January 28, 2025 • 49 mins
The textbooks tell us financial intelligence is the process of gathering and analyzing financial activities in an effort to uncover threats or criminal dealings. But financial intelligence is more than just studying bank accounts and online transactions. To make an impact, financial intelligence requires bold, creative action in the real world. Perhaps no one is more suited to offer perspective on financial intelligence than John Cassara. John is a 26-year veteran of the US government’s efforts to take down financial criminals. During his time as a CIA Case Officer and a Treasury Special Agent at both the Secret Service and U.S. Customs Service, John conducted investigations into money laundering, smuggling, terrorist financing, and weapons trafficking throughout Africa, Europe, and the Middle East. He even went undercover as an arms dealer during a two-year detail to the US Customs Service. John recently spoke with Designated host Yaya Jata Fanusie and detailed how he parlayed his field experience as a collector of human intelligence in the CIA into the world of illicit finance investigations.
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Designated’s Proud Sponsors: K2 Integrity is a global leader in risk management, compliance, investigations, and monitoring, combining the expertise of industry pioneers with interdisciplinary teams and advanced technology to protect our clients’ operations, reputation, and financial security. K2 Integrity is dedicated to ensuring, strengthening, and validating financial and commercial integrity and security. We understand that critical moments define an organization’s success. We strive to build financial and institutional integrity, reduce risk, and uncover truth. Our commitment to superior intelligence, expert analysis, and insightful solutions helps our clients navigate complexity and achieve better outcomes. To learn more about how K2 Integrity is revolutionizing the management of risk, visit http://www.k2integrity.com, or follow us on LinkedIn.
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Illicit Edge: Breaking News for Financial Crime Yaya Jata Fanusie, a former CIA analyst with years of experience in counterterrorism and financial crime investigations, will go behind the scenes with the professionals working to safeguard the global financial system from illicit acts. #finance #cia #espionage #financialcrime #china #mafia
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:04):
Today's program is supported by K two Integrity. K two
is the premiere global risk advisory firm. In an ever
changing world filled with uncertainties and risk, K two helps
clients with better insights, better solutions, and better decisions. K
two Integrity believe in better. I'm yaya jata FINUSI. What
(00:39):
is financial intelligence? The textbooks tell us it's the process
of gathering and analyzing financial activities in an effort to
uncover threats or criminal dealings. But financial intelligence is more
than just studying bank accounts and online transactions. In order
to make an impact, financial intelligence requires bold, creative action
(01:00):
in the real world. John Cassara is a twenty six
year veteran of the US government's efforts to take down
financial criminals. He started out as a CIA case officer
and later became a special agent at the Treasury Department's
Financial Crime Enforcement Network or FINNSEN. He's conducted investigations into
(01:20):
money laundering, smuggling, terrorist financing, and weapons trafficking throughout Africa, Europe,
and the Middle East. He even went under cover as
an arms dealer during a two year detail to the
US Custom Service. He's the real deal you'll hear from
John about how he parleyed his field experience as a
collector of human intelligence in the CIA into the world
(01:42):
of illicit finance investigations. He also shares his insights into
the varied states of US financial intel before and after
the nine to eleven attacks, and how he believes the
Treasury Department may have lost sight in the enforcement mission
that's needed to address today the most perilous economic threats. John,
(02:04):
I once heard you say that good financial intelligence requires
good human intelligence. What did you mean by that.
Speaker 2 (02:14):
Yeah, yeah, I think having good human intelligence is absolutely
vital for financial crimes investigations, money laundering investigations in particular.
And the reason I say that is from my years
of experience. I go back to the days when I
did a lot of mentoring, a lot of training overseas,
particularly in the developing world, particularly for example, the time
(02:37):
after nine to eleven when I was out providing training
and technical assistance and mentoring to countries that were working
to establish, for example, a financial intelligence unit that was
trying to create financial intelligence for the first time, and
many of these countries would say, yeah, we did it.
We stood up an FIU. Now we've got financial intelligence
(02:58):
coming in that's it's all we have to do. We're
gonna have money laundering cases right now, And it doesn't
work that way. Occasionally you might have that case, that
rare case. Will you have that perfect SAR or that
perfect bit of financial intelligence that will say, Okay, this
is the case. But experience has shown, My experience has shown,
(03:21):
the history of money laundering investigations has shown over the
last thirty years that putting a financial crimes investigation together,
a complex money laundering case together, is pretty much like
putting a jigsaw puzzle together. You need various pieces of
the puzzle. And that could in fact be financial intelligence,
but it could also be surveillance. It could be electronic intercepts,
(03:45):
it could be an undercover approach, it could be commercial records.
But over and over and over again, we've realized that
there is no substitute for human intelligence. Human somebody in
the inside, somebody that's recruited, somebody that's going to tell
you the story, somebody that's going to explain how it works,
somebody that's going to talk about the intention of the
(04:08):
criminal or the criminal organization.
Speaker 1 (04:11):
Well, John, you have had such a long, distinguished career
in the government and beyond. But take us back to
your early government days. You were at the CIA. What
sort of work were you doing.
Speaker 2 (04:25):
I was, and that's how it all started. Way back
when I was recruited out of college. This was actually
right after the war in Vietnam. There wasn't a lot
of hiring done back then. I applied to the CIA.
(04:47):
I was going to grad school, and literally, you know,
got the number out of the phone book, applied it was.
It was kind of a funny feeling because it was
kind of the first interview I really had john interview,
and I just had this feeling in my gut that
I got the job. It took a while, there was
a hiring freeze on, but eventually I got the telegram
(05:09):
and I loaded up all my possessions, you know, grad student.
I had a sleeping bag, my interview suit, my stereo,
a couple of pots and pans, put it in the
back of my car and traveled across the country and
reported to Langley, reported to headquarters, and much to my surprise,
they put me in in effect the library, his office
(05:32):
of Central Reference. And that's not what I was expecting.
I thought I was going to be the next James Bond.
And it was okay. And I really am grateful to
have that experience as an analyst because they did a
lot of biographical analysis looking at world leaders in this
type of stuff. And I enjoyed it. But I said,
(05:54):
this is not what I wanted. So I applied to
At that time, I think it still is called the
Career Trainee Program. It was in the Director of Operations.
It was that that elite working to become a case officer.
And I applied and I was accepted, and I absolutely
(06:15):
loved it. I loved it. I mean I couldn't believe
I was getting paid for this. And you know, I
went down for training and you know, learned the intelligence cycle,
the spottying, the assessing, the recruiting, developing, learning how to
do reports. And my first tour overseas, I was sent
(06:36):
out and there was it was the height of the
Cold War and people it's hard to relate today, but
I mean there was a real, a real threat out there,
and we were taking a threat extremely seriously. My my mission,
(06:56):
I was an Africa Division of the d O and
there were about thirty thousand Cuban troops in Angola. Cuba
was a very staunch ally of the Soviets and Angola
former Portuguese colony. I was sent out to Portugal to
(07:19):
try to develop information on the Angola target, on the
Cuban target, on the Soviet and their allies, the targets
in Angola and Africa, and was very, very successful at it.
Speaker 1 (07:33):
Right, And you mentioned the DOO, so the director of operations,
And it sounds like this is by this time, you know,
I guess the eighties Cold War by this time when
you're operating and as a case officer you mentioned targets,
So you had to do you had to identify actual individuals,
(07:54):
actual people as sources. So tell us a little bit
more about about that.
Speaker 2 (08:00):
Yeah, you could do that in a wide variety of
ways you had. I had a lot of latitude. I
was literally working the streets. I'm still not allowed to
tell exactly what I was doing and what my position
was out there, but I had a lot of latitude.
And some of these sources, if you will, were developed
(08:23):
from leads. I would get leads from from headquarters. They
say so and so is going to be visiting the country.
He's going to be or she's going to be at
this particular area. See if you can you know, meet
this person and develop them. That I did a number
of times. Sometimes it was in a network of people,
(08:44):
a group of people that I was introduced to other
people and the target would develop. In effect, there wasn't
just one way of doing it. There were a wide
variety of ways of meeting people. And that it's a
question of developing these people. Of course, I was undercover,
(09:10):
and you had to establish rapport and trust and get
to know them and assess their vulnerabilities. For recruitment, what
were they motivated by money? Perhaps? Were they you know,
anti government, did they hate the communist system, did they
(09:37):
have you know, affinity towards the West, whatever it was.
You did that, and then you had to structure. After
you were pretty sure that they would say yes and
they had the access to information that we desired, you
would you would give them the pitch, the recruitment pitch.
(09:59):
Will you work for us? Will you work for the CIA?
And in that position I did pretty well. I had
a number of really really good recruitments and and and
then the fun part for me was after they would
say yes, you get this information, then you'd send it back,
send it back to headquarters for the the you know,
the policy makers to help them in their decision making.
Speaker 1 (10:21):
And John, that's a very unique experience, the type of
experience that a lot of people have, even doing a
lot a lot of people don't have, even when looking
at finance, right, you were doing something very sort of
hand to hand, in person and on the ground. And
if I'm thinking that this is the eighties, there were
(10:41):
other threats as well. I mean by the eighties, I
know we had crime and drug cartels. Can you tell
us about some of the cases or some of the
targets that you worked in the eighties?
Speaker 2 (10:57):
Sure? Well, what I have to finish that a little
bit of a story by saying I had to leave
the agency because I first tour, I was a young man,
and I happened to fall in love with a young
lady out there, and I literally had to choose between
the woman I loved and the job I truly loved.
(11:19):
And so I left the agency and I was shopping
my resume, if you will. I wanted to continue to
work for the government. So I was picked up by Treasury,
first a secret service and then US Customs customs different
than Homeland Security investigations today, Legacy customs. They had a
(11:44):
very broad mission had everything to do with the border
of the United States. There was actually absolutely there was.
The legacy Custom Service mandate mission was very broad at
enforce more laws than the FBI does everything with the border,
including money and drugs and high technology and weapons and
(12:07):
this type of stuff. So, for example, you ask about cases,
one of the very first cases that I was involved
with with the US Customs Service was violations of the
Arms Export Control Act. And the reason I was asked
to join Customs from the agency was because the local
(12:30):
field office, the Washington d C. Field Office, actually the
rest in Virginia Field Office, had a major investigation going.
Friend of mine had an undercover operation targeting arms dealers,
and they asked me, with my background and experience of
I'd like to join him. So that's the two of us.
(12:51):
We did for two years. We had a undercover front company,
if you will, based in Georgetown Military Armaments and Communications,
and that was the name of the company, and we
basically used sources to let people know that we were
(13:13):
open for discussions. And it took a while. Again you
have to establish the rapport and the credibility, but eventually
one day we had a former Navy seal who was
escorting a couple of South Africans working for Arms Corps
the South African Munitions Company, come into our office and
(13:37):
after a while they approached us to see if we
could help them procure gyroscopes manufactured by Northrop to put
on a South African missile system. And if you remember
your history, South Africa was developing or had developed a
nuclear weapon at the time. This is during the apartheid era,
so we ran with them. It was a great case.
(13:59):
There was money launders from Canada that came down and
other South Africans. South African Security Service came in to
check us out. But after two years we took this
operation down. It was the first case of this natured
under the Anti Apartheid Act. We busted a number of people.
(14:21):
It made the national news, It made the front page
of the New York Times and the Washington Post and
you know the network TV that night, and it was
a really good case. But it was a good example
again using intel, using source development to make law enforcement cases.
Speaker 1 (14:43):
Now, you know, I was looking into the history of
some of the operations in the eighties that dealt with
the drug war, which you know we remember I remember,
you know, the eighties was the war on drugs and
just say no. But on the law enforcement side, there
was a lot that people maybe didn't know. And I
was reading about something called Operation Polar Cap. Yeah. Can
(15:06):
you tell us about that and your knowledge or involvement
with it.
Speaker 2 (15:13):
Yeah, thank you. It's a great case. At that time,
it was the largest anti money laundering case in history.
It was well over a billion dollars in nineteen, say,
nineteen eighty eight, nineteen eighty nine money and the case.
My involvement in the case was after my experience with
(15:35):
that undercover case Project Wayward, the anti apartheid case. I
was transferred to Customs headquarters and I was put in
the anti money laundering section. Didn't know a whole lot
about money laundering at the time, but it sounded like
fun and I wanted to I wanted to learn, and
(16:00):
I've been kind of doing it ever since. But again
with the government, it's being in the right place the
right time. After doing it for about a year or two,
I was asked to go overseas to our embassy in
Rome to head up the world's truly first anti money
laundering task force, Operation Primo Passa or First Step in
(16:21):
Italian and went overseas to Rome and had this task
force anti money laundering task force between the US Custom
Service and the Italian Guardia Finanzo or Fiscal police looking
at financial intelligence to target Italian American organized crime or
the mafia, particularly looking at the monies going back and
(16:43):
forth between Italy the United States. That is background one.
I got out there almost immediately. We got a lot
of requests coming from headquarters and others to take a
look at fallout of Operation Polar Cap. Operation Polar Cap
(17:04):
had just been taken down and it involved the misuse
of the international gold trade. And there were a lot
of schemes and variations of schemes related to Operation Polar Cap,
but the principal part of it, there was a bunch
(17:25):
of kind of renegade gold dealers in the Jewelry district
of Los Angeles, particularly a lot of Armenian networks, and
they would take drug dollars basically circulate them through some
of these gold dealers, gold stores, gold fronts Ropex was
(17:48):
one of the big ones, and then the gold companies
would then deposit this these drug dollars in banks saying
it was the you know, not the proceeds of crime,
of course, but it was part of their of their business.
Speaker 1 (18:05):
You know.
Speaker 2 (18:05):
They were buying, selling trading gold and that was the
part of the money laundering, the placement and the layering.
And then there were other schemes as well. They would import, say,
for example, gold plated lead bars from Uruguay, you know,
and then they would pay for that those gold bars
(18:29):
that were coming into the country. So there were a
lot of schemes. But towards the very end of the operation,
there was a guy that they videoed and taped because
they had a lot of surreptitious they had. They had
a lot This place was was was the government had
(18:49):
this place wired literally and there was a guy that
came in. They didn't know his full name, they just
knew that he was from He was called John, he
was from Milan, Italy, and that he was a person
of some prestige and everybody kind of deferred to him,
and he was very much involved in this gold business. Anyway.
(19:11):
Then the case went down, but the undeveloped Leads as
we called him, came out to our office in Rome
find out about this John of Milan and his involvement
in Operation Polar Cap So I spent the next two
plus years of my life learning everything there was to
know about John and his operations, and it turned out
(19:33):
it was a tremendous learning experience. Learned a great deal
about the misuse of the international gold trade. It got
me started in trade based money laundering, got me started
in underground financial systems like Kuala, and a lot of
those lessons that I learned i'm still applying to this day.
Speaker 1 (19:54):
So from watching John from Milan, which was a great,
great name for a a mysterious criminal gold dealer, what
were some of the techniques? What did you learn?
Speaker 2 (20:08):
We got a lot of documents. A lot of these
investigations start, you know, obviously with documents, invoices, fictitious invoices,
and trying to track these invoices down relating to the
buying and the selling of gold. And a lot of
this goes back to the trade based money laundering, over
invoicing and under invoicing. So I was kind of getting
(20:30):
a foundation on how that worked. There were other techniques
as well, in fact, human sources. John was operating in Italy,
but a lot of the leads went to the Middle East.
We were a regional office in Italy. We covered something
like it was about thirty odd countries, So I was
(20:55):
on the I'm sorry, it was more like fifty two countries.
I was on the road lot to the Middle East,
to the golf area of the Middle East, and I
would be tracking these leads down, these these invoices that
originated in Kuwait or the UAE or Gutter or wherever,
(21:15):
and along the ways I would go back to the
you know, source development. I would try to talk to
people in the industry or talk to about the chambers
of commerce that were kind of overseeing, you know, the
gold industry, or I would talk to the gold brokers,
(21:37):
and I would of course ask about John. But at
the same time, I was educating myself about the misuse
of the international gold trade, the industry itself, how it worked,
why gold was a favorite instrument for money. Launders and
later terrorist financiers talk to people in the diamond industry,
et cetera, et cetera. That led me in turn to
(21:59):
you know who, waladars and import export dealers in the
golf and all this stuff. I was learning pay tremendous
well dividends or the lady the foundation for what was
going to happen at the events around nine to eleven.
Speaker 1 (22:24):
So before we get to nine to eleven, just to
sort of break it down, I mean, it sounds like
you were able to identify clues in these operations, and
the clues it sounds like, were these invoices. So am
I right in thinking that you get an invoice on
what some would think is just a legitimate business deal,
(22:46):
some sale of gold, trading gold, but that invoice would
have info that would then link you to well the supplier,
the other partners, and you sort of, I guess, became
an expert at this technique, this technique of using the
trading system to hide money laundering. And in fact, John,
(23:06):
I know you wrote you wrote the book on trade
based money laundering. Literally one of your books is trade
based money Laundering, and I learned a lot from that book.
But trade based money money laundering doesn't probably get the
headlines it should. Why is it important to understand?
Speaker 2 (23:24):
Because I think trade based money laundering is probably the
biggest money laundering methodology in the world, and it has
been for some time and it will continue to be.
Speaker 1 (23:35):
So.
Speaker 2 (23:36):
Trade based money laundering is very broad, as you know,
yah yah, I mean it deals with what you said,
it was customs fraud, but it also deals with tax
evasion and export incentive fraud, and that fraud, value added
tax fraud, carousel fraud, capital flight, evading, capital controls, barter trade,
value transfer, underground financial systems, black market payso exchange walla
(24:00):
fight chen, flying money. You know, even what I call
commercial trade based money laundering. If you put it all together,
as I said, it's the largest money laundering methodology in
the world, but it's also the least recognized, understood, and enforced.
(24:21):
One of the things I can say, and I you know,
you rack your mind thinking about what happened at the time.
But when I was overseas and I was learning about
all this stuff in the early nineties through all my travels,
you know, from from Rome going to the Middle East
and elsewhere, I needed to distinguish between traditional money laundering
at the time, which was basically large amounts of money
(24:44):
slashing around through Western financial institutions visav. What I saw
was money laundering via trade, which was uniquely a customs perspective.
So I I think I coined the term trade based
money laundering. At least that was in my case reports
and my messaging back to headquarters. At the same time,
(25:09):
there were two other individuals that were also working involved
with trade based money laundering that Deserve mentioned. Lou Bach
kind of the godfather of trade based money laundering at
Customs Headquarters was doing pioneering analysis looking at trade data
and he was using a term trade based money laundering.
And there was a really smart academic down in South Florida,
(25:34):
John zen Danowitz, who was also talking about trade based
money laundering for the first time. So this was the
origin of trade based money laundering in the early nineteen
nineties and it's taken off today.
Speaker 1 (25:48):
So the nineties, you're working cases around the world becoming
an expert in trade based money laundering. Plus you have
your CIA experience developing sources as a case officer. And
then we get to nine eleven. So nine to eleven,
as we've talked about on this show, things changed in
terms of financial threats. Where were you on nine to
(26:08):
eleven and then how did your work change and what
did you notice from that point forward?
Speaker 2 (26:15):
Yeah, when I came back from Rome, I became the
customs liaison to Treasury's Finsen and I was doing that
for about nineteen ninety six. You know through about two
thousand where I actually converted to Finnsen because I was,
you know, I was a family man, devoted family man,
(26:35):
and I was going to be transferred, and I asked
the management of Finsen if I could just stay there,
and they said yes, and it worked out. In most
first few years at Finsen were great because I love
the original mission of Finsen. We could talk about that
and how it's changed a little bit over the years.
(26:56):
But the idea of taking financial intelligence and and assisting
my colleagues in the United States and around the world
with their investigations, because again, particularly suspicious activity reports, you know,
they were only they were originated in the United States
about nineteen ninety six, about the same time I got
(27:18):
to Finsen, So a lot of this was just letting
people know what was available to them. But getting back
to your question about nine to eleven, I was at
Finsen when nine to eleven went down, and I was
(27:39):
I was still hurts to almost talk about it. I
was very almost depressed because we started looking in all
the wrong places for threat finance. Fin Cen at the time,
it had horrible management, it flat out did it had
horrible management, and Finsen was part of the you know,
(28:02):
a part of the bureaucracy, the culture of the bureaucracy
that you will understand, YAI, part of treasury. Finsen's wanted
to basically address the war on terror finance the way
they did the war on drugs. Meaning they were convinced
that financial intelligence was going to solve the problem, that
(28:25):
we were going to find Osama bin Laden's fortune in
the proverbial Swiss bank account. And I was also convinced
that was not going to happen. So I went to
Finsend Management and said, look at we've got to look
at the way our adversaries, our adversaries work transfer money,
transfer value. We need to look at the international gold trade.
(28:46):
We need to look at value transfer, we need to
look at howala And they didn't want to hear it.
In fact, I was actually given a gag order by
fin Send management, YEA, shall not talk about gold for example.
I mean think about think about that this was a
major threat that our adversaries were using. And I was
(29:09):
flat out not allowed to talk about it.
Speaker 1 (29:13):
Why so, why were they not open to this line
of investigation.
Speaker 2 (29:18):
I think there were two reasons. Number one, I just
said they were absolutely poor management. And number two, they
the mandate at finsend or the reason for their existence
was financial intelligence, and they were convinced that they could
make that square peg fit in a round hole. They
(29:39):
didn't want to They didn't want to deviate from that,
and I thought, No. I was there at Finsen's founding.
I was at Customs headquarters in nineteen eighty nine nineteen
ninety when Finsen. When Finsen was first formulated, it was
a joint initiative between the US Customs Service and the IRS.
(30:01):
The idea, very altruistic idea, was to get financial intelligence
get into the hands of law enforcement where they could
use it. You know. It was the antithesis of the
stove piping. You know that everybody who talked about at
the time of nine to eleven, it was the most
altruistic thing I ever saw in my government career. The
(30:22):
original promise and potential of fins and was off the charts.
But the mission was to help law enforcement and there
was nothing in that mission that said it had to
be had to revolve around financial intelligence. So if we
had information about trade based money laundering or jala or
gold or whatever it was. We should be able to
(30:44):
get that out the door as well and to assist
assist these investigations, but management didn't want to hear it.
Speaker 1 (30:52):
Today's program is supported by K two Integrity, the premier
global risk advisory firm. In today's world, threats can arise anywhere,
at any time, threats to your organization's operations, financial stability,
or reputation. K two offers a better way to counter
the threats facing your organization and provides critical intelligence and
(31:14):
actionable strategies to uncover the truth, make decisions, and reduce risk.
K two helps you face critical challenges with an experienced
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K two to help them thrive in an ever changing
world filled with uncertainties and risk by providing better insights,
(31:39):
better solutions, and better decisions. K two Integrity believe in better.
You mentioned hoalas a few times. Could you just break
down for us what a hoala is?
Speaker 2 (31:54):
Yeah? Howala is an underground financial system, sometimes called an
alternative remittance system. Sometimes people call it, you know, underground banking,
and there are a lot of sister systems around the world,
for example, the Chinese flying money systems, or Hundi in
Pakistan or Undi Al in Sri Lanka. They're all basically
(32:18):
the same thing. It's money transfer without money movement. So
somebody wants to transfer money from one country to another,
they give money to a broker, a who waladar, and
that another broker delivers that money to the ultimate destination.
The money's not actually physically transferred from one country to another,
(32:41):
the money in that end country is there. Eventually, the
whaladars have to settle accounts or balance the books because
value is being transferred from one country to another. So
somebody is running a surplus, somebody's running a deficit. There's
lots of different ways those brokers subtle accounts. Some of
(33:05):
it's via bank, some of it's you know, wire transfer,
some of it depending on where it is for example,
and the you know, inter provincial transfers. In Afghanistan, cash
couriers are used. We're seeing cyber being used today cyber currencies,
but historically and culturally it's trade trade based money laundering
(33:31):
and value transfer. The over and under invoicing. It's used
to subtle accounts between howaladars.
Speaker 1 (33:39):
So you've pointed out that a lot of times the
government is behind. So the adversaries are using all these
different innovative methods. They might be old methods, but they're
using whatever's at their disposal. But the government or Treasury
at the time sees, well, this is what we did
with the war on drugs. We followed the need the
(34:00):
bank money and the bank transactions. This is what we're
going to We're going to do, so then walk us
through the transition. It sounds like after nine to eleven
you were saying we needed to go in one direction
and there was resistance. So what has happened since then?
What has happened with Treasury and financial intelligence?
Speaker 2 (34:17):
I think a few things happened. I think we eventually
learned our lessons. For example, I was in Kabbo, Afghanistan.
This must have been about two thousand and five two
thousand and six, and I went out there to help
the Afghan government set up a financial intelligence unit. I
was assisting some other people working with Treasury's Office of
(34:40):
the Technical Assistance. And while I was out there, I
met with the agency, I met with DEA, I met
with people in the embassy and I was asking about
what are we doing regarding threat finance, and the answer
was basically nothing. They weren't doing anything at that time.
They weren't looking at gold, they weren't looking at whole walla,
(35:00):
they weren't looking at trade based money laundering. I was shocked,
absolutely flabbergasted. Eventually they kind of saw the light. Same
thing was going on the war in Iraq. Eventually they
realized that they had to start looking at the money
following the money in the value trails. Once they did
(35:22):
that in both instances, Afghanistan, Iraq and others, kind of
indigenous techniques, learning how our adversaries think and operate, we
started making a lot of progress. But they were hard
learned lessons, hard learned lessons. It's something our military dragged
(35:43):
its feet on for too many years, and I think
our intel services did as well. I think circa you know,
twenty twenty five, I think the lessons of the last
thirty years or clear. When it comes to financial crimes investigations,
(36:03):
everything hinges on enforcement. We've got to get back to
the basics of enforcement. You can have you know, four
million SARS filed at Finsend, which is great and that's
about what we do, four million sars a year filed
at finsend. But those sars aren't going to make a case.
As I said, Eventually, those sars have to be passed
(36:26):
off to law enforcement at the federal, state, even local level,
our international counterparts, and that's we're going to require investigators,
special agents for example, to take that SAR into work
the streets and use the tools in the toolbox to
put the pieces of the jigsaw puzzle back together. Again,
(36:48):
we're trying to take shortcuts. We're trying to use you know,
analytics systems, artificial intelligence, all that stuff, and this is
all great, but it's still going to require enforcement. And
this goes back to Treasury and what I think should
be happened. I think again Treasury needs to learn the
(37:11):
lesson of going back to the basics of enforcement as well,
because outside of IRSCID, whose major mission is tax enforcement,
Treasury no longer has an enforcement arm. It used to,
but it no longer does. Treasury used to have US Customs,
which was you know, established you know when about seventeen
(37:35):
ninety or something like that. It used to have the
US Secret Service, which is established right after the American
Civil War about eighteen sixty five. It doesn't now, But
is is there a gap?
Speaker 1 (37:48):
I mean so, I mean those are agencies. They are elsewhere, right,
they are in different forms, restructured or under different you know,
under different agencies. So why are you saying that enforcement
isn't happening. Don't we have enforcement agents and officers?
Speaker 2 (38:04):
Well, we do. But for example, let's just take ICE
Immigrations and Customs Enforcement, which was established under the new
DHS Department of Homeland Security right after nine to eleven
because Congress created DHS because they felt they had to
do something after nine to eleven. In my opinion, it
(38:25):
was absolute disaster. If you look at the acronym Immigration
and Customs Enforcement, immigration, well just you know, you know,
look at the headlines. What's going on. Our focus is immigration, immigration, immigration,
and legacy customs enforcement has been shortchanged. All that expertise
(38:50):
I've kind of alluded to, you know, revolving around you know,
value transfer, trade based money laundering, the misuse of the
international gold trade, legacy customs work, you know, the transfer
of technology and and munitions, all this stuff that's being
shortchanged for issues revolving around immigrations. You've been in the government. Yeah, yeah,
(39:14):
you know, there's only so much, so many resources, so
many people available, and if that priority is immigration, then
everything else is going to get short changed. How can
we make these major money laundering investigations, you know, if
we don't have the people and and the resources to
work it. And you say, well, other agencies and departments
(39:35):
can do it, but they're really not. For example, de A,
it's single mission. DEA is narcotics. You could say narcotics
money laundering, but that's it. What about all the other
stuff that they're not focusing on or the FBI. They're
good at what they do, you know, white collar crime,
catching bank robbers, but they don't have a clue about
(39:57):
trade based money laundering. That's not that's not their mission.
It is Treasury's mission. It's not DJ's mission, it's not
DHS's mission. It's Treasury's mission. And it had been for
two hundred years, and then they created this, this monstrosity
of DHS and it doesn't work. Learn the lessons over
(40:19):
the last you know, twenty odd years, and get back
to the basics of enforcement, put the Secret Service and
Customs back into Treasury, and then revitalize, you know, our
financial crimes investigations and then do it well.
Speaker 1 (40:36):
John, I mean speaking of lessons. You know, I know
you've written about things on the horizon, things that you've noticed.
We haven't mentioned much. You haven't mentioned much about China,
but I know you've written about China. So I'm wondering
if before we before we leave, you could say something
about CCP INC.
Speaker 2 (40:59):
Yeah, thanks for that question. Yeah.
Speaker 1 (41:01):
Yah.
Speaker 2 (41:03):
I started getting concerned about China because of my travels
overseas and I saw the expansionist Chinese threat, the CCP
INC Threat that I call in my book Overseas. As
part of the Belton Road initiative years ago, I started
(41:23):
trying to call attention to CCP's involvement with transnational crime
and money laundering. So I wrote a book came out
a couple of years ago on CCPING transnational crime money laundering.
And in the book, I looked at the top ten
(41:44):
twelve specified unlawful activities for money laundering, things that were
all aware of narcotics, trafficking, counterfeiting, weapons trafficking, high technology,
human trafficking, wildlife trafficking, all this stuff in almost every category,
(42:09):
almost every category, China leads the world. China CCP inc
lead the world. If you total up China's involvement, it
totals approximately two trillion dollars a year in transnational crime.
Two trillion is a significant number, particularly because experts think
(42:35):
that the magnitude of international money laundering is roughly in
the area of four to five trillion dollars a year.
So you can make an argument by looking at at
looking at specified unlawful activities, that China is responsible or
involved with about half the money laundering in the world.
But yet we never talk about it. We never talk
(42:57):
about their involvement in transnational crime, or rarely talk about
their involvement in transnational crime intellectual property rights violations alone.
People are estimating it could be a trillion dollars a year,
the biggest transfer of wealth of knowledge and human history,
(43:19):
you know. But we're not doing hardly anything to combat it.
It's it's it's a real threat, and it's something that
concerns the heck Otomy, you know. Honestly, I think if
we approach this the right way, I think China's involvement
in transnational crime is our biggest vulnerability. And I don't
(43:41):
understand why policymakers don't grasp this. Maybe the new administration,
the incoming administration, will look at this. But you know,
we always think of China as a threat. Could be militarily,
it could be diplomatically, it could be commercially economically, you know,
type tech et cetera, et cetera. And they are but
(44:04):
where they are more vulnerable. Okay, we have put all
these countermeasures out there, but we've never really successfully gone
after their criminality. Their criminality in this country and their
criminality around the world. We need to marshal our resources.
You know, back again we talked about the eighties and
the nineties, we put these task forces together. We have
(44:27):
task forces today, the heights and the hifskas, and this
is and that's great, But we could put together like
we did back in the nineteen eighties, you know, task
forces dealing with say Italian American organized crime. Put task
forces together in this country in particular areas that target
on the Chinese threat, the overlapping threat that deals with
(44:51):
transnational criminality. You know, it could be human trafficking, it
could be narcotics trafficking, it could be whatever. And the methodologies,
the unique methodologies that are Chinese adversaries used to launder
money and transfer value. I'd love to see that happen.
(45:15):
And I think we need also to work with certain
countries around the world and to educate them and to
have them join us, because it's not to do these
transnational cases. By definition, they're international in scope. We can't
just do it here in the United States. We need
(45:36):
to use our network of league ads, FBI, attja's overseas
network of customs offices, ICE offices overseas, et cetera, et cetera,
our intel presence and work and expose what's going on,
humiliate the CCP and let people know what they're up to,
(46:01):
how they're doing it, their money stashed away in offshore
centers around the world, and let them let people know
the extent of the CCP transnational crime and money laundering.
Speaker 1 (46:16):
Well, John, I mean, so you've given us some big
threats to think about, some bureaucratic problems and lessons learned.
But you mentioned there is a new administration by the
time this airs, it'll be after the inauguration. So wondering
if you could leave us with some thoughts about what
(46:36):
you would say to the new Treasury secretary if you
were you know, I won't say an elevator. In an elevator,
I'll say you're sitting at a dinner table and he's
sitting next to you, and you have a chance to
maybe give him some advice. What would you tell the
new Treasury Secretary.
Speaker 2 (46:56):
I would tell the new Treasury Secretary that part of
your mandate, part of your mission is to focus on
enforcement and go back and read your history and learn
about legacy customs and learn about the proud history of
(47:16):
the Secret Service. And a former, a predecessor, a Secretary
of Treasury basically gave up on the Secret Service and
gave up on Custom Service right after nine to eleven
and let those agencies, let them go away. And history
(47:44):
has shown that that was a major mistake. I mean,
just read about what's happened over the last so many
years with the Secret Service and Customs. Make a play,
make a very strong play in the administration to take
back the Secret Service and Customs and once again let
(48:05):
those proud Treasury, historical Treasury agencies thrive within the Department
of Treasury once again that's where they belong. Naturally, it's
a great fit. See if you could rectify the mistakes
of the past.
Speaker 1 (48:22):
It's clear that although he is no longer in government.
John Cassara still lives and breathes the mission that he
found a treasury fighting financial crime. I get it. I
myself spent a chunk of my career in the US
government countering threats. Sometimes when you're out of the fight,
you gain a clear perspective on what works and what
(48:43):
could be improved. As we begin a new year and
a new presidential administration, there's likely to be much debate
around how to best address financial threats, and as we
map out the best strategies, we'll all be best off
to listen to the Council of former Economic Warriors who
want to make sure we don't forget the mission. I'm
(49:06):
Yaya Jata Finuzzi and this is designated on the Illicit
Edge Network.
Today's program is supported by K two Integrity. K two
is the premiere global risk advisory firm. In an ever
changing world filled with uncertainties and risk, K two helps
clients with better insights, better solutions, and better decisions. K
two Integrity believe in better. I'm yaya jata FINUSI. What
(00:39):
is financial intelligence? The textbooks tell us it's the process
of gathering and analyzing financial activities in an effort to
uncover threats or criminal dealings. But financial intelligence is more
than just studying bank accounts and online transactions. In order
to make an impact, financial intelligence requires bold, creative action
(01:00):
in the real world. John Cassara is a twenty six
year veteran of the US government's efforts to take down
financial criminals. He started out as a CIA case officer
and later became a special agent at the Treasury Department's
Financial Crime Enforcement Network or FINNSEN. He's conducted investigations into
(01:20):
money laundering, smuggling, terrorist financing, and weapons trafficking throughout Africa, Europe,
and the Middle East. He even went under cover as
an arms dealer during a two year detail to the
US Custom Service. He's the real deal you'll hear from
John about how he parleyed his field experience as a
collector of human intelligence in the CIA into the world
(01:42):
of illicit finance investigations. He also shares his insights into
the varied states of US financial intel before and after
the nine to eleven attacks, and how he believes the
Treasury Department may have lost sight in the enforcement mission
that's needed to address today the most perilous economic threats. John,
(02:04):
I once heard you say that good financial intelligence requires
good human intelligence. What did you mean by that.
Speaker 2 (02:14):
Yeah, yeah, I think having good human intelligence is absolutely
vital for financial crimes investigations, money laundering investigations in particular.
And the reason I say that is from my years
of experience. I go back to the days when I
did a lot of mentoring, a lot of training overseas,
particularly in the developing world, particularly for example, the time
(02:37):
after nine to eleven when I was out providing training
and technical assistance and mentoring to countries that were working
to establish, for example, a financial intelligence unit that was
trying to create financial intelligence for the first time, and
many of these countries would say, yeah, we did it.
We stood up an FIU. Now we've got financial intelligence
(02:58):
coming in that's it's all we have to do. We're
gonna have money laundering cases right now, And it doesn't
work that way. Occasionally you might have that case, that
rare case. Will you have that perfect SAR or that
perfect bit of financial intelligence that will say, Okay, this
is the case. But experience has shown, My experience has shown,
(03:21):
the history of money laundering investigations has shown over the
last thirty years that putting a financial crimes investigation together,
a complex money laundering case together, is pretty much like
putting a jigsaw puzzle together. You need various pieces of
the puzzle. And that could in fact be financial intelligence,
but it could also be surveillance. It could be electronic intercepts,
(03:45):
it could be an undercover approach, it could be commercial records.
But over and over and over again, we've realized that
there is no substitute for human intelligence. Human somebody in
the inside, somebody that's recruited, somebody that's going to tell
you the story, somebody that's going to explain how it works,
somebody that's going to talk about the intention of the
(04:08):
criminal or the criminal organization.
Speaker 1 (04:11):
Well, John, you have had such a long, distinguished career
in the government and beyond. But take us back to
your early government days. You were at the CIA. What
sort of work were you doing.
Speaker 2 (04:25):
I was, and that's how it all started. Way back
when I was recruited out of college. This was actually
right after the war in Vietnam. There wasn't a lot
of hiring done back then. I applied to the CIA.
(04:47):
I was going to grad school, and literally, you know,
got the number out of the phone book, applied it was.
It was kind of a funny feeling because it was
kind of the first interview I really had john interview,
and I just had this feeling in my gut that
I got the job. It took a while, there was
a hiring freeze on, but eventually I got the telegram
(05:09):
and I loaded up all my possessions, you know, grad student.
I had a sleeping bag, my interview suit, my stereo,
a couple of pots and pans, put it in the
back of my car and traveled across the country and
reported to Langley, reported to headquarters, and much to my surprise,
they put me in in effect the library, his office
(05:32):
of Central Reference. And that's not what I was expecting.
I thought I was going to be the next James Bond.
And it was okay. And I really am grateful to
have that experience as an analyst because they did a
lot of biographical analysis looking at world leaders in this
type of stuff. And I enjoyed it. But I said,
(05:54):
this is not what I wanted. So I applied to
At that time, I think it still is called the
Career Trainee Program. It was in the Director of Operations.
It was that that elite working to become a case officer.
And I applied and I was accepted, and I absolutely
(06:15):
loved it. I loved it. I mean I couldn't believe
I was getting paid for this. And you know, I
went down for training and you know, learned the intelligence cycle,
the spottying, the assessing, the recruiting, developing, learning how to
do reports. And my first tour overseas, I was sent
(06:36):
out and there was it was the height of the
Cold War and people it's hard to relate today, but
I mean there was a real, a real threat out there,
and we were taking a threat extremely seriously. My my mission,
(06:56):
I was an Africa Division of the d O and
there were about thirty thousand Cuban troops in Angola. Cuba
was a very staunch ally of the Soviets and Angola
former Portuguese colony. I was sent out to Portugal to
(07:19):
try to develop information on the Angola target, on the
Cuban target, on the Soviet and their allies, the targets
in Angola and Africa, and was very, very successful at it.
Speaker 1 (07:33):
Right, And you mentioned the DOO, so the director of operations,
And it sounds like this is by this time, you know,
I guess the eighties Cold War by this time when
you're operating and as a case officer you mentioned targets,
So you had to do you had to identify actual individuals,
(07:54):
actual people as sources. So tell us a little bit
more about about that.
Speaker 2 (08:00):
Yeah, you could do that in a wide variety of
ways you had. I had a lot of latitude. I
was literally working the streets. I'm still not allowed to
tell exactly what I was doing and what my position
was out there, but I had a lot of latitude.
And some of these sources, if you will, were developed
(08:23):
from leads. I would get leads from from headquarters. They
say so and so is going to be visiting the country.
He's going to be or she's going to be at
this particular area. See if you can you know, meet
this person and develop them. That I did a number
of times. Sometimes it was in a network of people,
(08:44):
a group of people that I was introduced to other
people and the target would develop. In effect, there wasn't
just one way of doing it. There were a wide
variety of ways of meeting people. And that it's a
question of developing these people. Of course, I was undercover,
(09:10):
and you had to establish rapport and trust and get
to know them and assess their vulnerabilities. For recruitment, what
were they motivated by money? Perhaps? Were they you know,
anti government, did they hate the communist system, did they
(09:37):
have you know, affinity towards the West, whatever it was.
You did that, and then you had to structure. After
you were pretty sure that they would say yes and
they had the access to information that we desired, you
would you would give them the pitch, the recruitment pitch.
(09:59):
Will you work for us? Will you work for the CIA?
And in that position I did pretty well. I had
a number of really really good recruitments and and and
then the fun part for me was after they would
say yes, you get this information, then you'd send it back,
send it back to headquarters for the the you know,
the policy makers to help them in their decision making.
Speaker 1 (10:21):
And John, that's a very unique experience, the type of
experience that a lot of people have, even doing a
lot a lot of people don't have, even when looking
at finance, right, you were doing something very sort of
hand to hand, in person and on the ground. And
if I'm thinking that this is the eighties, there were
(10:41):
other threats as well. I mean by the eighties, I
know we had crime and drug cartels. Can you tell
us about some of the cases or some of the
targets that you worked in the eighties?
Speaker 2 (10:57):
Sure? Well, what I have to finish that a little
bit of a story by saying I had to leave
the agency because I first tour, I was a young man,
and I happened to fall in love with a young
lady out there, and I literally had to choose between
the woman I loved and the job I truly loved.
(11:19):
And so I left the agency and I was shopping
my resume, if you will. I wanted to continue to
work for the government. So I was picked up by Treasury,
first a secret service and then US Customs customs different
than Homeland Security investigations today, Legacy customs. They had a
(11:44):
very broad mission had everything to do with the border
of the United States. There was actually absolutely there was.
The legacy Custom Service mandate mission was very broad at
enforce more laws than the FBI does everything with the border,
including money and drugs and high technology and weapons and
(12:07):
this type of stuff. So, for example, you ask about cases,
one of the very first cases that I was involved
with with the US Customs Service was violations of the
Arms Export Control Act. And the reason I was asked
to join Customs from the agency was because the local
(12:30):
field office, the Washington d C. Field Office, actually the
rest in Virginia Field Office, had a major investigation going.
Friend of mine had an undercover operation targeting arms dealers,
and they asked me, with my background and experience of
I'd like to join him. So that's the two of us.
(12:51):
We did for two years. We had a undercover front company,
if you will, based in Georgetown Military Armaments and Communications,
and that was the name of the company, and we
basically used sources to let people know that we were
(13:13):
open for discussions. And it took a while. Again you
have to establish the rapport and the credibility, but eventually
one day we had a former Navy seal who was
escorting a couple of South Africans working for Arms Corps
the South African Munitions Company, come into our office and
(13:37):
after a while they approached us to see if we
could help them procure gyroscopes manufactured by Northrop to put
on a South African missile system. And if you remember
your history, South Africa was developing or had developed a
nuclear weapon at the time. This is during the apartheid era,
so we ran with them. It was a great case.
(13:59):
There was money launders from Canada that came down and
other South Africans. South African Security Service came in to
check us out. But after two years we took this
operation down. It was the first case of this natured
under the Anti Apartheid Act. We busted a number of people.
(14:21):
It made the national news, It made the front page
of the New York Times and the Washington Post and
you know the network TV that night, and it was
a really good case. But it was a good example
again using intel, using source development to make law enforcement cases.
Speaker 1 (14:43):
Now, you know, I was looking into the history of
some of the operations in the eighties that dealt with
the drug war, which you know we remember I remember,
you know, the eighties was the war on drugs and
just say no. But on the law enforcement side, there
was a lot that people maybe didn't know. And I
was reading about something called Operation Polar Cap. Yeah. Can
(15:06):
you tell us about that and your knowledge or involvement
with it.
Speaker 2 (15:13):
Yeah, thank you. It's a great case. At that time,
it was the largest anti money laundering case in history.
It was well over a billion dollars in nineteen, say,
nineteen eighty eight, nineteen eighty nine money and the case.
My involvement in the case was after my experience with
(15:35):
that undercover case Project Wayward, the anti apartheid case. I
was transferred to Customs headquarters and I was put in
the anti money laundering section. Didn't know a whole lot
about money laundering at the time, but it sounded like
fun and I wanted to I wanted to learn, and
(16:00):
I've been kind of doing it ever since. But again
with the government, it's being in the right place the
right time. After doing it for about a year or two,
I was asked to go overseas to our embassy in
Rome to head up the world's truly first anti money
laundering task force, Operation Primo Passa or First Step in
(16:21):
Italian and went overseas to Rome and had this task
force anti money laundering task force between the US Custom
Service and the Italian Guardia Finanzo or Fiscal police looking
at financial intelligence to target Italian American organized crime or
the mafia, particularly looking at the monies going back and
(16:43):
forth between Italy the United States. That is background one.
I got out there almost immediately. We got a lot
of requests coming from headquarters and others to take a
look at fallout of Operation Polar Cap. Operation Polar Cap
(17:04):
had just been taken down and it involved the misuse
of the international gold trade. And there were a lot
of schemes and variations of schemes related to Operation Polar Cap,
but the principal part of it, there was a bunch
(17:25):
of kind of renegade gold dealers in the Jewelry district
of Los Angeles, particularly a lot of Armenian networks, and
they would take drug dollars basically circulate them through some
of these gold dealers, gold stores, gold fronts Ropex was
(17:48):
one of the big ones, and then the gold companies
would then deposit this these drug dollars in banks saying
it was the you know, not the proceeds of crime,
of course, but it was part of their of their business.
Speaker 1 (18:05):
You know.
Speaker 2 (18:05):
They were buying, selling trading gold and that was the
part of the money laundering, the placement and the layering.
And then there were other schemes as well. They would import, say,
for example, gold plated lead bars from Uruguay, you know,
and then they would pay for that those gold bars
(18:29):
that were coming into the country. So there were a
lot of schemes. But towards the very end of the operation,
there was a guy that they videoed and taped because
they had a lot of surreptitious they had. They had
a lot This place was was was the government had
(18:49):
this place wired literally and there was a guy that
came in. They didn't know his full name, they just
knew that he was from He was called John, he
was from Milan, Italy, and that he was a person
of some prestige and everybody kind of deferred to him,
and he was very much involved in this gold business. Anyway.
(19:11):
Then the case went down, but the undeveloped Leads as
we called him, came out to our office in Rome
find out about this John of Milan and his involvement
in Operation Polar Cap So I spent the next two
plus years of my life learning everything there was to
know about John and his operations, and it turned out
(19:33):
it was a tremendous learning experience. Learned a great deal
about the misuse of the international gold trade. It got
me started in trade based money laundering, got me started
in underground financial systems like Kuala, and a lot of
those lessons that I learned i'm still applying to this day.
Speaker 1 (19:54):
So from watching John from Milan, which was a great,
great name for a a mysterious criminal gold dealer, what
were some of the techniques? What did you learn?
Speaker 2 (20:08):
We got a lot of documents. A lot of these
investigations start, you know, obviously with documents, invoices, fictitious invoices,
and trying to track these invoices down relating to the
buying and the selling of gold. And a lot of
this goes back to the trade based money laundering, over
invoicing and under invoicing. So I was kind of getting
(20:30):
a foundation on how that worked. There were other techniques
as well, in fact, human sources. John was operating in Italy,
but a lot of the leads went to the Middle East.
We were a regional office in Italy. We covered something
like it was about thirty odd countries, So I was
(20:55):
on the I'm sorry, it was more like fifty two countries.
I was on the road lot to the Middle East,
to the golf area of the Middle East, and I
would be tracking these leads down, these these invoices that
originated in Kuwait or the UAE or Gutter or wherever,
(21:15):
and along the ways I would go back to the
you know, source development. I would try to talk to
people in the industry or talk to about the chambers
of commerce that were kind of overseeing, you know, the
gold industry, or I would talk to the gold brokers,
(21:37):
and I would of course ask about John. But at
the same time, I was educating myself about the misuse
of the international gold trade, the industry itself, how it worked,
why gold was a favorite instrument for money. Launders and
later terrorist financiers talk to people in the diamond industry,
et cetera, et cetera. That led me in turn to
(21:59):
you know who, waladars and import export dealers in the
golf and all this stuff. I was learning pay tremendous
well dividends or the lady the foundation for what was
going to happen at the events around nine to eleven.
Speaker 1 (22:24):
So before we get to nine to eleven, just to
sort of break it down, I mean, it sounds like
you were able to identify clues in these operations, and
the clues it sounds like, were these invoices. So am
I right in thinking that you get an invoice on
what some would think is just a legitimate business deal,
(22:46):
some sale of gold, trading gold, but that invoice would
have info that would then link you to well the supplier,
the other partners, and you sort of, I guess, became
an expert at this technique, this technique of using the
trading system to hide money laundering. And in fact, John,
(23:06):
I know you wrote you wrote the book on trade
based money laundering. Literally one of your books is trade
based money Laundering, and I learned a lot from that book.
But trade based money money laundering doesn't probably get the
headlines it should. Why is it important to understand?
Speaker 2 (23:24):
Because I think trade based money laundering is probably the
biggest money laundering methodology in the world, and it has
been for some time and it will continue to be.
Speaker 1 (23:35):
So.
Speaker 2 (23:36):
Trade based money laundering is very broad, as you know,
yah yah, I mean it deals with what you said,
it was customs fraud, but it also deals with tax
evasion and export incentive fraud, and that fraud, value added
tax fraud, carousel fraud, capital flight, evading, capital controls, barter trade,
value transfer, underground financial systems, black market payso exchange walla
(24:00):
fight chen, flying money. You know, even what I call
commercial trade based money laundering. If you put it all together,
as I said, it's the largest money laundering methodology in
the world, but it's also the least recognized, understood, and enforced.
(24:21):
One of the things I can say, and I you know,
you rack your mind thinking about what happened at the time.
But when I was overseas and I was learning about
all this stuff in the early nineties through all my travels,
you know, from from Rome going to the Middle East
and elsewhere, I needed to distinguish between traditional money laundering
at the time, which was basically large amounts of money
(24:44):
slashing around through Western financial institutions visav. What I saw
was money laundering via trade, which was uniquely a customs perspective.
So I I think I coined the term trade based
money laundering. At least that was in my case reports
and my messaging back to headquarters. At the same time,
(25:09):
there were two other individuals that were also working involved
with trade based money laundering that Deserve mentioned. Lou Bach
kind of the godfather of trade based money laundering at
Customs Headquarters was doing pioneering analysis looking at trade data
and he was using a term trade based money laundering.
And there was a really smart academic down in South Florida,
(25:34):
John zen Danowitz, who was also talking about trade based
money laundering for the first time. So this was the
origin of trade based money laundering in the early nineteen
nineties and it's taken off today.
Speaker 1 (25:48):
So the nineties, you're working cases around the world becoming
an expert in trade based money laundering. Plus you have
your CIA experience developing sources as a case officer. And
then we get to nine eleven. So nine to eleven,
as we've talked about on this show, things changed in
terms of financial threats. Where were you on nine to
(26:08):
eleven and then how did your work change and what
did you notice from that point forward?
Speaker 2 (26:15):
Yeah, when I came back from Rome, I became the
customs liaison to Treasury's Finsen and I was doing that
for about nineteen ninety six. You know through about two
thousand where I actually converted to Finnsen because I was,
you know, I was a family man, devoted family man,
(26:35):
and I was going to be transferred, and I asked
the management of Finsen if I could just stay there,
and they said yes, and it worked out. In most
first few years at Finsen were great because I love
the original mission of Finsen. We could talk about that
and how it's changed a little bit over the years.
(26:56):
But the idea of taking financial intelligence and and assisting
my colleagues in the United States and around the world
with their investigations, because again, particularly suspicious activity reports, you know,
they were only they were originated in the United States
about nineteen ninety six, about the same time I got
(27:18):
to Finsen, So a lot of this was just letting
people know what was available to them. But getting back
to your question about nine to eleven, I was at
Finsen when nine to eleven went down, and I was
(27:39):
I was still hurts to almost talk about it. I
was very almost depressed because we started looking in all
the wrong places for threat finance. Fin Cen at the time,
it had horrible management, it flat out did it had
horrible management, and Finsen was part of the you know,
(28:02):
a part of the bureaucracy, the culture of the bureaucracy
that you will understand, YAI, part of treasury. Finsen's wanted
to basically address the war on terror finance the way
they did the war on drugs. Meaning they were convinced
that financial intelligence was going to solve the problem, that
(28:25):
we were going to find Osama bin Laden's fortune in
the proverbial Swiss bank account. And I was also convinced
that was not going to happen. So I went to
Finsend Management and said, look at we've got to look
at the way our adversaries, our adversaries work transfer money,
transfer value. We need to look at the international gold trade.
(28:46):
We need to look at value transfer, we need to
look at howala And they didn't want to hear it.
In fact, I was actually given a gag order by
fin Send management, YEA, shall not talk about gold for example.
I mean think about think about that this was a
major threat that our adversaries were using. And I was
(29:09):
flat out not allowed to talk about it.
Speaker 1 (29:13):
Why so, why were they not open to this line
of investigation.
Speaker 2 (29:18):
I think there were two reasons. Number one, I just
said they were absolutely poor management. And number two, they
the mandate at finsend or the reason for their existence
was financial intelligence, and they were convinced that they could
make that square peg fit in a round hole. They
(29:39):
didn't want to They didn't want to deviate from that,
and I thought, No. I was there at Finsen's founding.
I was at Customs headquarters in nineteen eighty nine nineteen
ninety when Finsen. When Finsen was first formulated, it was
a joint initiative between the US Customs Service and the IRS.
(30:01):
The idea, very altruistic idea, was to get financial intelligence
get into the hands of law enforcement where they could
use it. You know. It was the antithesis of the
stove piping. You know that everybody who talked about at
the time of nine to eleven, it was the most
altruistic thing I ever saw in my government career. The
(30:22):
original promise and potential of fins and was off the charts.
But the mission was to help law enforcement and there
was nothing in that mission that said it had to
be had to revolve around financial intelligence. So if we
had information about trade based money laundering or jala or
gold or whatever it was. We should be able to
(30:44):
get that out the door as well and to assist
assist these investigations, but management didn't want to hear it.
Speaker 1 (30:52):
Today's program is supported by K two Integrity, the premier
global risk advisory firm. In today's world, threats can arise anywhere,
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(31:14):
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(31:39):
better solutions, and better decisions. K two Integrity believe in better.
You mentioned hoalas a few times. Could you just break
down for us what a hoala is?
Speaker 2 (31:54):
Yeah? Howala is an underground financial system, sometimes called an
alternative remittance system. Sometimes people call it, you know, underground banking,
and there are a lot of sister systems around the world,
for example, the Chinese flying money systems, or Hundi in
Pakistan or Undi Al in Sri Lanka. They're all basically
(32:18):
the same thing. It's money transfer without money movement. So
somebody wants to transfer money from one country to another,
they give money to a broker, a who waladar, and
that another broker delivers that money to the ultimate destination.
The money's not actually physically transferred from one country to another,
(32:41):
the money in that end country is there. Eventually, the
whaladars have to settle accounts or balance the books because
value is being transferred from one country to another. So
somebody is running a surplus, somebody's running a deficit. There's
lots of different ways those brokers subtle accounts. Some of
(33:05):
it's via bank, some of it's you know, wire transfer,
some of it depending on where it is for example,
and the you know, inter provincial transfers. In Afghanistan, cash
couriers are used. We're seeing cyber being used today cyber currencies,
but historically and culturally it's trade trade based money laundering
(33:31):
and value transfer. The over and under invoicing. It's used
to subtle accounts between howaladars.
Speaker 1 (33:39):
So you've pointed out that a lot of times the
government is behind. So the adversaries are using all these
different innovative methods. They might be old methods, but they're
using whatever's at their disposal. But the government or Treasury
at the time sees, well, this is what we did
with the war on drugs. We followed the need the
(34:00):
bank money and the bank transactions. This is what we're
going to We're going to do, so then walk us
through the transition. It sounds like after nine to eleven
you were saying we needed to go in one direction
and there was resistance. So what has happened since then?
What has happened with Treasury and financial intelligence?
Speaker 2 (34:17):
I think a few things happened. I think we eventually
learned our lessons. For example, I was in Kabbo, Afghanistan.
This must have been about two thousand and five two
thousand and six, and I went out there to help
the Afghan government set up a financial intelligence unit. I
was assisting some other people working with Treasury's Office of
(34:40):
the Technical Assistance. And while I was out there, I
met with the agency, I met with DEA, I met
with people in the embassy and I was asking about
what are we doing regarding threat finance, and the answer
was basically nothing. They weren't doing anything at that time.
They weren't looking at gold, they weren't looking at whole walla,
(35:00):
they weren't looking at trade based money laundering. I was shocked,
absolutely flabbergasted. Eventually they kind of saw the light. Same
thing was going on the war in Iraq. Eventually they
realized that they had to start looking at the money
following the money in the value trails. Once they did
(35:22):
that in both instances, Afghanistan, Iraq and others, kind of
indigenous techniques, learning how our adversaries think and operate, we
started making a lot of progress. But they were hard
learned lessons, hard learned lessons. It's something our military dragged
(35:43):
its feet on for too many years, and I think
our intel services did as well. I think circa you know,
twenty twenty five, I think the lessons of the last
thirty years or clear. When it comes to financial crimes investigations,
(36:03):
everything hinges on enforcement. We've got to get back to
the basics of enforcement. You can have you know, four
million SARS filed at Finsend, which is great and that's
about what we do, four million sars a year filed
at finsend. But those sars aren't going to make a case.
As I said, Eventually, those sars have to be passed
(36:26):
off to law enforcement at the federal, state, even local level,
our international counterparts, and that's we're going to require investigators,
special agents for example, to take that SAR into work
the streets and use the tools in the toolbox to
put the pieces of the jigsaw puzzle back together. Again,
(36:48):
we're trying to take shortcuts. We're trying to use you know,
analytics systems, artificial intelligence, all that stuff, and this is
all great, but it's still going to require enforcement. And
this goes back to Treasury and what I think should
be happened. I think again Treasury needs to learn the
(37:11):
lesson of going back to the basics of enforcement as well,
because outside of IRSCID, whose major mission is tax enforcement,
Treasury no longer has an enforcement arm. It used to,
but it no longer does. Treasury used to have US Customs,
which was you know, established you know when about seventeen
(37:35):
ninety or something like that. It used to have the
US Secret Service, which is established right after the American
Civil War about eighteen sixty five. It doesn't now, But
is is there a gap?
Speaker 1 (37:48):
I mean so, I mean those are agencies. They are elsewhere, right,
they are in different forms, restructured or under different you know,
under different agencies. So why are you saying that enforcement
isn't happening. Don't we have enforcement agents and officers?
Speaker 2 (38:04):
Well, we do. But for example, let's just take ICE
Immigrations and Customs Enforcement, which was established under the new
DHS Department of Homeland Security right after nine to eleven
because Congress created DHS because they felt they had to
do something after nine to eleven. In my opinion, it
(38:25):
was absolute disaster. If you look at the acronym Immigration
and Customs Enforcement, immigration, well just you know, you know,
look at the headlines. What's going on. Our focus is immigration, immigration, immigration,
and legacy customs enforcement has been shortchanged. All that expertise
(38:50):
I've kind of alluded to, you know, revolving around you know,
value transfer, trade based money laundering, the misuse of the
international gold trade, legacy customs work, you know, the transfer
of technology and and munitions, all this stuff that's being
shortchanged for issues revolving around immigrations. You've been in the government. Yeah, yeah,
(39:14):
you know, there's only so much, so many resources, so
many people available, and if that priority is immigration, then
everything else is going to get short changed. How can
we make these major money laundering investigations, you know, if
we don't have the people and and the resources to
work it. And you say, well, other agencies and departments
(39:35):
can do it, but they're really not. For example, de A,
it's single mission. DEA is narcotics. You could say narcotics
money laundering, but that's it. What about all the other
stuff that they're not focusing on or the FBI. They're
good at what they do, you know, white collar crime,
catching bank robbers, but they don't have a clue about
(39:57):
trade based money laundering. That's not that's not their mission.
It is Treasury's mission. It's not DJ's mission, it's not
DHS's mission. It's Treasury's mission. And it had been for
two hundred years, and then they created this, this monstrosity
of DHS and it doesn't work. Learn the lessons over
(40:19):
the last you know, twenty odd years, and get back
to the basics of enforcement, put the Secret Service and
Customs back into Treasury, and then revitalize, you know, our
financial crimes investigations and then do it well.
Speaker 1 (40:36):
John, I mean speaking of lessons. You know, I know
you've written about things on the horizon, things that you've noticed.
We haven't mentioned much. You haven't mentioned much about China,
but I know you've written about China. So I'm wondering
if before we before we leave, you could say something
about CCP INC.
Speaker 2 (40:59):
Yeah, thanks for that question. Yeah.
Speaker 1 (41:01):
Yah.
Speaker 2 (41:03):
I started getting concerned about China because of my travels
overseas and I saw the expansionist Chinese threat, the CCP
INC Threat that I call in my book Overseas. As
part of the Belton Road initiative years ago, I started
(41:23):
trying to call attention to CCP's involvement with transnational crime
and money laundering. So I wrote a book came out
a couple of years ago on CCPING transnational crime money laundering.
And in the book, I looked at the top ten
(41:44):
twelve specified unlawful activities for money laundering, things that were
all aware of narcotics, trafficking, counterfeiting, weapons trafficking, high technology,
human trafficking, wildlife trafficking, all this stuff in almost every category,
(42:09):
almost every category, China leads the world. China CCP inc
lead the world. If you total up China's involvement, it
totals approximately two trillion dollars a year in transnational crime.
Two trillion is a significant number, particularly because experts think
(42:35):
that the magnitude of international money laundering is roughly in
the area of four to five trillion dollars a year.
So you can make an argument by looking at at
looking at specified unlawful activities, that China is responsible or
involved with about half the money laundering in the world.
But yet we never talk about it. We never talk
(42:57):
about their involvement in transnational crime, or rarely talk about
their involvement in transnational crime intellectual property rights violations alone.
People are estimating it could be a trillion dollars a year,
the biggest transfer of wealth of knowledge and human history,
(43:19):
you know. But we're not doing hardly anything to combat it.
It's it's it's a real threat, and it's something that
concerns the heck Otomy, you know. Honestly, I think if
we approach this the right way, I think China's involvement
in transnational crime is our biggest vulnerability. And I don't
(43:41):
understand why policymakers don't grasp this. Maybe the new administration,
the incoming administration, will look at this. But you know,
we always think of China as a threat. Could be militarily,
it could be diplomatically, it could be commercially economically, you know,
type tech et cetera, et cetera. And they are but
(44:04):
where they are more vulnerable. Okay, we have put all
these countermeasures out there, but we've never really successfully gone
after their criminality. Their criminality in this country and their
criminality around the world. We need to marshal our resources.
You know, back again we talked about the eighties and
the nineties, we put these task forces together. We have
(44:27):
task forces today, the heights and the hifskas, and this
is and that's great, But we could put together like
we did back in the nineteen eighties, you know, task
forces dealing with say Italian American organized crime. Put task
forces together in this country in particular areas that target
on the Chinese threat, the overlapping threat that deals with
(44:51):
transnational criminality. You know, it could be human trafficking, it
could be narcotics trafficking, it could be whatever. And the methodologies,
the unique methodologies that are Chinese adversaries used to launder
money and transfer value. I'd love to see that happen.
(45:15):
And I think we need also to work with certain
countries around the world and to educate them and to
have them join us, because it's not to do these
transnational cases. By definition, they're international in scope. We can't
just do it here in the United States. We need
(45:36):
to use our network of league ads, FBI, attja's overseas
network of customs offices, ICE offices overseas, et cetera, et cetera,
our intel presence and work and expose what's going on,
humiliate the CCP and let people know what they're up to,
(46:01):
how they're doing it, their money stashed away in offshore
centers around the world, and let them let people know
the extent of the CCP transnational crime and money laundering.
Speaker 1 (46:16):
Well, John, I mean, so you've given us some big
threats to think about, some bureaucratic problems and lessons learned.
But you mentioned there is a new administration by the
time this airs, it'll be after the inauguration. So wondering
if you could leave us with some thoughts about what
(46:36):
you would say to the new Treasury secretary if you
were you know, I won't say an elevator. In an elevator,
I'll say you're sitting at a dinner table and he's
sitting next to you, and you have a chance to
maybe give him some advice. What would you tell the
new Treasury Secretary.
Speaker 2 (46:56):
I would tell the new Treasury Secretary that part of
your mandate, part of your mission is to focus on
enforcement and go back and read your history and learn
about legacy customs and learn about the proud history of
(47:16):
the Secret Service. And a former, a predecessor, a Secretary
of Treasury basically gave up on the Secret Service and
gave up on Custom Service right after nine to eleven
and let those agencies, let them go away. And history
(47:44):
has shown that that was a major mistake. I mean,
just read about what's happened over the last so many
years with the Secret Service and Customs. Make a play,
make a very strong play in the administration to take
back the Secret Service and Customs and once again let
(48:05):
those proud Treasury, historical Treasury agencies thrive within the Department
of Treasury once again that's where they belong. Naturally, it's
a great fit. See if you could rectify the mistakes
of the past.
Speaker 1 (48:22):
It's clear that although he is no longer in government.
John Cassara still lives and breathes the mission that he
found a treasury fighting financial crime. I get it. I
myself spent a chunk of my career in the US
government countering threats. Sometimes when you're out of the fight,
you gain a clear perspective on what works and what
(48:43):
could be improved. As we begin a new year and
a new presidential administration, there's likely to be much debate
around how to best address financial threats, and as we
map out the best strategies, we'll all be best off
to listen to the Council of former Economic Warriors who
want to make sure we don't forget the mission. I'm
(49:06):
Yaya Jata Finuzzi and this is designated on the Illicit
Edge Network.
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