13 ms·

How the government set up a fake bank to launder drug money (2012)

210 points by mdeck_ 5y ago

fnord77 5y ago
text version https://www.publicradioeast.org/post/episode-418-how-government-set-fake-bank-launder-drug-money https://www.publicradioeast.org/post/episode-418-how-governm...
- WarOnPrivacy 5y ago
  You are the man.
ptsneves 5y ago
I always wonder how this is legal in the U.S.A? Creating a fake bank in another country sounds like committing fraud in another country. At worst it can be they would be charged with money laundering themselves. What is the line of what is acceptable at entrapment in the United States? What stops any agency from creating permanent fake banks for example? I am glad drug lords get busted. I hate them, but I think if there is no line, then we do not need any kind of law. Just declare drug traffickers as not human and exterminate them. I do not think the outcome would be good.
- dkersten 5y ago
  That’s why they were approached to do sons things but not others, I guess. I assume that means there was some kind of oversight. Also it’s not entrapment if the criminals are soliciting them.
- wil421 5y ago
  If the government setup their own Silk Road and busted a bunch of drug dealers it wouldn’t be any different than starting a bank. The first informant said I have drug traffickers asking for banking services. They setup what they were already seeking. Most likely a few governments and courts in multiple countries were already OK with it by the end.
  - nomoreplease 5y ago
    > If the government setup their own Silk Road and busted a bunch of drug dealers it wouldn’t be any different than starting a bank. Silk road was e-commerce. The laws & regulations of e-commerce and banking are very different, so yes they would different. Doubly so as it's in two nations. Thirdly so, because now international laws and regulations apply
  - vmception 5y ago
    Yeah, just a heads up that darknet commerce goes much darker after every enforcement action. More of it switches to Monero despite being less convenient, debilitating tracing capabilities. It accelerated need for completion of Monero multisignature capabilities, allowing the custody of funds to remain with the buyer and seller, instead of requiring the exchange as an escrow provider which is where many of the funds are seized when the government finds a server and takes it down. Buyers and sellers do their own encryption handshakes based on certain software protocols. Instead of all messages stored on the marketplace server. And they avoid certain apps like Wickr. The effort to take down a marketplace increases while the yield decreases. Classic war of attrition. Everyone already knows the best practices, they are just too lazy to implement them until there is evidence that it’s necessary and not just paranoia.
    - shadowgovt 5y ago
      Of course, but these patterns are true of most businesses (and indeed much human behavior). Companies have policies planned exceeding implementation because the cost isn't justified (until it is). ... and "enforcing the law incentivizes criminals to spend more on not getting caught" isn't really an argument for not enforcing the law. Indeed, from the point of view of law enforcement, it's short-term win-win... Every resource spent on being harder to catch is a resource not spent on the actual harmful criminal activity.
      - vmception 5y ago
        These are not hard best practices.
- singlow 5y ago
  Were the bank activities themselves illegal? It would only be entrapment if they were soliciting the illegal activity. It sounds like they were just soliciting banking services in a way that was attractive to illegal actors. Even if the banking services themselves were not legal, it would seem like entrapment if they used that to charge them with banking crimes. If NYPD operated a Limousine service in hopes that criminals would discuss their crimes while being overheard by an undercover officer, it would not be entrapment.
  - vmception 5y ago
    The bank activities were illegal and non compliant. The OCC was about to cut them out of the entire banking network for poor reporting, meaning no OCC-licensed banks could take or send wires to them or hold accounts in their name. It would have shut off all trade for this bank without knowing what they’re doing or alleging any crime, yet. This is how the US enforces its will worldwide. The Treasury has a similar way to do that, without the OFAC list. They did it in 2018 https://www.google.com/amp/s/www.forbes.com/sites/francescoppola/2018/02/28/why-the-u-s-treasury-killed-a-latvian-bank/amp/ https://www.google.com/amp/s/www.forbes.com/sites/francescop... Back to the OCC, the outcome of the audit would have solidified criminal charges against the bank directors, but then they backed off with the “this is a government operation” excuse. Other reasons they would back off being any other kind of leverage, which small banks do not have.
    - ptsneves 5y ago
      Exactly. What they were doing was not legal and an audit ruled so. But yeah, ends justify the means
  - 542458 5y ago
    “ It would only be entrapment if they were soliciting the illegal activity.” I’d like to note that this isn’t how entrapment works in the US (or many other places). If I’m an investigator, it is not entrapment for me to go to government employees and say “Hey, I’ll give you $100 in exchange for state secrets. You in?”. Covertly soliciting illegal activity to try to catch criminals is not entrapment. It only rises to the level of entrapment when it is something that would cause a “normally law-abiding person” to break the law, or that the defendant would otherwise have had no criminal intent - for example, “Give me state secrets or I’ll kill your wife” would be entrapment.
- Cthulhu_ 5y ago
  It's legal because the law doesn't explicitly forbid it, I guess? Legality is a very flexible thing. Morality is another, but not necessarily the same. Anyway, generally speaking, law enforcement is granted things that citizens do not, e.g. visibly wearing weapons, owning and transporting narcotics, etc. But those things are obvious. Your last bit is very totalitarian, and I would have hoped we had intellectually grown beyond that.
  - gjvnq 5y ago
    Interestingly, the principal of legality in Brazil has two different meanings: 1. For regular people, it mean that they can do whatever the law doesn't forbid. 2. For public officials, it means they can only do what the law allows. Source: https://www.migalhas.com.br/amp/depeso/302660/principio-da-legalidade--o-escudo-do-cidadao https://www.migalhas.com.br/amp/depeso/302660/principio-da-l...
  - suifbwish 5y ago
    Morality is totally flexible too, all you need to do to justify your atrocity is to make it help kids in some small way
- spoonjim 5y ago
  In the US, “entrapment” is fairly narrow and covers only those situations where the police actually directly tell you to commit the crime.
ttul 5y ago
Today’s version would be a crypto exchange with its own USD stable coin.
saul_goodman 5y ago
Let's see, so they didn't nab any of the big players in the operation. So effectively they helped the biggest players by making it harder for the small to mid-tier drug cartels do conduct business. Sure, way to put the squeeze on the cartels there... A tangent to this is the way we conduct drug enforcement in the US. It's much better for police departments to wait until after the dealers make money to catch them so they can seize the cash as part of the crime. This dis-incentivises the actual prevention of the spread of illegal drugs. The entire system is corrupt and there's little to no incentive for the authority to behave in the spirit of the laws they enforce - to raise public health by eliminating the personal health and social problems that drug addition creates.
- suifbwish 5y ago
  You nailed it. You have to let the fruit ripen before you pick it. Also if you don’t go after the suppliers, you will have more distributors to harvest later. It’s literally a cash crop for the DEA/police
  - adolph 5y ago
    Feature or bug? Cui bono? https://en.wikipedia.org/wiki/Cui_bono https://en.wikipedia.org/wiki/Cui_bono
  - joe_the_user 5y ago
    I recall there testimony around Operation Fast And Furious where the DEA basically said that they chose a cartel to dominate the trade and busted them once a decade or so. They justified this on the ground that otherwise, the various factions would be fighting things out. But yeah, this make the DEA effectively the ultimate Mafia boss. And yet, each vicious step in this vicious game can be justified by a logic that seems reasonable on it's own ("Drugs" should be illegal 'cause of harm of drug use to society, drug dealing should be actually organized by the police 'cause of harm of unfettered drug dealing, the truth should be covered 'cause of harm of not trusting authorities...).
- hpoe 5y ago
  Well the reason for that is that the large cartels are already part of the game. SOCOM needs a place to get the money for their off the books operations, and if you start looking into special operations units it turns out there are a lot of those guys pretty heavily involved in drug trafficking.
stevespang 5y ago
Where is the text version ?
chrispai 5y ago
With the technology growing, some criminals might exploit cryptocurrency and use Monero to launder money.
williesleg 5y ago
NPR is a fraud
strathmeyer 5y ago
Three short paragraphs? Do we have to install the app or something?
- mdeck_ 5y ago
  There’s a “listen” button at the top of the page. It may take a second for the Javascript that loads it to run after the rest of the page loads.
reedjosh 5y ago
Everyone is surprised to find the government does shady stuff, but many of these operations are even acknowledged like Iran-Contra where the government sold arms to the embargoed Khomeini government to generate black money to fund the Contras. > Senior administration officials secretly facilitated the sale of arms to the Khomeini government of the Islamic Republic of Iran, which was the subject of an arms embargo.[2] The administration hoped to use the proceeds of the arms sale to fund the Contras in Nicaragua. https://en.wikipedia.org/wiki/Iran%E2%80%93Contra_affair https://en.wikipedia.org/wiki/Iran%E2%80%93Contra_affair It's also discussed that the CIA does similar things with poppies to generate black money to fund regime changey activities. Here's one such article which is a weird source, but points to more mainstream sources for evidence. https://www.thelibertybeacon.com/a-conspiracy-theory-that-became-a-conspiracy-fact-the-cia-afghanistans-poppy-fields-and-americas-growing-heroin-epidemic/ https://www.thelibertybeacon.com/a-conspiracy-theory-that-be...
- et2o 5y ago
  This wasn’t “shady,” this was essentially a sting operation where they eventually seized 90 million dollars in cash and arrested over 100 people. Not bad. The bigger result was that it poisoned trust of banks by there kinds of criminals.
  - croes 5y ago
    Professionals already have banks for that. 90 million dollars? These are small fishes. They only helped the bigger ones go get rid of the competition and the effect on drug trafficking is near zero.
    - Quenty 5y ago
      From another perspective, consider it probably did not cost $90 million to execute this plan. So overall, this is a net profit, and most likely cost effective.
      - rahilb 5y ago
deleted 5y ago
[deleted]
pxlt 5y ago
Similar to this story that broke today, where the FBI secretly ran an 'encrypted' messaging network as a two-year sting operation https://www.theverge.com/2021/6/8/22524307/anom-encrypted-messaging-fbi-europol-afp-sting-operation-trojan-shield-greenlight https://www.theverge.com/2021/6/8/22524307/anom-encrypted-me...
- mdeck_ 5y ago
  That was the impetus for my sharing this story :)
trhway 5y ago
Government provides an encrypted platform, a bank for money laundering, ... the supply chain has long been CIA side hustle. Basically private drug criminals are really federal contractors by now.
ChrisArchitect 5y ago
transcript: https://www.npr.org/transcripts/694548245 https://www.npr.org/transcripts/694548245

210 points by mdeck_ 5y ago

text version https://www.publicradioeast.org/post/episode-418-how-government-set-fake-bank-launder-drug-money https://www.publicradioeast.org/post/episode-418-how-governm...

WarOnPrivacy 5y ago
You are the man.

ptsneves 5y ago

I always wonder how this is legal in the U.S.A? Creating a fake bank in another country sounds like committing fraud in another country. At worst it can be they would be charged with money laundering themselves. What is the line of what is acceptable at entrapment in the United States? What stops any agency from creating permanent fake banks for example? I am glad drug lords get busted. I hate them, but I think if there is no line, then we do not need any kind of law. Just declare drug traffickers as not human and exterminate them. I do not think the outcome would be good.

dkersten 5y ago
That’s why they were approached to do sons things but not others, I guess. I assume that means there was some kind of oversight. Also it’s not entrapment if the criminals are soliciting them.
wil421 5y ago
If the government setup their own Silk Road and busted a bunch of drug dealers it wouldn’t be any different than starting a bank. The first informant said I have drug traffickers asking for banking services. They setup what they were already seeking. Most likely a few governments and courts in multiple countries were already OK with it by the end.
- nomoreplease 5y ago
  > If the government setup their own Silk Road and busted a bunch of drug dealers it wouldn’t be any different than starting a bank. Silk road was e-commerce. The laws & regulations of e-commerce and banking are very different, so yes they would different. Doubly so as it's in two nations. Thirdly so, because now international laws and regulations apply
- vmception 5y ago
  Yeah, just a heads up that darknet commerce goes much darker after every enforcement action. More of it switches to Monero despite being less convenient, debilitating tracing capabilities. It accelerated need for completion of Monero multisignature capabilities, allowing the custody of funds to remain with the buyer and seller, instead of requiring the exchange as an escrow provider which is where many of the funds are seized when the government finds a server and takes it down. Buyers and sellers do their own encryption handshakes based on certain software protocols. Instead of all messages stored on the marketplace server. And they avoid certain apps like Wickr. The effort to take down a marketplace increases while the yield decreases. Classic war of attrition. Everyone already knows the best practices, they are just too lazy to implement them until there is evidence that it’s necessary and not just paranoia.
  - shadowgovt 5y ago
    Of course, but these patterns are true of most businesses (and indeed much human behavior). Companies have policies planned exceeding implementation because the cost isn't justified (until it is). ... and "enforcing the law incentivizes criminals to spend more on not getting caught" isn't really an argument for not enforcing the law. Indeed, from the point of view of law enforcement, it's short-term win-win... Every resource spent on being harder to catch is a resource not spent on the actual harmful criminal activity.
    - vmception 5y ago
      These are not hard best practices.
singlow 5y ago
Were the bank activities themselves illegal? It would only be entrapment if they were soliciting the illegal activity. It sounds like they were just soliciting banking services in a way that was attractive to illegal actors. Even if the banking services themselves were not legal, it would seem like entrapment if they used that to charge them with banking crimes. If NYPD operated a Limousine service in hopes that criminals would discuss their crimes while being overheard by an undercover officer, it would not be entrapment.
- vmception 5y ago
  The bank activities were illegal and non compliant. The OCC was about to cut them out of the entire banking network for poor reporting, meaning no OCC-licensed banks could take or send wires to them or hold accounts in their name. It would have shut off all trade for this bank without knowing what they’re doing or alleging any crime, yet. This is how the US enforces its will worldwide. The Treasury has a similar way to do that, without the OFAC list. They did it in 2018 https://www.google.com/amp/s/www.forbes.com/sites/francescoppola/2018/02/28/why-the-u-s-treasury-killed-a-latvian-bank/amp/ https://www.google.com/amp/s/www.forbes.com/sites/francescop... Back to the OCC, the outcome of the audit would have solidified criminal charges against the bank directors, but then they backed off with the “this is a government operation” excuse. Other reasons they would back off being any other kind of leverage, which small banks do not have.
  - ptsneves 5y ago
    Exactly. What they were doing was not legal and an audit ruled so. But yeah, ends justify the means
- 542458 5y ago
  “ It would only be entrapment if they were soliciting the illegal activity.” I’d like to note that this isn’t how entrapment works in the US (or many other places). If I’m an investigator, it is not entrapment for me to go to government employees and say “Hey, I’ll give you $100 in exchange for state secrets. You in?”. Covertly soliciting illegal activity to try to catch criminals is not entrapment. It only rises to the level of entrapment when it is something that would cause a “normally law-abiding person” to break the law, or that the defendant would otherwise have had no criminal intent - for example, “Give me state secrets or I’ll kill your wife” would be entrapment.
Cthulhu_ 5y ago
It's legal because the law doesn't explicitly forbid it, I guess? Legality is a very flexible thing. Morality is another, but not necessarily the same. Anyway, generally speaking, law enforcement is granted things that citizens do not, e.g. visibly wearing weapons, owning and transporting narcotics, etc. But those things are obvious. Your last bit is very totalitarian, and I would have hoped we had intellectually grown beyond that.
- gjvnq 5y ago
  Interestingly, the principal of legality in Brazil has two different meanings: 1. For regular people, it mean that they can do whatever the law doesn't forbid. 2. For public officials, it means they can only do what the law allows. Source: https://www.migalhas.com.br/amp/depeso/302660/principio-da-legalidade--o-escudo-do-cidadao https://www.migalhas.com.br/amp/depeso/302660/principio-da-l...
- suifbwish 5y ago
  Morality is totally flexible too, all you need to do to justify your atrocity is to make it help kids in some small way
spoonjim 5y ago
In the US, “entrapment” is fairly narrow and covers only those situations where the police actually directly tell you to commit the crime.

ttul 5y ago

Today’s version would be a crypto exchange with its own USD stable coin.

saul_goodman 5y ago

Let's see, so they didn't nab any of the big players in the operation. So effectively they helped the biggest players by making it harder for the small to mid-tier drug cartels do conduct business. Sure, way to put the squeeze on the cartels there... A tangent to this is the way we conduct drug enforcement in the US. It's much better for police departments to wait until after the dealers make money to catch them so they can seize the cash as part of the crime. This dis-incentivises the actual prevention of the spread of illegal drugs. The entire system is corrupt and there's little to no incentive for the authority to behave in the spirit of the laws they enforce - to raise public health by eliminating the personal health and social problems that drug addition creates.

suifbwish 5y ago
You nailed it. You have to let the fruit ripen before you pick it. Also if you don’t go after the suppliers, you will have more distributors to harvest later. It’s literally a cash crop for the DEA/police
- adolph 5y ago
  Feature or bug? Cui bono? https://en.wikipedia.org/wiki/Cui_bono https://en.wikipedia.org/wiki/Cui_bono
- joe_the_user 5y ago
  I recall there testimony around Operation Fast And Furious where the DEA basically said that they chose a cartel to dominate the trade and busted them once a decade or so. They justified this on the ground that otherwise, the various factions would be fighting things out. But yeah, this make the DEA effectively the ultimate Mafia boss. And yet, each vicious step in this vicious game can be justified by a logic that seems reasonable on it's own ("Drugs" should be illegal 'cause of harm of drug use to society, drug dealing should be actually organized by the police 'cause of harm of unfettered drug dealing, the truth should be covered 'cause of harm of not trusting authorities...).
hpoe 5y ago
Well the reason for that is that the large cartels are already part of the game. SOCOM needs a place to get the money for their off the books operations, and if you start looking into special operations units it turns out there are a lot of those guys pretty heavily involved in drug trafficking.

stevespang 5y ago

Where is the text version ?

chrispai 5y ago

With the technology growing, some criminals might exploit cryptocurrency and use Monero to launder money.

williesleg 5y ago

NPR is a fraud

strathmeyer 5y ago

Three short paragraphs? Do we have to install the app or something?

mdeck_ 5y ago
There’s a “listen” button at the top of the page. It may take a second for the Javascript that loads it to run after the rest of the page loads.

reedjosh 5y ago

Everyone is surprised to find the government does shady stuff, but many of these operations are even acknowledged like Iran-Contra where the government sold arms to the embargoed Khomeini government to generate black money to fund the Contras. > Senior administration officials secretly facilitated the sale of arms to the Khomeini government of the Islamic Republic of Iran, which was the subject of an arms embargo.[2] The administration hoped to use the proceeds of the arms sale to fund the Contras in Nicaragua. https://en.wikipedia.org/wiki/Iran%E2%80%93Contra_affair https://en.wikipedia.org/wiki/Iran%E2%80%93Contra_affair It's also discussed that the CIA does similar things with poppies to generate black money to fund regime changey activities. Here's one such article which is a weird source, but points to more mainstream sources for evidence. https://www.thelibertybeacon.com/a-conspiracy-theory-that-became-a-conspiracy-fact-the-cia-afghanistans-poppy-fields-and-americas-growing-heroin-epidemic/ https://www.thelibertybeacon.com/a-conspiracy-theory-that-be...

et2o 5y ago
This wasn’t “shady,” this was essentially a sting operation where they eventually seized 90 million dollars in cash and arrested over 100 people. Not bad. The bigger result was that it poisoned trust of banks by there kinds of criminals.
- croes 5y ago
  Professionals already have banks for that. 90 million dollars? These are small fishes. They only helped the bigger ones go get rid of the competition and the effect on drug trafficking is near zero.
  - Quenty 5y ago
    From another perspective, consider it probably did not cost $90 million to execute this plan. So overall, this is a net profit, and most likely cost effective.
    - rahilb 5y ago

deleted 5y ago

[deleted]

pxlt 5y ago

Similar to this story that broke today, where the FBI secretly ran an 'encrypted' messaging network as a two-year sting operation https://www.theverge.com/2021/6/8/22524307/anom-encrypted-messaging-fbi-europol-afp-sting-operation-trojan-shield-greenlight https://www.theverge.com/2021/6/8/22524307/anom-encrypted-me...

mdeck_ 5y ago
That was the impetus for my sharing this story :)

trhway 5y ago

Government provides an encrypted platform, a bank for money laundering, ... the supply chain has long been CIA side hustle. Basically private drug criminals are really federal contractors by now.

ChrisArchitect 5y ago

transcript: https://www.npr.org/transcripts/694548245 https://www.npr.org/transcripts/694548245