Money Laundering 101

The post Money Laundering 101 appeared first on WhoWhatWhy.

Earlier this week, former IRS Criminal Investigator Martin Sheil looked at what Trump and his associates should be afraid of as the government probes their business and financial dealings. In this week’s WhoWhatWhy podcast, Sheil tells Jeff Schechtman how bank records have become the key to the government’s investigation of any complex financial crime.

Sheil gives a behind-the-scenes tour of what special counsel Robert Mueller and his investigators will be doing to follow the paper trail and “box in” their targets. It’s a look at the Trump investigation, but also a chilling portrait of the tools and powers that the government has at its disposal when it looks into anyone’s financial affairs.

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Jeff Schechtman: Welcome to Radio WhoWhatWhy. I’m Jeff Schechtman.

You all remember that during Watergate, the mantra was, “follow the money.” Well, it may very well be turning out that in the Russia-gate story or the Trump-gate story, the same may be true. That rather than simply a focus on hacking, and election interference, and collusion, the real story that is emerging centers on hundreds of millions of dollars in cash that was used to buy luxury properties, to launder money, evade taxes for individuals, foreign governments, and dozens and dozens of corporations and LLCs. The problem for those trying to hide these transactions is that the laws and regulations have gotten far more sophisticated than back in the day when Al Capone was finally done in for not paying his taxes. Today the financial reporting regulations of banks, particularly post-9/11, and post-the 2008 crash, are exceedingly complex, and the Treasury Department’s ongoing vigilance in the area of financial crimes makes it much harder to hide anything, especially once the financial alarm sounds in the Treasury Department. So given all of this how vulnerable is Trump and his associates? How might Mueller’s investigation into financial crimes play out beyond just the national security concerns of election hacking? And is this investigation into his business dealings which Trump should fear most? We’re going to spend some time today looking at all of this with my guest, Martin Sheil. He’s a retired branch chief of the IRS criminal investigation division, and his recent article, “Why Donald Trump Should Be Nervous,” appears in WhoWhatWhy.org. Martin, thanks so much for joining us.

Martin Sheil: Hey, it’s great to be here, Jeff, thank you so much for inviting me on.

Jeff: I want to talk first about all of the things that are in place today that make it really incumbent upon banks to report what’s going on with respect to unusual financial transactions. Talk a little bit about that first.

Martin: Sure, sure. That was a great intro by the way, Jeff. You really seem to have a handle on the approach that I’m taking and hopefully that Mr. Mueller and his team are taking. “Follow the money” has become like a cliché. It’s a great soundbite, but if you drill down a little bit over the years, it’s really become more like follow the paper. And the money trail is really a paper trail, and I think this is where a lot of the folks involved in the Trump campaign may be tripping themselves up. You know, they’re big businessmen, and they’re real estate magnets and whatnot, they’re used to having their way and just directing people and not really having to be accountable to basic paper trails of accountability, government regulations and whatnot. You see this with several of the folks like Mr. Flynn and Mr. Kushner recently, they just don’t want to fill out their foreign security disclosure forms correctly, they leave out a lot of things which makes someone like myself wonder if they’ve filled out their tax forms correctly and have they filled out all the forms that the banks are required to fill out. Have they been accountable with these various regulations.

Jeff: Explain to us what FinCEN is. It’s something we’ve been hearing a lot about lately.

Martin: FinCEN is the financial enforcement crimes unit of the US Department of Treasury. They were created in the 90s, pursuant to the Bank Secrecy Act and they’re just a big database of all sorts of forms that the banks are required to file pursuant to what’s known as anti-money laundering regulations. The Patriot Act which was expanded subsequent to 9/11 really made the banks much more accountable in terms of… they almost become an arm of the government in that they’re required to know their customers, called KYC (know your customer), and that means they need to know the person behind all these different companies, shell corporations, partnerships, whatnot. They need to know who the actual physical beings are that are using the banks to transmit their monies worldwide, globally. You know, in getting to know their customer, they realize they see something that is just not kosher – put it that way – in terms of the business transaction. If they see some suspicious wire transfers going to, say like tax haven countries in the Caribbean or Switzerland or Liechtenstein or Belize or Hong Kong and some of these places, then they are required to file what’s known as a Suspicious Activity Report, known in the trade as a SAR, S-A-R. These Suspicious Activity Reports are just a terrific lead for law enforcement such as all the federal agencies, the big ones anyway, have access to these Suspicious Activity Reports. FBI, certainly IRS, Criminal Investigation (CI), Customs, DEA (Drug Enforcement Agency) quite a bit too. So if they see the banks will then file these report and they will detail their concerns, if they see something highly unusual for a specific business, they will include bank account numbers, wire routing numbers, all sorts of technical information that really saves a lot of time for law enforcement to use and follow up. FinCEN really is there to be used by all law enforcement once they obtain clearances from their agency and from Department of Treasury. They will use it. Now, what’s terrific about it is that all the banks, all the domestic banks are required to file their reports, their currency transaction reports, their suspicious activity reports, and all these other foreign activity bank account records, etc., with FinCEN.  

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