(bouncing horn music)
- [Kal] Money Laundering.
What is it?
Well, suppose that I got all this money
from some sort of a criminal enterprise.
Maybe I'm a drug kingpin or an arms dealer.
Or maybe I'm a lobbyist doing business
with shady foreign politicians.
No matter what I did to get it,
my money is now tainted by my crime,
which makes it tricky to spend.
(splashing)
Money laundering is the process
of giving your dirty cash a makeover
so that it appears legitimate to bankers and retail stores.
That's a lot harder than it seems.
- Best place to hide your diamonds are in your scrotum.
- [Kal] There's a secret international financial system
created just to help criminals spend their money
without anyone knowing the deplorable things
they did to get it.
And we're talking a lot of money.
Because most criminals aren't dumb enough to declare it,
there's no way to know the exact amount,
but it's likely bigger than the world steel industry,
and possibly even the world's food industry.
So where is this hidden economy?
It's right behind you, and in front of you.
It's everywhere,
and I'm going to show you how to spot it.
Whether you like it or not, we're all connected by money.
I'm Kal Penn, exploring this giant beast
that is the global economy.
We all know crime pays,
but how do bad guys stash their cash?
Do criminals have their very own bank of evil?
It's more like an informal network of lawyers
who use accounting tricks to keep dirty money
flying below the radar.
For decades, it was all kept hush hush.
Then in 2015, the curtain was pulled back
to reveal the industry's shadiest methods.
(boat horn)
- Was there any shipping magnates caught up in the Panama Papers?
- Yeah, all of them.
- All of the shipping magnates? - Seriously they are all in there.
- Hamburg-based Jan Strozyk was part of an international
team of reporters that published stories
about a massive financial data leak
that came to be known as the Panama Papers.
It exposed hundreds of thousands of secret companies
being used to hide billions of dollars,
and Jan was one of the first journalists to lay eyes on it.
I'm super curious about how you got involved in all this.
I'm imagining like some dude in a black trench coat
with a suitcase that's connected to a handcuff,
and he's like handing you something
and disappearing into the fog. How did this all come to you?
- There was a whistleblower that came to my colleague
and asked him if he was interested in data leaks.
And in the end it turned out to be
the biggest data leak journalists ever looked at.
We're talking about 11.5 million individual files.
And this was the first time ever
that someone outside of the money laundering industry
was able to look at what was going on there.
- [Kal] These files were the confidential client records
of the law firm Mossack Fonseca,
and if you thought the confessions in your secret diary
might be damaging, theirs revealed how they helped
the criminally rich launder dirty money.
- Mossack Fonseca specialized in setting up companies
so nobody can look who is behind it.
They are called shell companies.
So if you have money that's from a dubious source,
you can do your business and nobody
could find out where the money comes from.
So you would just go there
and on both side they would know
it's not good for the business relationship
- if everybody know who's behind this. - Sure.
So they would not really ask who the end client is.
They would just set up the company.
In one case, there was a customer
and they used, like, names from Harry Potter,
and they set up companies like Azkaban and something. I don't know.
- That's the nerdiest shit I've ever heard!
- It is!
- Are these drug cartels that are laundering money?
Who's doing this?
- They were doing business with drug cartels,
mafia, doing business with arms dealers,
and if we look at the Panama Papers as a total,
we have almost 200 different countries.
Basically, every country in the world
that's in some way implicated.
- That's crazy! - Yeah, it is.
I mean there were a lot of arrests
after the initial publication,
and there's going to be a lot more coming in the next years.
And there are hundreds of people that are
probably sitting at home and they're a bit scared right now, I guess.
- [Kal] The Panama Papers revealed rampant money laundering
all over the planet.
So far, prosecutors and journalists have only processed
the tip of the iceberg,
and I wanna find out just how deep it goes.
But I'm just an actor-slash-TV host.
I've never been connected to the seedy underbelly
of drugs or financial crimes, so...
In order to figure out how money laundering works,
I'm gonna need a million dollars.
(thud)
Thanks, Cody.
(phone ringing)
Perhaps you're wondering what would stop
an aspiring money launderer like me
from taking this bag of money and depositing it
directly into the bank.
First of all, that would actually just be
a super short episode, but also, here's what would happen.
- Next member, please.
- I'd like to make a deposit, please.
- Okay, I'm gonna need you to complete a deposit slip.
A million dollars?
Okay, because you're depositing over 10 thousand dollars,
I'm gonna need to complete a currency transaction report.
- Interesting, okay.
- What is the source of the money?
- It kind of fell from the sky.
I know that sounds a little weird,
but it was, yeah.
- Okay, that's what I'm gonna have to write on your report.
And that's reported to the federal government.
- Okay, um, let me think about it and come back.
- If you don't deposit the money,
I still will need to complete a SAR,
which is a Suspicious Activity Report.
Either way, there's gonna be some reporting done,
because you're carrying around this amount of cash.
- Is it easier if I happen to find a receipt
for selling something?
Okay, um, thank you, I'll think about it.
American banks have to report all suspicious
cash transactions.
It's the law.
Apparently legitimate business deals
rarely involve duffel bags full of Benjamins.
- Amanda, I need to talk to you about completing a SAR.
- Everything's fine, Amanda.
So, where do you go to find out how to evade the law?
Easy, the place where those laws are written,
our nation's capital, Washington, D.C.,
where there are at least a few good guys
fighting to keep bad-guy money out.
Kerry Myers is a veteran FBI hard-ass.
He segued from the bomb squad
to the anti-money laundering beat,
so maybe he can help me make my money
look as harmless as we do.
This is not your first time on a Segway, is it?
- No, I was a bomb technician with the FBI,
and we used to use Segways when we would be in a bomb suit
to go down range so we're not worn out
by the time we get there
- to do our job. - That's awesome.
- At the FBI, financial investigation
is a part of every crime you investigate.
There's always a financial component.
- So how would I launder money?
- The easy answer is don't, unless you wanna go to jail.
- (laughs) Sure.
- But there are three steps to money laundering:
placement, layering, and integration.
Placement is when the criminal takes the proceeds
of illegal activity, and he goes in
and physically makes a deposit into the financial institution.
Layering is, once the cash is now into the system,
he wants to move it around among different accounts,
maybe accounts of different banks
to make it harder to trace and to further try
and hide its identity.
Integration is when the money, after it's been moved
and layered through different accounts,
is when the criminal pulls the money out of the bank
and then uses it for a legitimate transaction.
But, placement is the choke point,
because our laws are designed to catch
the placement of the money into the financial institution.
- [Kal] Oh, I know.
- The trick is, trying to get it
into the financial institution without a report being filed
with the Financial Criminal Enforcement Network, FINCEN.
Think of it as a library.
That report stays at FINCEN and law enforcement
can get every report that any financial institution
has ever filed concerning your activity with cash
or suspicious activity at a financial institution.
- There are all these regulations,
all this other reporting.
How would somebody launder money, then?
- If I wanted to launder money,
I would use a cash-based business.
A perfect example would be a taxi cab company.
It's very difficult for the government
to estimate whether you had 10 fares today
or 20 fares today, and you start taking the proceeds
of illegal activity, commingling it with
the legitimate revenue from a cash-based company
and start sliding it into the financial system.
If I'm a bank, and you're a taxi cab company,
and you make a deposit every day with me
for six thousand dollars, that's not going to
cause any alarms if one day it's nine thousand,
or even one day it's 12 thousand.
Although I may file the report,
I'm not gonna be alarmed about it
because we have a history of this taxi cab company
is consistently making cash deposits every day
as a part of their revenue.
- [Kal] I've always dreamed of starting
a cross-fit doggie daycare.
I wish there was some sort of how-to guide
for starting a money laundering cash-based business.
- Hi, I'm Benjamin, owner and operator
of Ben's Cash-Only Businesses.
I'm a professional consultant,
and I can teach you to start
and run a cash business, guaranteed.
How do I know you can run one?
Because I run several.
Have money and time on your hands?
Start a shell corporation and use it...
to invest in real estate.
Blossom into a florist.
- I'm here to pick up the orchid.
- Great. - (ka-ching)
Or even better, your corporation can put money in art.
Oh, not in art, you dummy.
Bid on it.
Auctions are anonymous, so they don't care
where the money came from.
I bought this painting with my brand new
legitimate art business that's not sketchy in any way.
In a couple years, you can sell it again
through the same auction house,
and you can take that clean money to the bank.
Know your business and keep the government out of it.
- Hey, how did all this cash get here?
- Selling flowers, of course.
The only thing criminal here
is the low cash-only prices.
So come on over to Ben's Cash-Only Businesses.
The only question we ask is why are you asking
so many questions?
(rhythmic bass and drum music)
- [Kal] With some of these businesses,
it could take years to clean a lot of cash.
I've gotta get rid of it before the show ends.
I'm in Miami to meet someone who knows
how to clean a lot of cash quickly.
- I was being considered for a judgeship.
That's how secretive we were.
Nobody knew that I was a trial lawyer during the day,
and I'd put on my mask and I was a money launderer at night.
- Back in the 80s, Humberto Aguilar
lived a double life, defending criminals
as an attorney by day, also becoming a criminal
by laundering their money, also by day.
Until he got caught and spent six years in prison.
So now I must ask you a question
about money laundering.
How did you do it?
- Well, back when I was doing it,
most of the guys I worked for transported cocaine.
Client came to me and said, look, I gotta problem.
I go, you got a lot of problems.
- As soon as you said that, I was like,
Well, okay, this seems pretty normal so far.
- And I said, okay, what's your problem?
I gotta take you, and I go, okay, let's go.
So we went to this warehouse, and it was a huge place,
bigger than this, full of boxes.
Okay, what's the problem?
He says, open a box.
What, what? Open a box!
So I open a box and it's full of money.
Okay, and that one, too, and that one?
Yes, okay, we've got a big problem.
- Yeah, it sounds like if you had a whole warehouse...
- One warehouse?
I worked for a lot of different people.
- Oh, so this was... (laughs)
This wasn't just one client one time.
- No.
- [Kal] In the 1980s, Americans had quite
the appetite for cocaine.
And Miami was the entry point for most of the supply.
The town's business was booming,
and dealers were swimming in billions of dollars
of dirty cash.
(car peeling out)
- My clients would say, look, I need to use this money.
'Cause how many cars can I buy?
How many houses can I buy, cash?
And I said, oh, oh, this is a challenge.
I created a plan, and the plan was simply
get the money out, get it overseas,
and bring it back legally.
- How did you physically get the money out of this country?
- I would take these boats that went
to pick up the cocaine,
would go down to South America empty.
And I said, wait, I'm gonna use 'em.
So I would put the money in these boats
to go down to South America and end up in Panama,
and you have your people waiting at the port
with guns to protect your cash.
So you get the money in Panama,
and you go to the bank, and you find the banker.
And you start off slowly, build the relationship.
You say, what kind of watch you wear?
That's a Seico, no, man, no, not my banker.
And you go and you give him your Rolex.
Here's my Rolex, that's yours now.
And he looks at it, whoa, 30 thousand bucks, right?
Now, you own this guy. You own him.
You say, okay, this is my money. I wanna deposit it.
I'm gonna open this account for this corporation, always corporations.
You're gonna start using shell companies.
- [Kal] Shell companies, they're key to laundering
big sums of cash.
These corporate facades exist only on paper
with no real business to speak of
aside from holding on to money
and moving assets around without detection.
Think of money laundering as a cigar.
Inside you have your money, the tobacco.
Outside, you have your shell company,
the wrapper that conceals the tobacco.
The glue that holds it all together
is your company's board of directors.
These are people who appear to run your company,
giving you total anonymity.
Once the wrapper is sealed in a tidy package,
it's hard to look at what's really inside.
- And one of the things I would do is,
when I went to Panama, there's a couple
of whorehouses, I looked for a different way of doing it,
no, it's whorehouses.
But the whorehouses are good because they have IDs.
- Who has IDs? - The girls.
- All right, back up
- and talk me through-- - We'll go back.
So you form a company first. Who owns the company?
Oh, shit, these two women own the company.
I've got their IDs, here.
You pay these whores two hundred bucks to use their IDs.
They don't know what you're doing with it,
they don't care, they got two hundred bucks,
hey, I don't have to sleep with anybody
for two hundred bucks, that's great.
- So there was never a risk that they could go
to the bank and say, that's my 10 million dollars?
- There were always risks involved,
but the money's out of there soon.
In two, three weeks, I move the money. Where does it go?
Switzerland, a wonderful place.
And they send a car, and they pick you up,
and you've got the money sitting there, and you're okay.
- So they're just facilitating your money laundering.
- No, no, they're investment--
- Sure, yeah, okay, they're facilitating their investment
in their new clients, their new relationships.
I worked in government. I know how these languages work.
- It's wonderful, it is wonderful.
- And then where would you move it?
- Back here to invest it in Miami.
They all wanted their money back to be able to use it.
And that was my job.
- It's legitimately coming from a legal bank
- under a corporation name? - Yeah.
At the time, I honestly didn't think it was illegal
in my mind and heart.
I knew it was, but hey, come on.
- [Kal] But you feel like it's not hurting anybody.
- It's not, look at Miami today.
No really, you look at all these businesses
that are grown up.
They made Miami a grown-up city.
And people ask me, well, what happened
to all the money that was laundered in Miami?
Get up, you go on I-95, you go over the overpass
that overlooks downtown, and you look at all
these beautiful buildings.
You know what, that's the money.
- So, I've got this bag of money.
What do I do with it?
- First, get it out of the country.
Get it to Liechtenstein, Guernsey, Cyprus.
It's probably one of the dirtiest places in the world.
- [Kal] The island of Cyprus is well situated
to be the premier money laundering destination
for most of Europe and Asia.
I don't have a drug boat like Humberto,
and the lawyers at Amazon told me I couldn't wire money
like most real launderers do,
because it would be criminally boring to watch.
So I'm taking my private plane.
- Ladies and gentlemen, we'll be touching down in Cyprus shortly.
Ladies and gentlemen, we've arrived in Cyprus.
- [Kal] Cyprus has everything that an international
traveler with large sums of money could possibly desire.
- Hello. - Hello, Mr. Kal.
Welcome, sir, can I take the bags?
- No, thank you. - Sure?
- No, I'm fine, thank you.
Great weather, expansive beaches,
Russian karaoke, and somehow less suspicious,
a massive financial services industry.
- [Kal] How are you?
- I'm fine. Welcome to Cyprus, sir.
- Thank you. I'm excited to be here.
- Oh, thank you.
- First time in Cyprus.
- It's a lovely place.
- It seems like it, it's warm.
I've heard a lot of really interesting things about it.
- What is the purpose of your trip?
- Well, I, uh... - Tourist?
- I guess, I'm a tourist.
I also have some cash with me.
- Cash.
- And wanted to...
- Cleaning or laundering?
- We can just talk about that straight up?
We can call it that, we don't have to...
- Of course, of course.
- Okay, well, yeah, I'm here to launder money
and set up a shell company.
- Of course. It's the paradise of money here.
- Why is it the paradise of money?
- First, because of the taxes.
We have low tax in Cyprus.
Otherwise, there is a lot of accounting companies.
And we have a lot of Russians, actually, to launder money.
- Okay, so you're saying a lot of Russians
come here to launder their money.
- Yeah. I can be the company's director if you want.
- You can be the director of my shell company?
- Of course. If you pay me good money.
More than the taxi.
- Yeah?
- So you said that you have a lot of cash.
- I do, so I have a lot of cash with me, and uh...
- With you? You mean here now?
- Yeah, here now.
- How much?
- Enough that I've brought other people
with cameras in the cab with me.
- Alright.
- I'm a little-- I have to be honest,
I'm a little surprised that we're able
to talk so openly about money laundering
and shell companies.
Is that, uh, is that common,
or is that just 'cause you're an interesting guy?
- It's common, but it's just between us.
- Okay.
- Now let's get back to the money.
You didn't say how much you bring.
- Well, so how much, uh, how much would your rate be?
- No less than seven.
- No less than seven hundred euros?
- Thousand.
- Oh, seven thousand euros, okay!
Hey, I'm trying to negotiate here, man.
Cyprus's registrar of companies is an enormous warehouse
storing all the island's corporate registrations.
Here, there are paper records for hundreds
of thousands of shell companies.
The sheer volume and backlog of digitization
makes any one of them about as easy to find
as the Ark of the Covenant.
- It's a good place to do business, actually, here,
and if you keep an open mind,
there's great potential in Limassol
because of the many foreign companies, Russians, Germans.
Actually, the largest...
- Lately a lot of Israelis.
- [Kal] Even if my shell company doesn't do
any real business, I'll need to provide
an address for my corporate records.
Andreas Solea has the coolest mustache
I've seen since Miami, so I will follow his advice.
Because he and his daughter, Elisa,
run an office space rental company,
and business is booming.
- You have some offices that you just have the desk.
- Lot of empty offices. Rented. - Rented, empty offices rented.
- Of course, rented, 'cause otherwise that wouldn't be good for you.
- We, as a company, we don't actually care what kind of job you do,
or why you need the office.
- It's not our business. - We don't ask, actually.
- We never ask what is your kind of business.
It's your office. It's your private office.
- You can do whatever you want with it.
- You can do whatever you want there.
Of course, in the contracts it's written
not for illegal purposes, but who knows?
- Do you suspect that some of your tenants
might be money laundering?
- Money laundering?
- Anybody can do whatever they want. It's not our business.
- That's been clear. - It's everywhere the same.
From Cyprus to United States, to Russians
to Germans, to everywhere.
Those that they say, "Oh, they don't do it in Germany,"
either they are lying...
or they want to protect sort of the image of their country.
- Interesting. - There is everywhere money laundering.
With the right lawyers and accountants,
you can do a lot of things.
So what is the problem?
- [Elisa] Everybody makes money from it.
- So you're saying, it's good for the economy.
But is there ever a worry that the money
is coming from things like terrorism or violence,
and that that's what sort of propping up the economy?
- Now it does.
- Well, I didn't put that idea in your head.
- Oh, you did, you did. - Really?
- Yes. It never passed my mind, you know.
- On the level we work and our contacts...
How do you say it? If you don't mix with the chickens
then you don't become a chicken. You know what I mean?
- [Kal] It seems turning a blind eye to money laundering
in Cyprus is so common that they have
their own weird chicken metaphor.
Am I alone in thinking that there's
a whole lot of willful blindness happening here?
I need to find someone who sees
what's really going on.
Not everyone on Cyprus is ignoring money laundering.
Hey, guys.
James Henry used to serve the corporate beast
as chief economist at McKinsey & Co,
but now he lances it towards
by investigating financial crimes.
He's part of a network of journalists
working to uncover trails of illicit money
that cross multiple international borders.
Those trails often lead to Cyprus.
- I'm working with journalists in the Netherlands,
and the UK, and Cyprus.
And it's incredible to see this new kind of
collaboration going on.
- All right.
Oh, you fucker!
(laughter and splashing)
- Countries like Cyprus sell this kind of financial secrecy.
You know, it's an easy business to set up,
you offer secret companies and trusts.
You have lawyers that are basically
willing to work for anybody.
The banks are willing to take their money.
And this is a huge business, so it sounds great.
But we're talking about betting the future
of a country like Cyprus on a sector
that's loaded down with systemic risk.
And you also end up with some clients
that you're not proud of.
- [Kal] Have there been any negative consequences for this?
- Yeah, so the financial system here grew very fast
from 2004 until 2011.
The banks became like 900% of national income.
And by 2013, the whole economy was taken down.
- Whoa.
- And since the 2013 crisis, there's a whole set of
changes in the laws that could make it
much harder to launder money and to hide assets here.
But there's still a big gray area.
There's a lot of elasticity in the enforcement.
The financial secrecy industry is still
protecting money launderers.
It's protecting tax dodgers, it's protecting kleptocrats
that are basically Russian oligarchs
who accumulated huge fortunes by basically looting Russia.
- I assume things like this continue to exist
because there's people who enable these things.
- You can imagine a kind of Star Wars bar scene
where you have all these various players
gathered around the same kind of watering hole
which is the financial secrecy provided by this industry.
- [Kal] It sounds like this cantina has
a pretty substantial cover charge.
I hope this bag of cash can get me a seat at the bar.
Okay, so you're the expert.
So, how do I launder this bag of money that I brought?
- So one of the objectives of money laundering
is always to have a good story to make things
appear as if they came from some legitimate source.
And real estate is one of the easiest of those.
First step would be to get a company
in whose name you will own the real estate.
In Cyprus, we have about two thousand lawyers,
and they can set up a company
that then becomes the owner of your condo
or your property, and that way,
no one will really understand that it's yours
if someone's looking for your assets later on.
You can pay cash for the real estate,
and when you go to sell it, you have an explanation
for where the money came from.
You know, I didn't get it from drug dealing,
I got it from real estate.
- [Kal] Okay, so I have to find a lawyer.
- Yeah.
- [Kal] The multi-generational Yiangou Law Firm
specializes in setting up companies for foreigners.
They have a sterling reputation
and know the new laws well,
which may be why they're the only Cyprus law firm
willing to let me bring in cameras
to witness how they conduct business.
Not only are they gracious enough
to open their office for me,
they've also opened their kitchen.
(bright music)
This is amazing.
- This is a very...
common, let's say, lunch that we have usually.
- [Kal] This is the common lunch?
You eat like this every day? If I ate like this every day,
I would nap for a couple hours and then go back to work.
- Well, stay a few weeks in Cyprus and you will adjust.
(European string music)
- What kind of law do you guys do for the most part?
- Personally I've been dealing with corporate matters.
Vangelis is an accountant auditor,
and Natalie is an administrator.
- Cyprus has no raw material.
Has no industry. Has no agriculture.
So that's why we developed
the lawyers, the accountants, the bankers.
And then they try to find business outside Cyprus.
- [Kal] George and his family have agreed
to walk me through the process
of finally starting my own company.
I'm anxious to see just how elastic
the new regulations are.
- So do you have any specific name
in mind for your company?
- Oh, that's a good questions.
Um, The 69 Brothers.
- The 69... very interesting name.
- That's very specific.
- You like that? - It's very specific.
- He likes the 69 Brothers.
- That's very specific.
- It's very specific.
- So basically now we're just going
to search into the registrar record.
- Okay, so she's Googling 69 Brothers...
- She's searching whether a similar name exists.
- Well, actually, there aren't any "69 Brothers"
registered as a company so..
the name's clear.
- [Natalie] You're ready to go. - That's a good sign.
- but there's also the shelf companies,
the available ones.
And if you are okay
with using our nominee officers, i.e. directors,
shareholders, then we skip the whole registration part
and you can buy an off-the-shelf company.
- So I would be very curious to hear about that.
- Okay, I have printed the list.
- Here are the companies that we actually have now
with a ready-made structure.
People just use the structure because
this information is not publicly available.
So your name, it does not appear anywhere.
This is very typical structure that they use in Cyprus.
- Um, wow, all right, so if I pick one of these,
then what are the costs and how quickly can it be set up?
- So before we proceed with the cost,
we need first to fill out a questionnaire.
So you are going to establish a company in which area?
- Well, I assume, uh...
- "Assume" is not a good start, actually.
- That's true, let me, okay...
- So like, what are the more common reasons
that people will set up a company?
- Basically for trading activities.
Or maybe a consulting company.
- I think a consulting company was the...
- Yeah, I mean, that could be a...
- Would make sense. - Consulting. Consulting.
- Now we need to identify if you're going to be
in the category of politically exposed persons.
- I worked in American politics for a few years.
- (Hail to the Chief plays) - No big deal.
Does that mean I'm politically exposed?
- Yes, you can influence people.
Or you can have influence into
the general, let's say, market or business.
So normally you should be in this category.
- Okay. - And your personal, let's say, financial background?
Can you give us a little bit where have you earned your money?
From which activities specifically.
- It fell from the sky.
- So, Kal, I just wanted to let you know...
it seems suspicious.
We want to avoid accepting a client
who is going to be involved in any money laundering.
- Okay, so this is a little more complicated than I thought.
- Many people believe that it's quite easy
to incorporate a company in Cyprus,
but things changed in 2012 to 2013, actually.
When the financial crisis
and the banking sector collapsed.
Now we need to follow specific rules.
Things now are more strict.
- [Kal] Something feels off,
and not because I just made a lawyer
say 69 Brothers on television.
This law firm says I can't even take the first steps
to launder my million bucks,
but everyone else says there are still
huge rivers of dirty money flowing through Cyprus.
I need to find out what happened during
the crisis in 2013 that supposedly changed everything,
and for that, I'll need someone
who saw it all from the inside.
Panicos Demetriades is the former governor
of the Central Bank of Cyprus turned whistle blower.
I'd love to meet up and find out what he knows,
but he's no longer here.
So it turns out that when you fight money laundering
in one of the world's top laundering economies,
you receive death threats,
and have to move your family out of the country.
This place is pretty incredible.
- It's my gateway to Europe, basically.
- The station, or the bar itself?
- (laughs) The station. - Is this real?
- If I press this, they will know-- - I've never tried it.
- You've never tried it? - I've never tried it. No. Do you try it?
- Oh, that was quick.
- Wow. - How are you, sir?
- That's amazing. - Cheers, by the way.
- Cheers. - (clink)
- Cyprus has had a reputation for being a place
where people can bring a suitcase of money,
nobody would ask where it was from.
You can set up a company.
Nobody would ask anything other than,
here, give us a few bucks, and here's your board,
here are your shareholders.
- That used to be the case, I think.
That used to be the case that people could do that.
But it has tightened up quite a lot as a result of the crisis.
Ordinary law firms, for example, in Cyprus
wouldn't even dare to bend the law.
- Now? Okay. - Now.
But those practices is what, I feel,
eventually led to the crisis of 2012-2013.
- [Kal] Remember what happened to the U.S.
Back in 2008 and 2009 when major banks failed
and the government bailed them out?
There was an Oscar-nominated movie about it.
- [Announcer] The government will purchase
125 billion dollars in U.S. bank stocks
over the coming days.
- It's an investment.
- [Kal] Well, the same thing happened to Cyprus in 2013,
except Cyprus was so flush with dirty foreign money
that it's banking system was 10 times
as large as the economy.
There was no way the country could afford
the cost of bailing the banks out,
so there was something called a bail in.
The banks seized 10% of their largest depositors' accounts.
In exchange, those account holders
became partial owners of the banks.
The new shareholders are the depositors
whose deposits are turned-- converted into equity.
- Right. - The interesting thing is
that it only affected deposits above 100,000.
So only 4 percent of depositors were affected by the bail-in.
- So then who were those four percent?
- Russian and Ukrainian oligarchs.
- Wow, okay. - It used to be the case
that it was very hard to know how much
Russian and Ukrainian money was in the system...
- Okay. - because of banking secrecy.
Through the bail-in we realized that 50% of the money
that was bailed in belonged to Russians
like Viktor Vekselberg who is
allegedly very close to Mr. Putin.
He's on the US sanctions list.
- Okay, so that sounds problematic. - Yes.
- (ding) - (liquid pouring)
- Thank you very much.
Did those four percent of people
then have the controlling stake in these banks?
- Yes, of course. I mean, the shareholders effectively decide
who is going to sit on the board.
- And those people then make, what,
the policies of the bank, the decisions?
- Absolutely. - Why do people wanna influence banks this way?
- What can happen is that banks can be looted from within.
If somebody controls the bank,
they can loot the assets,
and there's opportunities there for tax evasion.
It's fertile ground, effectively, for corruption.
(ding, ding)
Eventually when the bank of Cyprus needed additional capital,
the bank attracted Wilbur Ross
to lead a group of investors...
- I'm sorry, say that again. - Wilbur Ross.
- Wilbur Ross, the U.S. Commerce Secretary?
- Your current... absolutely.
- Our commerce secretary Wilbur Ross?
- Wilbur Ross, the current U .S. Commerce Secretary? - Absolutely. Absolutely.
And he became a vice chair of the bank
in 2014, I believe.
Wilbur Ross was on the board until recently.
When he became Commerce Secretary, he stepped down.
Nevertheless, two major shareholders
were one politically exposed American,
and one very politically exposed Russian.
- (ding, ding, ding) - I'm gonna need the bottle
for what you just told me.
Is there really that much more oversight now?
- The rules are different for different people, right?
So, some people can bend the rules.
And for the benefit of the big and the powerful,
and that's a danger for the whole world,
not just for Cyprus, it's a danger for everywhere, I think.
For Europe, for the United States.
- [Kal] Across the globe, rules like those in Cyprus
crack down on the schmucks like me
trying to launder a million dollars,
but the big guys, the ones with a few billion,
well, it's easy to clean your money if you run the bank.
There's more money going through the illegal
shadow economy than ever, but that money is in
the hands of a much smaller and richer group.
(bell ringing)
- Think of money laundering as cheating on your math exam.
You get all the answers in some underhanded way,
and then try to pass it off
as your own legitimate hard work.
Cheating used to be something anyone could do
if they put their lazy math-averse mind to it,
write formulas on your hand,
hide answers in your hat,
flirt with the nerdy kid while you copy off of him,
but all over the world, schools caught on
to these flagrant methods of cheating and cracked down.
That's like the money laundering reforms
put in place around the world over the last few decades.
Holy smokes, that's a lot of reforms.
Cheating, for low-level corrupt idiots
like these guys, became harder.
Now the people who can get away with cheating
and money laundering are the ones with connections,
wealth, and insight into the sophisticated loopholes.
- What's up, dick bags, is this Griffin Hall?
Of course, it is, my dad's Griffin.
- So now, when it's time to take the exam...
- Oh, is it test time?
Yo, teach, get over here.
You look good, you been doing crunches
to get ready for my dad's pool party?
- Yes. - Let's see those abs.
- His connections and vast wealth incentivize
me to look away while I maintain plausible deniability.
If anyone drags me in front of an ethics board
about helping kids cheat,
I can say, of course not,
I was simply showing the student my body.
And that's what the billionaires and oligarchs are doing.
Rich connected charmers like this guy
cheat and then graduate into more connections
that make them even richer.
Ever wonder why the shadiest rich kids
get ahead despite being irrationally confident morons?
Here's a money laundering problem for you.
Add laws that impact low-level offenders,
subtract scrutiny for high-level offenders
and those who own banks,
then divide the assets amongst their friends.
What are you left with?
Pool party at Griffin's house.
I hate myself.
(screams)
- [Kal] If money laundering is now a luxury
reserved for the big fish,
I need to consult a bonafide shark.
Felix Sater has been involved in some shady businesses
with questionable characters,
but also some well-respected businesses
with government connections.
He committed fraud for the Russian mafia
and helped foil plots to assassinate George W. Bush
and Colin Powell.
He also made a fortune laundering money.
So maybe he knows where a minnow like me
can clean a paltry million dollars.
- You can head upstairs now. - Thank you.
You're like the real-life most interesting man in the world.
- I should probably put out a tequila or something.
- Is tequila your drink of choice?
- No, margaritas, but now I'm forced
to drink them out of plastic cups.
- (laughs)
Earlier in Felix's career, he stabbed a guy
with a margarita glass, and that was just
the beginning of his adventures.
- I went to Dubai to try to find out
how Al Qaeda was laundering money through them.
And that's where I got into the whole Bin-Laden hunting business.
I'm testifying on Friday at Senate Intel
in front of Senator Feinstein.
The best place to hide your diamonds are in your scrotum.
- In your like, you just tuck 'em underneath?
- You tuck 'em right underneath your balls.
- That's amazing.
- I had a very successful career on Wall Street.
That ended really badly over the margarita.
The guy I got into a fight with
wanted to drop the charges, but the district attorney wasn't having it,
so um, I was convicted of assault.
The lawyer needed a hundred thousand for the appeal.
I had a kid coming. I had no money.
That's how I got started on, what I call
the darker side of Wall Street.
I was making a lot of money illegally,
and all that required money laundering.
But at this point, my money laundering days are way done.
For the last 20 years, I've been trying
to pay back my debt for doing it.
I've worked with every three-letter agency there is
in this country,
showing them every single step of the way how it's done.
They've come to me, they've asked me,
so I try to help them stop both money laundering,
as well as theft of assets and things of that nature.
- Are there things that we should be doing
collectively as a country to prevent money laundering?
- Yes, but the reality is we can try
to stop money laundering, but you can never stop it 100%,
because the type of controls that you would need
to put on to stop money laundering
will also choke the financial system
to the point where it won't work.
Free flow of money, trade, ease of us buying products
from somewhere, the easier it is to conduct business,
the easier it is to money launder.
- Interesting. - So that's why
money laundering will always exist.
- So what are the tops of the list
for money laundering right now?
Where are the easiest places you can do it?
- The funniest part is that the largest amount
of laundered funds go in and out of the United States.
- Oh, wow, okay. - So all these countries that hate America
like to keep their money in America
because it's very safe and nobody's gonna take it away
from them unless they get caught doing something dirty.
That's why they wanna buy cars here,
apartments, houses, so we are number one
for laundered money.
- Damn.
- And in the United States, the main conduit
of money laundering is Delaware.
- What makes Delaware a place where people launder money?
- So Delaware has the most corporate friendly
laws on the books, and that's why most of the
publicly traded companies are Delaware listed companies.
So for money laundering, it's a go-to state.
I mean, I could literally dial the phone right now
and within the next 30 seconds
we will have a Delaware corp formed ready to go.
- Whoa. - Yeah.
- [Kal] Delaware, the first state
to ratify the Constitution.
Delaware is so business-minded that even
its state nickname, The First State,
brags about how quickly it processed paperwork.
What better place to transform exotic
drug-dealing, Ferrari driving money
into unremarkable buttoned down Ford Fiesta money.
Delaware is laundered money, the state.
I really struggled to start a shell corporation in Cyprus,
but in Delaware, it's a snap,
and I don't even have to go to Delaware.
I just hop online, fill out a handful of questions,
and name my company.
Like Cyprus, the state of Delaware is small
and doesn't have a very diverse economy,
so its government decided to become
the easiest state in the country to set up a corporation,
and you don't even have to pay Delaware state taxes
if you don't live there,
which is perfect, because I've decided
on some other living arrangements.
But first, I'm gonna need a whole lot more money.
Oh, shit.
Then I'm headed back to Cyprus to buy enough
bank stock to become a shareholder.
After that, it's easy.
All I have to do is bribe the right government--
(beep)
And I can take full advantage of the island's
luxury real estate market,
using my freshly cleaned cash to buy a swanky pad.
Whoa, what a beautiful view.
I'm here with what our lawyers have told us
to emphasize is a totally legit real estate agency
that would never knowingly sell a house
to a money launderer.
I think I'd like to buy this house.
Can we set this up through a company so that nobody can find me?
- Yes, yes. If you can sign here, please.
- [Kal] Now I just wait for someone to come along
to buy this house from me,
giving me clean cash to use however I please.
(electronic music)
- Hotchi Chachi, that's a lot of reforms.
86, 2018, do the math.
I can't.
It's 20, it's 30--
impossible.
Do your test.