Stephen Platt:

Good afternoon and welcome to another Anti-Money Laundering Talk Show podcast with me, Stephen Platt. Today, we’re going to be talking to a dear friend of mine and one of the world’s preeminent anti-money laundering experts, Bob Mazur. Bob is one of a handful of people who as an undercover agent has laundered money for Colombian and Mexican drug cartels.

Stephen Platt:

Most people simply read about money laundering typologies in textbooks, whereas Bob has lived the life of a professional money launderer, trusted over a number of years by some of the most dangerous people on earth. And all of this done whilst a law enforcement agent. He placed himself at enormous personal risk because of his dedication to the investigation and prosecution of financial crimes. And even though he has long since retired from law enforcement, I know from my friendship with him that the anti-money laundering flame still burns very brightly inside of him.

Stephen Platt:

Bob’s first undercover assignment was depicted in the film The Infiltrator, which was based on his book of that title. Starring Bryan Cranston, it’s a really entertaining and thought provoking movie, and I recommend it to you. His latest book The Betrayal tells the story of Bob’s subsequent undercover assignment in Operation Promo, in which as Robert Baldasare, an Italian American businessman originally from New York, he controlled an investment company and a mortgage brokerage business laundering for a highly dangerous Cali drug cartel. Bob, thanks for joining us again. It’s been a couple of years I think since you were last on the show. I know you’re an exceptionally busy man much in demand. Thanks for joining us again. How are you?

Robert Mazur:

I’m doing fine. And it’s an honor to be invited.

Stephen Platt:

It’s kind of you to say so. Bob, the latest book which I’ve read obviously is a real page turner. It had me on the edge of my seat, even though I already knew the story from our discussions. For the benefit of our listeners and without, as it were demotivating them from buying it, because they really should. Would you mind giving us a quick summation of the story and the background?

Robert Mazur:

Sure. At the conclusion of the undercover operation portrayed in The Infiltrator, as a lawyer, you well know that’s when the work really starts. So for two years, I prepared for trials and testified in trials. And in the course of convicting BCCI officers, got the opportunity to debrief them. And I was up until that point, assuming that the BCCI affair was an anomaly. But as I began to spend months with them in the course of debriefing and with the records before us, because we had done search warrants at their branches. It became pretty obvious to me that their claim that they weren’t doing anything different than a certain segment of the international banking and business community was doing was a reality.

Robert Mazur:

That compelled me to really want to go back, to go back into the underworld to try to help the rest of the world understand this phenomenon that causes a segment of the international banking and business community to enrich themselves and to become an asset for these lethal organizations all over the world. And not just for drug traffickers and illegal alarms dealers, people pilfering treasuries, tax evaders, dictators who are pilfering their nations’ assets. There is a group of people who do that on a regular basis.

Robert Mazur:

And it was very easy for me to identify some of them because once I was accepted into the underworld in a false ID with false companies, with support from informants. And I must say agents behind the scenes who deserve tremendous credit for the success that we saw in both of these operations. It was startling to me to see, and quite easy for me to identify those people within the underworld who provide these services. Pillars of the community to the rest of us outwardly.

Robert Mazur:
So when the Drug Enforcement Administration offered me an opportunity to transfer over to that agency for the purpose of becoming a long term undercover in another probe similar to the one portrayed in The Infiltrator, I jumped at that opportunity. Getting into the Cali Cartel I have to confess, it was really just my acquiring another tool of believability so that I could deal within that corrupt portion of the international banking and business community that services the underworld. So they became kind of a passive reinforcement to those people who wondered whether I really was the bad guy who I purported to be, or whether I was an undercover agent.

Robert Mazur:

The operation went just unbelievably great for the first four months or so. I quickly became someone dealing with people who were in turn directly dealing with the leaders of the Cali Cartel. I was dealing with direct reports who were the most important money launderers that were servicing the cartel.

Robert Mazur:

But as time went on, I began to recognize that certain people were beginning to withdraw, raise questions about me. And in my gut, it occurred that this was because there was corruption within my own organization. And ultimately, that became the truth. Little did I know at times when I was working undercover in Panama and in Colombia, there was a few people within the Cali cartel who knew I was a DEA undercover agent. I came very, very close to being killed.

Robert Mazur:

And as I wrote this book, the superficial betrayal is really the betrayal by someone who purported to be a friend and a colleague while they were recklessly providing information that they knew darn well was likely to result in my death. At that time when I was working undercover in Colombia, Pablo Escobar was offering $300,000 for the head of any DEA agent. So it was a very, very risky time.

Robert Mazur:

But as I started to write this book more and more, I saw the different levels of betrayal. And I think that there’s a betrayal within unfortunately the pillars of the community who should be the gatekeepers to report these types of transactions. And I saw a betrayal I feel within the law enforcement community of doing as some attribute to Albert Einstein, doing the same thing over and over again, and expecting a different outcome. It was a definition of insanity. And it is, because we do the same thing over and over again. And the harsh reality is these criminal organizations are larger than ever. There’s more drugs on the street than ever. And there’s more money laundering going on than ever.

Robert Mazur:

So we need to look in the mirror and face the facts, and try to see how we can recalibrate this. So I offer some ideas within the betrayal about that. But Stephen, you know my family. And the ultimate betrayal that I recognized as I was writing this book was my betrayal to the people I loved the most… who I walked away from… for an idealistic goal… that has been a burden for everyone in my family. And I live every day trying to do what I can do to help heal that wound. So that’s the ultimate betrayal. But there are many levels of betrayal in the book, and I hope that your listeners enjoy it.

Stephen Platt:

Well, I certainly really did enjoy it, Bob. And the various levels of betrayal or types of betrayal that you refer to there come across very, very strongly. There are as you say, a number of different layers to this. What compelled you to write the book, Bob? I mean, I know that it’s a big undertaking to write something, particularly when you’re under pressure to meet the very high expectations of the first book, which was a New York Times bestseller. It got turned into a big Hollywood movie. There must have been a risk at least in the back of your mind that the sequel would not live up to that. It certainly does. I mean, I personally think it’s a better read. It’s a better page turner than The Infiltrator actually. That’s my personal opinion, but what compelled you to put pen to paper again?

Robert Mazur:

Well as a law enforcement officer, just like 99.99% of them that serve around the planet, what drove me was wanting to be a part of making a difference. And my view of being a part of making a difference at that time was not to go into management, but to try to get in the trenches and to get the information and the evidence that nobody else could get. And frankly, information became my heroin. Because every time that I was dealing undercover, if I didn’t get the next rung of the ladder, the next biggest piece of information, I felt as though that I wasn’t meeting the expectations of everyone else and myself included. And now that I’ve hung up my undercover spikes, I still want to try to be a part of making a difference. And I felt that this story helped people in a different scope than The Infiltrator did to get a bird’s eye view of this unfortunate phenomenon.

Robert Mazur:

I did a treatment, just a book proposal. I have the pleasure of having developed I think a friendship and a working relationship with Bryan Cranston. So I had met with him and his wife in New York. And during the course of it, I told him about this story and told him that I was in the process of putting that treatment together. And he once hearing of it felt that it really was compelling. And he was very interested to see what it is that I put together because he saw it potentially as a sequel to The Infiltrator. So I gave that to him and I didn’t hear anything for a month or two. And he reached out and had a lot of glowing things to say. So at that stage, I decided that okay, I’m going to dive in here, and I’m going to do the research, and I’m going to get this and put it together.

Robert Mazur:

And I did. I have a I think very good agent, book agent. But what really carried the day was Bryan and the small team from The Infiltrator who The Infiltrator had distribution problems that became I guess the silver lining of the cloud, the distributor was supposed to get it out many, many more theaters and failed to do that, and ultimately went into bankruptcy. But that caused the film to be a little bit less known by the public, and Amazon Studios picked it up and put it out on Amazon Prime. And it became their best seller. So they were really interested because they had done well through The Infiltrator streaming. And they now wanted to talk about The Betrayal.

Robert Mazur:

So Bryan and a few of the people close to him set up a meeting, and we went out to Amazon Studios. And they were all in. And shortly thereafter, Amazon Publishing offered to publish the book. And so now we’ve got the book published and we have the film rights in the possession of Amazon Studios and a team that is attempting to put together a screenplay that will merit doing a second film. But for those who’ve been involved in that process, they realize that one in several hundred books ever gets seriously thought of as a film, and probably one in a thousand become a film. So it’s uphill battle, but I think we’re on our way.

Stephen Platt:

Well, that’s fascinating. I had no idea that there was a distinct possibility of The Betrayal also being turned into a major movie starring Bryan Cranston. That really would be fantastic if it were to happen. Now to come back to the operation promo itself, you talked then about your motivation for engaging in this work. But after Operation Sea Chase, where you’d been undercover for a number of years laundering ultimately for Escobar, a very significant bounty was put on your life. And yet, you chose to go undercover again in Operation Promo laundering for the Cali Cartel.

Stephen Platt:

There are a number of different ways in which you can make a difference. Going undercover is one of them. Why did you choose to put yourself at such enormous personal risk for a second time? I mean, I think a lot of people would think that that is extraordinary, that you have survived Operation Sea Chase. And despite that, you rolled the dice again. Why Bob? It’s an amazing story.

Robert Mazur:

You know Stephen, unless you are with me and crawled through this portal of the real world into the underworld at such a level where you see the massive corruption, the massive trafficking, the massive laundering, the control of countries, the control of presidents of countries, the control of militaries, and judicial systems, and the theft of the rule of law in so many nations. I had this thought that I had learned so much from that first operation, that I was uniquely armed to take advantage of this second opportunity that could be a real difference maker. And one of the things that I came to realize in the course of writing books is that as an undercover agent, I definitely had flaws. One of my flaws was this belief. And I can only guess this because I was although in the military, I wasn’t on a battlefield with bullets coming my way. But if you are in that position, you are so laser focused on your goal that everything else in your life must be put aside.

Robert Mazur:

So in order to achieve the goal, and in order to stay alive, and to accomplish what I want to accomplish, if what I had to do would cause me ultimately later to lose even my career. That was a cost of the mission, because the mission was everything. And if I had to do certain things at that moment, I felt this way. I never will ever feel this way again. But at the moment, I felt if I have to do certain things and it causes me to lose the bond with my family, then that’s a cost of the mission. Because the mission is the most important thing. And it would be the last thing I would ever entertain. But if I had to lose my life in order to further the mission, I had myself convinced that that was just a casualty of the mission, and there was nothing more important than the mission.

Robert Mazur:

I basically became a person who was addicted to information. I had to get that critical thing. I mean, keep in mind the wake of The Infiltrator, I was dealing with people who would give me information and we’d seize a ton of cocaine. I would be with people and I would get information about Manuel Noriega’s illicit fortune was. I would be in a room and I would learn about three bank chains in the United States the rest of the world thought was owned by U.S. citizens. When in fact, they were controlled by a foreign group, very much involved with the intelligence community in the Middle East.

Robert Mazur:

These were things that were massive, massive crimes. And this was going to be an opportunity to crawl back into that world and to help the rest of the world see how unfortunate the truth is about what’s going on around us. That small percentage of people who are in that illegal world of power control 95% of the people who aren’t even involved in that, because of the corroding effect that they have on democracies and governments.

Robert Mazur:

And just last year 2021, we lost 108,000 young people to the overdose of fentanyl in the United States. How can we stand by and not do whatever we can possibly do to try to change that? We have to. It’s up to us. And one of the messages that I love to share with people in the compliance field, in law enforcement is to help them to understand each and every single one of them can make a huge difference. Their voice counts. And if they’re willing to make the greatest effort that they possibly can within the four corners of their employment, and if they all do that, this is going to be a lot better world. So we all need to do that.

Stephen Platt:

Yep. Well, countless billions have been spent fighting financial crime over the course of the last 30 or 40 years. A lot of dedicated law enforcement agents, yourself included have continued to put themselves at enormous risk. But, there is a lot of skepticism about whether global AML efforts are working. When you look at the world of anti-money laundering now from all unique vantage point with all of that rich experience that you have, what do you see?

Robert Mazur:

You know, I go along with David Lewis and his comment that we’re all doing poorly. Some are just doing more poorly than others. If you look at the reality of it and if the United Nations Drugs and Crime estimate, and I think it’s the low bar that has been offered, that there’s 2 trillion seeking money laundering services every year. And you look at the asset forfeitures that are out there. 98% or more of that money never is seen by us in the private sector, the law enforcement, or the regulatory world. So clearly, we need to look at what’s going on and how we can possibly improve this.

Robert Mazur:

We must face the fact that there is an epidemic of corruption. Can you imagine last year, the Drug Enforcement Administration Special Operations Division, and I’ll tell you, they are the elite of the elite, but they’re small. There’s probably 45 or 50 people involved as agents out of thousands of DEA agents. But they did a case on one of the Mexican cartels last year. And they were hunting down trying to figure out who is this person who uses the code name El Padrino, the godfather. And they intercepted communications, all types of communications. And ultimately, they identified who El Padrino was and they found him visiting California and arrested him. And guess what? El Padrino turned out to be a General Salvador Cienfuegos, the defence secretary of Mexico who had been feeding information to the cartels, helping them to succeed and involved in it all the way up to his ears. He was being held without bond in the United States until the president of Mexico contacted the people who were in administration then, that would’ve been the Trump administration. And Attorney General Barr, pressure was put on him. The Mexicans said, “Listen, this is a violation of our sovereignty. We should prosecute Cienfuegos within our borders.” We unfortunately allowed that. And within 30 days of his being in Mexico, they decided that the evidence didn’t hold up, and he didn’t do anything wrong.

Robert Mazur:

When you have the power to take presidents, ministers of defense, and those types of individuals and put them on your team, we better up our game. We better start recognizing that in order for us to succeed in this game, we got to take the gloves off. And the way to take the gloves off in my view, and I wrote about it. And you were so kind to publish a white paper I did back in 2019. But I do believe that the Department of Justice, and the U.S. government, and other governments suggest that we are really vigorously enforcing violators of money laundering. And I don’t believe that that’s true whatsoever. Because if you look closely at the cases, the majority of money laundering prosecutions are add-on charges to people who are involved in a specified unlawful act. They’re people who are involved in healthcare fraud, or drug trafficking, or whatever.

Robert Mazur:

And they’ve been charged with the substance offense, but now they’re getting hit with the money laundering offense. Know if we want to go after the biggest money launders in the world, we need to put together a task force in every major nation. A task force just like the task force that’s there for the anti-terrorism task force, where everything goes through the FBI. There are 50 other law enforcement agencies that are involved in that terrorism task force. And their job is to identify the biggest terrorists and go after them and prosecute them. That’s exactly what we should be doing in money laundering.

Robert Mazur:

There are people who do nothing but launder money for any criminal organization that wants their money laundered. Those are the people that we should be going after. Most recently Altaf Khanani, who was based in Dubai and Pakistan was prosecuted. He was laundering 14 to 16 billion a year. People call him the Goldman Sachs of the underworld. Okay. That was a good one that we hit. And Iman Juma who was Lebanese Colombian, who was involved in the laundering of billions of dollars from the sale of drugs in Europe through the Middle East, Venezuela, and other places. That was a good hit. These people are out there. Those are the people that I believe we need to be focusing our attention on. And there is a way for us to be able to identify them without a global cooperation. By a combination of law enforcement and private sector, those people will not get touched. And we need to do that. And institutions need to be given the opportunity as they are in the United States, although I don’t think it’s taken advantage of as much as it should under the Patriot Act, to share information with safe harbor not to be concerned about being prosecuted for disclosing financial transactions with other participating financial institutions. There are some efforts to do that, but they’re not robust.

Stephen Platt:

It’s a fascinating answer, Bob. I mean, you say we need to take the gloves off. The question is why we have not yet done so. I mean, what Russian sanctions reveal is that there are countries that are prepared to take some steps at some cost to themselves. There are other countries that are less prepared to do so. Their pain threshold is lower if I could put it that way. And then there are the majority of countries in the world that are not prepared to take any steps at all. Which really illustrates that doing the right thing, whether it’s sanctioning an aggressive nation like Russia, or bearing down on a full-time money launderer laundering as you say, billions of dollars a year is a balancing act between protecting your own commercial interests as a nation, on the one hand. And on the other hand doing what you know is frankly right.

Stephen Platt:

And as the economic environment becomes tougher, which it’s likely to do over the course of the next five, 10 years as we see the fallout from COVID economically, and also the war in Ukraine. Is there a danger you think that countries are going to begin to effectively go into reverse, to compromise more when it comes to dirty money because they are placing as it were a greater emphasis on protecting their own economic interests?

Robert Mazur:

I think if we look at the recent past, Latvia, Estonia, many other locations. Can you imagine, the dance bank case. There were $200 billion moved from Russia. You had the IBA case. You have the Troika case. You have the Swedbank case. You have case, after case, after case with hundreds of billions of dollars being removed from Russia and placed around the world. You know darn well that a portion of that is in wherever Mr. Putin’s safety locker is located, where his assets are.

Robert Mazur:

We have a very recent and long history of turning a blind eye mostly in favor of financial benefit for participating in that. Is it going to get worse? I think that from a tax perspective, it’s continually getting better in the sharing of information. There are some very unbelievably terrible conspiracies, criminal tax conspiracies that were carried out by a number of major Swiss institutions. But one would hope that that is not going to be as prevalent as it was before.

Robert Mazur:

But I think you may see a movement, and we have seen a movement. There is a very highly publicized matter that came out in the last two years where there was a gold refiner based in Dubai, [inaudible 00:30:40], that the U.S. law enforcement was ready to take action against. And for political reasons, as it’s reported by the ICIJ and other journalists, the case was killed in the United States with a thought that if it was aggressively pursued, a collateral benefit would be lost. And that was the support of the UAE in anti-terrorism type cases. So it’s publicly reported that the U.S. government provided details with the UAE. And that ultimately, information got into the minds and hands of people who were involved in the criminal conduct.

Robert Mazur:

The amount of hundreds of billions of dollars that are routinely laundered through the gold refining industry is massive. And it’s very difficult. How could you expect a financial institution, when a business is involved half the time in legitimate transactions and half the time in illegal transactions, and we don’t have a criminal prosecution that’s been brought forward, how many institutions are going to bank a business like that? Quite a few. We’re talking about hundreds of billions of dollars.

Stephen Platt:

I mean, I accept that there have been very many financial institutions, and I’ve no doubt that there continue to be dozens more that have actively facilitated wittingly or otherwise the laundering of tens, hundreds of billions of dollars. And when you read the anatomy of these scandals Robert, I know that you study them. Often the detail, it’s difficult frankly to believe the ease with which major money launderers have been able to utilize the products and services of institutions. And clearly, money accounts.

Stephen Platt:

Nevertheless, the financial services industry plays a really important part in the generation of intelligence for law enforcement through suspicious activity reports and so on. And I frequently, I hear people within the law enforcement community give praise to the financial services industry for the participation and for the role that it plays. And I was very interested actually recently to read something that David Lewis, who you referenced earlier, the former head of the FATF. David’s obviously now with Kroll. But he wrote this. He said, “We allow people to set up and use companies, and nominee directors. Then we require banks to identify the beneficial owners behind their customers and transactions, recognizing that people including but not to criminals do this. But then when people do it and it becomes politically expedient, we express surprise and call it fraud.” He said, “Isn’t this having your cake and eating it? If we were serious about tackling dirty money, we’d prevent these practices in the first place, rather than allowing them, and then obliging banks or putting the onus on banks in the private sector to try and see through these structures to identify the real actors behind them.”

Stephen Platt:

Do you think there’s something in that point that David’s making there? I mean, do you think that the time has come for governments to simply outlaw practices, as opposed to continuing to allow them, and then placing the onus on banks and other financial institutions to try to crack them and see through them?

Robert Mazur:

In a perfect world, the answer to that is yes. Unfortunately, the world’s not perfect. And people of power, economic power, huge economic power within the legal world rely on those in order to pay little or no taxes. So therefore, and those people, at least in my country, have the biggest impact on those who make laws. So for that reason, I don’t see that happening. In a perfect world, it should. But in reality, I don’t think it has a chance.

Stephen Platt:

Yeah, I agree with you wholeheartedly now. Going back to the portrayal Bob, you go into a lot of detail about the methods that you used to launder the Cali money. Ranging from smurfing through to the use of precious metals and jewels, casinos, trade based finance, Forex, layering through shell companies and bank accounts, and so on. What vulnerabilities do you think the international community still needs to get to grips with? I mean, the betrayal is a story which is a few years old now. But talking in a contemporary sense, where do you see the biggest loopholes in the international trade or financial system?

Robert Mazur:

Yes. And you make a good point that some of these techniques were being used in cases decades ago. But the reality is they’re still used today because they’re highly successful. The principle method that I saw the Cali Cartel using had to do with disguising the repatriation of drug profits into Colombia to appear to be the repatriation of legal exports. And I know that there have been many efforts within the U.S. government, and one that was detailed last year in a report by the general accounting office about how it is that they feel that law enforcement can attempt to I identify and prosecute people who do this. And frankly, I thought it was gibberish. And the reason that I did was they were always talking about comparing the invoices for the importer and the exporter. And somehow that was going to show the anomalies.

Robert Mazur:

First of all, they’re not going to be able to get that matching, the paperwork is immense. But there is an Achilles heel to that. There’s an Achilles heel, and this is a method that’s used in many countries because all countries want to try to get their exporters to repatriate their wealth back into their country. It’s a question of balance of trade. It’s a question of enriching the people within the borders and the assets within your borders.

Robert Mazur:

So in Colombia using that as an example, there is a legal method for you to repatriate export revenue, legal export revenue. It’s called [Spanish 00:38:18], the return of exchange. Reimbursement of exchange, excuse me. And all you need to do is you need to provide to your banker in Colombia, you provide your banker with a documented exportation and an invoice that shows that you sold, and we’ll use an example, $5 million worth of coffee beans to Starbucks. So now with that paperwork, the person at Starbucks can now send $5 million to the U.S. correspondent of let’s say Banco Cafetero, because they were the ones who we prosecuted. The officers of that bank are the ones we prosecuted in that case. They’ll send that $5 million in wire transfers to the Miami branch of Banco Cafetero, for further credit to the Bogota branch, for further credit to a finance company, that manages export companies. That’s typical in Colombia. And then onto the export companies.

Robert Mazur:

Well, you know what? Really international businessmen don’t want to repatriate all of their revenue, because they need dollars to deal in the international markets. So on 5 million, let’s say they want to bring back just 1 million. They’re going to leave the rest of the stuff in dollar accounts somewhere else. They now have $4 million worth of documents that they can sell on the black market to people who have narco dollars that are being filtered into bank accounts.

Robert Mazur:

And with those documents, it’s very easy to wire transfers then come in to the Miami branch or Banco Cafetero. Or they bring checks or bring whatever they want to bring. And that gets transferred through the process back. But this all goes through a payable through account that is maintained at the Miami branch of Banco Cafetero. Who’s looking at those payable through accounts? When you go through those accounts and you identify that the documentation indicates that $5 million should be coming in from Starbucks, and you look at the payouts. And the money that’s coming in, 1 million comes from Starbucks, but 4 million comes from 25 other different places. And there are wire transfers that are coming in. Guess what? That’s drug money.

Robert Mazur:

That’s the focal point in which law enforcement and bank regulators should be looking at. I don’t anybody that does that. I really don’t. And I don’t know why they don’t do that, because it’s an easy task. You don’t have to collect documents from Colombia, and the United States, and many other countries. No, all you need to do is go to the correspondent bank that initially gets the money from the purported buyers of the export goods. And that’s it.

Robert Mazur:

So things like that, I’m hoping that people will take some notice to in The Betrayal story. I tried to detail that as best that I can. But you know when you get down to the bottom of it, and this goes back to one of your earlier questions, why does that happen? And why is it that banks aren’t blowing the whistle on that? And why is it that countries don’t blow the whistle on it? Well at the time, there was a 28% inflation rate in Colombia. And the central bank is pretty smart. They say, “Hey listen, exporters. You bring your money back to Colombia. We’ll immediately exchange it for pesos. And we, the central bank are going to hold the dollars.” Why are they going to hold the dollars? Because if they hold those dollars, because of course they’re going to be holding certain capital. If they hold that capital in dollars, they avoid the 28% inflation rate. And their money’s worth 28% more at the end of the year.

Robert Mazur:

I oftentimes tell a story from The Infiltrator that shines a light on the will of governments, because that is a thing that is not there to the degree that it should be. But it was a meeting that I had with a BCCI exec. We used to socialize at Regine’s in Miami, and it was late at night. And he’d had a couple of scotches and said, “Boy Bob, do you know who the biggest money launder in the United States is?” Of course, I’ve got my information is heroin mind going. And I’m thinking, “Wow, I’m going to really get a big case here.” And he says, “Well, it’s the Federal Reserve of course.” And I said, “What?” He goes, “Bob, let me tell you the reality of this. Okay? So in Colombia at this time,” at the time he was talking with me. It was illegal for any Colombian to have a U.S. dollar account.

Robert Mazur:

So he goes, “Listen, the Colombian government has established the situation that if you’re a Colombian, you cannot have a dollar account. But, they also have what we call the sinister window or the anonymous window at the central bank. And if you know the right people, you can go there with as much cash as you can possibly carry, and they will exchange it for Colombian pesos.” And he goes, “Bob, what do you think they do, the central bank does with that, those dollars? Periodically, they’ve got so much of it, they put it on pallets, they shrink wrap it, and they fly it to the United States. And it goes to the federal reserve so that they have a credit with their account, with the federal reserve.”

Robert Mazur:

And his point was, “Bob. Don’t you think that there is someone with enough smarts at the Federal Reserve that they can put two and two together and say, ‘Wait a minute, this is a central bank in a country that prohibits its citizens from having dollar accounts. But they are shipping to us hundreds of millions of dollars at a time in U.S. dollars. Where do you think those dollars are coming from?’ Nobody on either side of the government did anything about it. There’s no doubt both sides of that financial transaction had to know where that money was coming from.”

Robert Mazur:

So political will is something that we also have to try to find. And there is a lack of political will. The only thing that I’ve seen in our anti-money laundering fight that has clearly caused political will to surface is an effort to go after massive tax evasion orchestrated by financial institutions. Why? Because that takes money out of a country. It doesn’t bring money into a country, the U.S. So the U.S. is saying, “Yeah, I need your help. We got to stop this income tax evasion.” And so they very vigorously and very effectively have attacked that involvement by international institutions in tax conspiracies. But it’s woeful compared to other crimes.

Stephen Platt:

Now you referenced Bob, in your answer there, the need for everybody to work smarter. And I’m reminded actually of something that our mutual friend Martin Woods whose views I always find very, very thought provoking. He said in a recent post, I don’t know if you saw it, that the AML community should move from KYC to KYD. KYD being know your data. And he said that in his view, we don’t actually see the data because we are looking beyond it. And he gave us an example. Seeking to identify an unusual transaction in a personal account, which receives say one primary credit each month from a known employer. A never debit say more than $5,000. The data in that account suggests that it’s not a money laundering account, right? So why apply screening and transaction monitoring to it? Why expend as it were any energy from an AML perspective on an account like that?

Stephen Platt:

What he said was to secure an advantage and to be more effective, we need to do perhaps less, not more. And I thought that was very thought provoking because anti-money laundering has been characterized in recent years as inexorably involving more staff, more money, more expenditure. There are huge costs involved, but the industry’s compliance performance still leaves a lot to be desired. Do you think there’s something in the point that Martin makes? Do you think that if we were to do less, if we were to work smarter, we might achieve more?

Robert Mazur:

Absolutely. I have always been a proponent of the risk based analysis. If I were involved in compliance in a international bank, I would … first of all, we have to recognize that we’re there. Yes, we are there for the purposes of filing these reports and hope that it’s going to be part of making a difference. But we also are there for the purposes of protecting the reputation of the institution. So in order to protect the reputation of the institution, dependent upon the terms imposed upon the banking industry by the regulators, we are going to unfortunately have to deal with some of that craziness of ticking the box until the regulators are told that ticking the box isn’t as important. Because we can have this idea of know your data, but we got to get them on board as well.

Robert Mazur:

I would have an enhanced compliance section. My enhanced compliance section would be focused looking at accounts based upon geographic risk, business type risk, product type risk, transaction pattern type risk.

Robert Mazur:

Those issues would cause me as I got to know the portfolio well, and I spent time with the sales side so I know the portfolio well. Because of my background, I think I could identify those account relationships that have the very highest possibility of abusing the system for the purposes of moving illicit funds. And I would be focusing my enhanced group on those particular accounts and constantly being vigilant about the nature of the transactions.

Robert Mazur:

And I would also want that enhanced segment to have an enhanced rapport with those within the law enforcement and regulatory world who as a team, we can work with using the Patriot Act and safe harbor to share information and then weed out from those in that one pile that we’ve come up with, which ones are the real, real problems. Which are the ones that we either need to onboard, or in some instances, the U.S. government or a government asks you to leave an account open because they want the intelligence that’s going through there. If that’s something that the institution wants to consider, then that’s something that could serve that purpose. But I really do believe that we need to recognize that all accounts cannot be handled the same way. If we continue to handle it that way, we create so much paperwork that’s useless, that we bog the system down. And for those within the financial intelligence units who try to make a positive achievement out of an analysis of those records, we make their job so much harder when we put all of that stuff in there.

Robert Mazur:

It’s like if you could walk through the forest, and you know that you’re looking for trees that have a particular disease. And you’re trained to know what the outward signs are on the leaves, the bark, the roots, whatever. You should be walking through the forest and finding those trees, cutting them down, and getting them out of there. You shouldn’t be analyzing the entire forest all the time, constantly looking at each leaf on each tree. No, you need to go after the ones that are most likely poisoning the system. So in a similar sense, I think that that’s what we need to be doing with respect to high risk accounts.

Stephen Platt:

Well, I mean at the moment, I think there are large parts of industry that can’t see the wood for the trees. But I mean, the quality of any institution’s anti-money laundering effort is only as good as the quality and accuracy of their customer data. I think we could both agree on that, Bob. I’m aware, here we are in 2022, and I’m aware of tier one financial institutions that are still managing customer risk on Excel spreadsheets.

Robert Mazur:

Wow.

Stephen Platt:

Now you and I, we’re both aware of that. We look at this current Russia sanctions compliance emergency, and there are some institutions that are spectacularly ill equipped to be responding to these sanctions in a compliant way. And until I think as Martin says we really overcome this customer data challenge so that customer data can be assessed, monitored dynamically. We are never really going to get to grips with this problem, are we?

Robert Mazur:

Customer data is an important asset for the team. But another thing that I think is so important that needs to parallel that is engaging people, hiring people who truly have the experience and ability to make the most use of that type of data. Not to pick on any particular institution, but there was a, well it’s a history. I mean, anybody can look it up. So back in the day, we’re talking a decade ago. So back in the day, HSBC needed to get more people to be working in their compliance department. This was in Delaware, in the United States. There was an adjoining group that was involved in credit card Capital One. They sold the Capital One asset off. They took a wand, waved it over people who were involved in credit card processing, and made them compliance officers. That’s not effective in anti-money laundering. But unfortunately, what it does is it causes someone to look at it and go, “Look at this. We have 500 people who are engaged here for the purposes of doing A, B and C. There are 500 people who really don’t know which end is up. I’ll take 50 who really have high caliber experience to do something with the information over just bodies for the sake of having bodies.” So I think that the data is important, and having people with experience who can use that data is extraordinarily important.

Stephen Platt:

Fascinating. One area Bob that I think is a source of demotivation for people around the world involved in anti-money ordering has at least historically been what many of them regard us hypocrisy on the part of the United States in this area. You’ve expressed embarrassment in the past at America’s failure to get to grips with shell corporations in Delaware, Wyoming, and so on. What’s the state of play on that issue now? And how important is it to you do you think that America leads by example in this area?

Robert Mazur:

It’s extraordinarily important that they do. I think that this beneficial ownership issue, what I see in the United States and in other jurisdictions as well, is people constantly moving the goalposts. “We’re going to set this up, and it’s going to be in place. And they’re going to be a requirement to do this, and this, this by X time.” And then all of a sudden, that’s not a realistic date, and it moves further out, and it moves further out.

Robert Mazur:

I think the beneficial ownership issue is important. It’s not a silver bullet. And the reason I say that is that, and I talk about this in The Betrayal. The most sophisticated of those who are involved in laundering money use corrupt gatekeepers on the paperwork. And everything that is instructed with regard to where the money needs to be, what needs to be done is all simply provided verbally by the people who are truly controlling.

Robert Mazur:

So if you set up an organization as one, a lawyer who I’m sad to say was from the UK and had an office in the BVI, who is working with a banker in Panama and with a guy who had previously been one of the number one guys in Latin America for one of the major accounting firms. They put together this structure that on its face looked like a European mutual fund. And it was nothing but a massive money laundering machine. And the reason they did it under a mutual fund is because they anticipated the questions about beneficial ownership. Most of which is anybody who has more than a 20% interest and what their comeback would be based on the way the structure was put together is that we have hundreds of investors. Nobody has 20% beneficial interest. And it would be a violation of our fiduciary responsibility and the law for us to disclose the identity of the beneficial owners, because there is no requirement for us to do that.

Robert Mazur:

So one way or the other, the bad guys are going to get around some of this stuff. But we need to get achieve getting this facade in the United States of picking on BBI, and Hong Kong, and some of the other jurisdictions. When we’ve got Delaware, Wyoming, and Nevada that we don’t have transparency on the corporate entities. So yeah, we lose a lot of credibility by not addressing that.

Stephen Platt:

Well Bob, it’s a rather dispiriting note to end on, but I’m afraid that the clock has beaten us again. Thanks for taking the time to join us. As ever, I’ve greatly enjoyed our discussion. For those of you listening, I can highly recommend Bob’s book The Betrayal. Not only as I said, as an entertaining page turner, but also as an education in real life money laundering methodologies. There really is a lot to be gained from it for AML professionals. Similarly, there is a lot to be gained from engaging Bob to speak at internal training or awareness raising events. He is one of the most engaging speakers I’ve ever had the pleasure of listening to, and I know that there are really very few people in the world who know more about contemporary money laundering methodologies and the corresponding vulnerabilities of financial services than Bob. And Bob can be contacted at robertmazur.com. For now, thank you very much for listening, stay safe, and keep up the good fight. Thank you.