeah, lots of things in businesses like construction and contractors and things like that, they still use a lot of cash because people play their suppliers and their contractors and things on the black. So it's fairly, you know, there's a lot of cash washing around in that business. I mean, one of the things I didn't have room to put in the piece is one simple way of money laundering is like store cards like gift cards and loyalty cards which you can load up with quite a lot of value quite quickly. You know, there are lots of towns in America where a mall would have 10 or 20 different shops that use store cards and a typical city would have 20 of those malls and you'd do, you know, $500,000 of value in each one of those shops every single day. You can put millions and millions of dollars of value on stored cards a day per career you have doing it. And what happened to them is that they're then sold to contractors who buy stuff for like house or innovation, things like that. Usually it's a 90% of the value. So you'd have, say, $10,000 worth of value on a stored card, the contractor would buy it for $9,000. And the thing about the utility to them is that they bill the client for the full value. So they buy it on a loyalty card, build them for the full thing and they get effectively 10% off. The money laundering gets the loan of the money and the contract gets 10% off. So there are a lot of businesses that though that still use it. And the other one I'd have, I think I mentioned is casinos. Casinos would take cash for chips, absolutely no questions asked. And you can get, you know, you can, in proportion to, you can lose a lot of money very quickly in a casino. That's kind of the whole point of them. You can laundre a lot of cash very quickly in a casino too. And of course, as you make clear in the piece that these things, the things that we know about and that they're written about in these two books and that are huge amounts of what way people are doing it. We don't know about because if we did, the authorities would be onto it. Although maybe that's giving the authorities too much credit and there are these things still going on that people do know happen and, you know, it's too hard to catch or, or may, I mean, is there, I mean, in terms of that, you know, the sort of the economic threat. If you were the amount, all this cash, all this money that's moving between the criminal economy and the legitimate economy, if you were to clamp down on all this stuff, I mean, is there a risk that some of these malls would then close and so on? And actually you'd have, you know, the one of the reasons governments don't do anything about it is because it would, because of the economic threat. That's definitely the case. And one of the reasons we know that's true is that when there's a financial crisis, there was a thing, you know, 2008-19, suddenly the rules were a lot more lax, you know, when banks were worried about running out of money, there was a deliberate lowering of, that's what's lowering of standards, but a conscious effort to not ask inconvenient questions. I forgot on the name of it, there's a John Lakeri novel about it. John Lakeri's last book is about, there's a Russian banker doing exactly that. He's getting as much money as possible into the British financial system, but basically because he's been asked to, because the banks need the deposits. And yeah, there are definitely times when, I mean, there are, you know, the analogy is with, it's true the thing, so the analogy is with cheats and drug cheats in sport, where, you know, the people on the cutting edge of what they're doing right now are a very long way ahead of what the authorities are actually testing for. The authorities are testing for things that people have been caught doing in the past, whereas, you know, the cutting edge is stuff that no one's been caught doing and the authorities don't even know they're doing it. They don't even know they're doing it. If they were doing it, they'd be testing for it, which they aren't. Money laundering is a bit like that, that we can, we only know the thing that unsuccessful crux have been caught doing in the past. We don't know what successful crux have been in the present tense, but there are instances where there are known scams and scandals that the authorities are kind of, it's either incapacity or deliberate policy not investigating, pursuing, cracking down on it and that the massive glare in current example here at the moment here in, in UK and Europe is a thing called missing trader into community fraud, intra-community fraud, which is, it's slightly too complicated to explain on the hoof, but it's to do with VAT. It's to do the fact that one of the huge design flaws in VAT is it's not charge on products moving across borders. Different countries have different rates, it's too complicated, so if it goes across the border, it's zero rated for VAT. And the MTIC, as it's called, it was a big, big thing in the, it started in the UK, again, I've been starting to stoke. Somebody worked out, somebody or bodies worked out that there was a scam possible in, and they put phones, it happened with phones because, say mobile phones are ground each, you import a phone to the UK, zero rated for VAT. You controlled two companies, company A, it's imported it from, no, no, if you, sells it to company B in the UK, charges VAT. It was 17.5%, then let's say it's 20% now. So if phones come in for a ground, you sell it to your other company and charge 200 quid VAT. But other company then exports it, the export doesn't have VAT. So to make the system balance, company B claims back the 200 quid it's just paid. Because we paid those bloats 200 quid, we demand our 200 quid back from the government, because that's how VAT works. Government says, okay, here's your 200 quid. They go, company A, can we have our 200 quid please that you were paid? And company A has disappeared. That's why it's missing. trading trader. So one trade, the trader imports it, sells it and then vanishes. It's a huge, huge, huge, multi, multi, multi-billion dollar scam that ran for years. And it's one of the rare success stories at the British government actually, the whole range of tools, prosecutions, change some laws, crack down on it over, of course, about a decade. And you can't eliminate it and they've got more and more successful. They'd have a chain of companies. You'd have sort of 10 companies involved in a chain of which the majority were legit. And you'd hide at one or two missing traders in the middle of the flow. And also you'd have it cross multiple borders. You'd have that chain of 10 transactions crossing five borders. And you'd mix it, this thing about layering that we're talking about earlier. You'd mix it with legitimate transactions that were going through those companies. And you would have goods going backwards and forwards. And it would be like a shell game. So it's very hard to get rid of. But it's going massively crack down on here in the UK. But the problem is it's just relocated to Europe. And the European authorities themselves say it's the estimated value is 50 billion euros a year. And that the proposed solution is there isn't one. Because to tackle it, the only way you can actually tackle it is by adjusting the VAT system and the vested interests and the design of it as such that they can't do it. And it's a pretty amazing thing that you've got a 50 billion euro annual form of criminal activity that's effectively not police. They can't do anything about it. Or choose not to do anything about it. And I mean, clearly there could be a money laundering element in that. But it doesn't on the face of it sound like money laundering. That's just robbing governments essentially. You're claiming VAT rebates and governments is defrauding the taxpayer. Well, a lot of money laundering is that. I mean, and the system to the systems that were set up, I think, were the financial action task force set up in late 80s as a result of a conference that hosted by METRE on among the G7, the Rich Country Group. And the financial action task force, it's primary concern was people shifting money between jurisdictions to pay less tax, to avoid tax. And part of the focus on money moving between legitimate parts of the financial system, ticking boxes about the sources of funds and things like that is because it's actually not directly targeting money laundering, it's targeting tax evasion. And in Sephiros, the system is misdesigned and set up wrong, which it is. It's because it comes from that. Yeah. And the thing about that, the missing trader into community thing is that the money that goes in initially is cash that buys the phones. And then it's repeatedly laundered, moving the thing backwards and forwards. The reason it's phoned, say, you know, fancy iPhone, a grand pop, a lorry full of those is 10 million quid. So, you know, every one of those going backwards and forwards, you're clean, you've got 10 million quid's of cash transaction being sorted every time. And they would, and it's called the nickname MTIC was the formal name, the nickname is carousel Ford, it's because it was just like a carousel, go around, that lorry would literally just go backwards and forwards and forwards. And would the phones themselves sometimes be stolen? I mean, I meant to hold that whole recent business about Morgan McSweeney's phone and, you know, people joking, the only phone theft in London, the police have ever bothered to investigate. But I did see, you know, here's someone saying that they'd, you know, used their phone, my phone tracker and it was in a container and dover about to head into the continent. So, I mean, would it be something that you could be selling, you got a container full of stolen phones that you're selling or do they need to be legitimate in the first place for it to be, you to get away with it or could it be a, that feels to me like it could be a different business because the, well, where's the cash transaction there? Is someone, because the phone's been nicked. So, it's not clear to me whether cash transaction aspect of that would be. I mean, it is a big question, the thing about the missing phones and why, there's a baffling thing about the why the metropolitan police were so slow to act on it. You had hundreds of thousands of phones a year being stolen in London and very often people could see where they were. You could see on it. But the police, we said that the tracking thing isn't sufficiently accurate. It doesn't meet the legal threshold. And I suppose you're saying it's in a container somewhere in the port of Felix though. It's kind of well great, but we're not opening all those containers. So, there's not much. Well, in fact, when they eventually acted on it, it was a bunch, I think. They had a, a number of missing phones were tracked to a specific container he throw. They just, it reached a point where I had to say, to say, even the met, but, you know, that there was something going on here when you had, you know, a dozen phones in one specific location and they rated it and found, I think it was, you know, thousands of phones in this one. One location. I mean, I think that is odd about it is because the financial times ran a piece about the building in Shenzhen. They literally named the building. You had the address. You can look it up on Google maps. They had the address where most of the stolen iPhone in the UK were ending up. And why there wasn't enough of an evidence chain to trace that back to specific, that's a criminal. Anyway, they, and they, they didn't immediately read, I think, what they did is they tracked backwards to find the gang who were nicking all those phones and shipping them off and made a series of arrests. And although it's, this is an under reported fact, but phone thefts are down 40% in London because of busting that gang. It's not, you think it's opportunistic, but it's not, or a lot of it, isn't it? No, no, it's not opportunistic. It's definitely an organized crime, but it's not, and there will definitely be money being cleaned at some point in that process, probably when they sell the phones in China. But it's not, you know, the initial transaction isn't a money laundering thing. It's just physical theft. And I mean, that, you'd write in your piece for other things going to and fro between the UK and China, including from, you talk about Mouls earlier, but Bista Village, there's a fashion outlet. Yeah, that's the thing, but it thinks it's that, you know, I mean, this is slightly mysterious thing about just what it meant, success, Bista Village has been. And it's the only train I've ever heard of in the UK that has its announcements in Mandarin, the train from Marlibone to Bista Village. And Bula's theory, thesis is that, well, the cop he talks to, the thesis is that it's Chinese gang sends drugs to the UK, UK drug dealers sell drugs for cash, cash given to or deposited in the bank accounts of Chinese students of travelers who are visiting. They don't necessarily know. By the way, there can be innocent parties in this transaction. Just, you know, can you buy it and take it back to China? The luxury goods bought and taken back to China, which is many instances. Yeah, these are 10 grand apopt, some of these handbags and the kind of luxury tat. And then it's sold in China for, you know, for lack of value. And you've taken again, you've turned drugs into drugs in one place, into cash in another in a way that's invisible to the financial system. And it does look like, you know, quite a lot of, I mean, it's a mystery, where there's such a demand for this mad luxury goods, things like watches and Gucci bags. But it looks like quite a lot of that is just money laundering and things like watches. You know, there's not too many ways you can take a, you can just walk across the border with a hundred thousand pounds in value, no questions asked, but you can do that in the form of a watch. And you can do that in the form of handbags. The bullet quesad, but it's only, it sounds a bit mad if you get it wrong. The link connecting these drug dealers with Chinese organised crime is Gucci bags, you know, what? But actually, the answer is yeah. Yeah. And you don't need to, you don't need to load them with drugs or cash, because the bag itself is the repository of value, yeah. The bag itself is the thing. I mean, it's, it's, and you know, there are other examples of it's in cultural and files, but I've forgotten what that I think is a drug dealer in Turkey. And his thing of taking money across the border would be in form of gold. He would go in one direction with a, he had a bangle on his wrist, like a three pound brass bangle. In one direction, it was made of brass, and in the other direction, it was made of gold. And that sort of, that amount of gold was 150 grand apart. So physical goods are a very good, you know, their cash is exceptionally handy in criminal transaction, but so is gold. And so is the thing that was so big I didn't even get to in the piece, which is crypto. Gold, by the way, has one of my favourite, there wasn't room for this in the piece, but one of my favourite forms of money laundering is, it was a thing that was discovered by the, the alchemists who act where redia, which dissolves gold. And it makes it look like, it makes it, basically like lucasade. You apply this salt to it and you get this in called lucasade. And then you smuggle the lucasade wherever you want to in its container, then you apply a mineral salt to it and it re-crystallises this gold. And it was used in the, the Nazis at one point banned the Nobel Prize and confiscated Nobel prizes because the Nobel Foundation had awarded it to a Nobel Peace Prize to Carl von Elcietski, who's an anti-Nazi activist. And in retaliation of Nazi spam the Nobel Prize and start confiscating them. So two German scientists, Max von Leuer and James Frank smuggled their Nobel prizes out to Denmark as a Hungarian klemskull George Dehe. He was set to look after him and the next problem is the Nazis invade Denmark. So he had his issue with his two wack and great Nobel statuettes in the corner of his lab. So he dissolved them. He applied them to Aquaregia, dissolved them and just left them in beakers and the shelf of his lab, from where he's then locked out for the duration of the war. He goes back in at the end of the war and learn the whole, there the Lucas Aide resembling jars are still on his shelf. And he did this rather wonderful thing of he sent them to Stockholm. So these are the Nobel Prizes in the ritual. And they crystallized out the sort back as gold and reforged them as the Nobel Prizes and gave them back to the two Nobel laureates. I think that's a, it's not exactly money laundering, but it's a rather wonderful story about, you know, hiding, hiding, met value. Yeah, exactly. Sometimes, yeah, sometimes it's, they're on the side of the angels as a people doing the smuggling. And that thing about the people, apart from, you know, the goodies who are smuggling gold and so on across borders. And as you say, most money laundering, most of the smuggling happens. There are all these things in place. You know, there's a blizzard of acronyms of all these organisations trying to stop it and they, you know, they're not very good at catching most people. But if they don't catch the big fish, do they, I mean, how often do innocent people get caught up in their nets as it were? All the time is the answer. I mean, absolutely all the time. And that thing attracted a lot of attention when Nigel Farage, what D bank, as they call it, a couple of years ago by Coots, but actually that's the tip of the iceberg is more than 300, I think it's 350,000 people get D banked in the UK every year. And it's for any kind of transaction that looks in any way suspicious, which very often it's a, it's a nightmare for charities. It's a particular nightmare for charities that have anything to do with the Islamic world it's a nightmare for charities that have anything to do with Ukraine. People get a D bank for being politically exposed as they call it. And the problem is that the incentives for the banks, the banks have been the target of colossal fines for dealing with entities, companies, countries that they're not supposed to deal with. Some of those fines are fair enough because the banks knowingly doing things they shouldn't. And another instance is things that, you know, it's less fair because they couldn't necessarily have known. And the way that, to the way that the system is set up is that you get these gigantic, I mean, in the billions fines if you're a bank, make a mistake. And there's no incentive, there's no upside for catching people. The banks don't even, if they report transactions, which they do, by the way, in a colossal scale in America, it's over 10,000 transactions a day get reported. And of course, S.A.R. suspicious activity report, which is millions a year, which is the same as not reporting anything, as it's just impossible to look into. The banks have known incentive for getting it right because they don't find out anything that happens. And massive incentive for getting it wrong. And so what they do is they earn the side of reporting and flagging everything. And it's simpler to just ban and block your customers rather than to just take the huge downside risk of fines running into the billions. And so we have the system that misses a lot of the illegitimate activity because it's looking for the wrong kind of transaction, but blocks lots and lots of legitimate activity. And it's politically exposed people. It's charities that have anything to do with dangerous parts of the world. But there's also a thing at KYC, you know, your customer, there's a lot of legislation around that, which in the UK has to sort of bizarre, that's the thing where you need a utility bill. You know, this mysterious sacred, all powerful document in British life, which is your gas bill. And that, you know, you very often need two proofs of address to do all sorts of legal things. And you get the thing where, because of know your customer, KYC, as it's called legislation that's brought in as part of the AML anti-money laundering apparatus. And you have people who have the same bank account for 50 years, I mean, just to cite a specific example known to me, so I've been with the same bank for 50 years. But the bank has changed the way the account works or has a new policy in place about having to verify things that they've had in place for a long time. So you get this old catch 22 thing, because exactly because your identity has been known for ages, you have to now verify it. But you have people who, in case of say a widow, the utility bills are in her late husband's name, because they haven't changed it. Passports expired because it hasn't travelled for more than a decade. And the same license has expired because she'd never drove in the first place or it's unsighted or whatever and things like that. And so this person can't prove their identity. They fail KYC tests at a bank where they bank not just the same institution, same branch for half a century, because this apparatus have been brought in to stop Mexican drug dealers. And so, yeah, it has colossal consequences. I mean, again, I think that it's in the billions. I think the estimate has come up with it's like a sort of $200 billion a year annually, the cost of what was compliance apparatus. But, you know, isn't doing the thing it's supposed to be doing and it's causing enormous consequences for ordinary businesses, charities and ordinary people. So these things that are in place clearly failing to catch most of the bad guys making life very difficult for lots of ordinary people. I mean, do either of these books have any suggestions for what might work a bit better? Well, bullet pass three, he thinks that a lot of the problem is to do drugs being illegal and that it would help to shift a lot of that in the way that prohibition helped create a huge apparatus of criminality in America in the 20th century that an equivalent thing is happening now with drugs. He thinks getting rid of high denomination bills would massively help. And it is a head scratcher, this thing about 80% of the value being of the US dollar and $100 bills, 70% of them being abroad. That earns a lot of money for the US government, it's called Senorage, which means for the cost of printing a piece of paper you get $100 a volume and that scales up, I think the estimate. I noticed I'm talking exclusively in billions, I think that's thought to be something like $50 billion a year to the US Treasury. Same thing happens in the euro. On a slightly smaller scale, setting up in the UK again, slightly smaller scale. But printing your own currencies is a very powerful, it's a good little learner, it's effectively free money for central banks. So scrapping those high denomination bills would help he thinks. And then the other missing piece is just finding out what's going on. Instead of, or as well as just to deflect some of the $200 billion you spent on compliance on just properly trying to get back to the analogy of drug testing, finding out what the cheats are doing now in the present tense as opposed to the stuff that they have been caught doing in the parking lot. L'Amina was a big thing in America, it was chain of jewelers and gold elus and things like that, she was controlled by the cartels. And at the point that was busted, that was the biggest fraud of its kind. Only laundering scheme of its kind of a found. But that was nearly 40 years ago. So we need an equivalent thing about just what's happening now. We're the equivalent of missing trade or intra community fraud, but not the one that they know about, the ones that they don't know about. There is just a genuinely massive problematic knowledge gap about this. And it's caused by the fact that it's so lucrative that there are just so many reasons for being ahead. So the criminals are ahead. And if you could get them for money laundering, stop the money laundering, that would have a knock on effects of making other kinds of crime possible. I mean, you met some prohibition earlier and a bit in the way that alcohol was finally got for tax evasion. If you can get terrorists and drug dealers for money laundering, then you're going to stop those other kinds of crime too. Yeah, because that's right. I mean, it's the thing that makes everything else possible. If you couldn't use the proceeds of whatever criminal activity you're up to, if there was no, then would literally be no profit in it. So I mean, in a sense, money laundering isn't just a form of crime. Money laundering is crime. It's the thing that makes crime happen. And if you look at the numbers, it's the Michelle Camdassou who used to run the International Monetary Fund, put the range of between two and five percent of global GDP. Well, the upper scale of that is the, that makes it the third biggest business in the world and the third biggest economy in the world is criminal activity, you know, illicit criminal flows of funds. And so, yeah, making it impossible or just making it harder, you know, hardening the target, as they say, would have a significant, I mean, as a direct consequence, would significantly reduce other forms of criminal activity. Is it going to happen? Well, on the evidence, you have to say probably not because governments benefit from senior rich, that's the thing that will stop them abolishing the high-denomination bills. And the West has this very bad habit of when it latches onto these things, it acts out its desire to, you know, be seen to do something on other parts of the world. So there have been all sorts of crackdowns in banking systems that are, you know, smaller countries that aren't part of the big global Hegements, aren't part of the EU or US. But when the money laundering is attached to, the even entities controlled by Britain, I mean, notoriously, but. Virgin Islands. You know, I'd a man, channel islands, all sorts of suspicious things, historically have been seen to be going on in those places. And, you know, we're very good at debanking and cracking down on, you know, if you're a charity link to Ukraine, good luck opening a bank account. But there is a lot of illicit flows of money that are effectively ignored, because that flow is important to the financial system, as it currently stands. So, short of some sort of outrage, there was a shift after 9/11, but again, it was sort of slightly selectively enforced, and, you know, the Americans cracked down on lots of things, but they didn't crack down on Saudi Arabian money flows, and famously 15 of the 19 perpetrators of the 9/11 attacks with Saudi. So, we just, we in the developed world, are hypocritical and selective about how we enforce these things, and that doesn't particularly cause optimism. Sorry to end on a note of gloom, but that's the current state of playing. Yeah, and I was both that thing about, I mean, it is notable that from your piece, and presumably that's true of the books, there's a lot about Chinese gangs, and presumed that, you know, there's a focus on, if you can say all its people coming from outside and doing this, it's a way of deflecting attention from part, among other things, it's a way of deflecting attention from, as you say, from domestic forms of crime. Yeah, I mean, informal value transfers, they call it, is there's a massive thing in China because China has capital controls, you can only get $50,000 out at any one time in China, and so that is a global issue effectively in industry, and it's an awful lot of Chinese own flats in London that cost more than $50,000, and it's quite interesting to think about that, the amount of, you know, you actually can visibly see money being laundered in the form of those flats because they can't legally be bought with a $50,000 cash limit, but yeah, there's a lot of stuff that doesn't, attention doesn't get paid, and it's interesting when the, after Ukraine, when there was a crackdown on the oligarchs here in the UK, mainly in London, you know, the only thing that happened before and after was that Putin invaded Ukraine, if the money was dirty, the money was just as dirty, but on, at the start of February 2022, then it was, you know, the month after, and you know, it is the case that there is a political convenience threshold for these things being called, and just to come back to the analogy with sport, you know, the sport that's had the biggest crisis in relation to drug cheating, was cycling, and it's been, it's been a catastrophe for cycling, that it was so brought into the spotlight and it became evident that it, you know, drug cheating was absolutely rampant pretty much everybody was doing it, everybody knew, it had become a kind of accepted norm in the sport, but that didn't happen because people got upset about it, or governments thought this isn't the right thing, it happened because the police randomly stopped a car coming across the Belgian border, car belonging to a Swainier, which is one of the sort of assistants attached to the Fistina's team, was randomly stopped by the police, they can have random checks in France that you can't have, you can't have in the UK, you don't need probable calls in France, the stopped car opened the boots absolutely full of drugs, and the next morning at dawn, and this is in the middle of the Tour de France, everybody was raided, and that's where the scandal happened, and by the way, France, the only country in the world where doping in drugs is, a jumping in sport is a criminal offense, it's actually against the law to take illegal performance, to take performance enhancing drugs in sport, it's not illegal everywhere else, but it is illegal in France, as a direct result of that thing, and that kind of destroyed road cycling as a sport, so it's a little bit like that, that the thing that makes national outrage happen that causes change to happen in relation to money laundering hasn't happened, there isn't that thing, and it would be a kind of disaster, I think, in some respects for governments, for the full extent of the dirty money in the system to become visible, so I think they're kind of happy that it hasn't, they haven't had that, you know, the festine a car moment. John Lansister, thank you very much. Thanks a lot Tom. You can read John Lansister's piece in the 21st of May issue of the LRB, along with Becker-Rossfeld on Marlon Houseoffer Tom Stevenson on America's Afghanistan delusion, and David McCulloch on Baltic snake cults, and if you listen to our close readings podcast, whether you subscribe or just listen to the free version, we're running a survey and we'd love to know what you think, you can just follow the link in the description. The LRB podcast is produced by Anthony Wilkes, the music is by Kieran Brunt, I'm Thomas Jones, thank you for listening.