Sometimes I think we can get so bogged down in paperwork (“Who can certify this copy document?”, “What about the client who does everything online and so has no paper statements or bill?) that we forget our most potent AML tool: our common-sense, our feeling that something just isn’t right. I often point out in training that AML legislation (at least in the jurisdictions where I work) requires you to verify identity, but only to enquire about the client’s business and expected pattern of activity and transactions. And because the latter does not require documentary proof, I think it is sometimes forgotten or downgraded.
Earlier this month, police in Los Angeles raided around fifty businesses in the downtown garment district, looking for money being laundered (in our sense, not the garment sense) on behalf of the Sinaloa drug cartel in Mexico. After a day of raids the police walked away with about US$65 million in cash; in one warehouse alone, they found $35 million. It’s all part of the Black Market Peso Exchange, whereby drug traffickers use their illegal US dollars from drug sales to buy goods in the US and export them to Mexico, where they receive clean pesos in exchange. They can thus avoid carrying large amounts of US currency across the (heavily-policed) border to Mexico, or having to channel it through financial institutions, where eagle-eyed MLROs will spot it. Leading Operation Fashion Police, Assistant US Attorney Robert Dugdale said that Los Angeles had “become the epicentre of narco-dollar money laundering with couriers regularly bringing duffel bags and suitcases full of cash to many businesses”.
Well, you can see where I am going with this. All of these garment businesses had bank accounts into which they paid these vast sums of cash. Did the banks ask whether cash payments are usual in the garment industry? Did they ask why, for instance, QT Fashion, specialising in maternity wear, was suddenly doing so well that its takings were up by millions a month? That’s a lot of stretchy tights and roomy smocks. It’s the old-fashioned (groan) questions that matter: does this fit (double groan) with what I know about my customer’s business, and about businesses like his? How often do account managers visit their customer’s premises to make sure that business on the ground matches business through the account?