Episode 98: Anti-Money Laundering with John Cassara

In this season of The Data Sleuth Podcast, titled "From Numbers to Narratives," guest host Justin Burns, tackles topics including FBI Investigations, Anti-Money Laundering, Family Fraud, IRS Investigations, and more. In each episode, Justin is joined by an industry expert to help tell the story behind the numbers and explore the latest in fraud detection and prevention.

In today’s episode we discuss Anti Money Laundering Tactics with John Cassara.  In this episode, Justin and John discuss:

·       The impact of money laundering on the economy.

·       Common methods criminals employ to launder money.

·       Tactics being used to combat money laundering.

·       Why China is currently the largest money laundering threat to the global economy

GUEST BIO

John Cassara began his 26-year U.S. government career as a CIA Case Officer during the Cold War.  He later served as a Treasury Special Agent in both the U.S. Secret Service and US Customs Service where he investigated money laundering, trade fraud and international smuggling.  He was an undercover arms dealer for two years.  Assigned overseas, he developed expertise in Middle East money laundering, value transfer and underground financial systems. Since his retirement, he has lectured in the United States and around the world on a variety transnational crime issues.   He has been a consultant for government and industry and has testified as an expert witness before Congressional committees.   He is on the Board of Directors of Global Financial Integrity and the International Coalition Against Illicit Economies.  He is a fellow at George Mason University’s Terrorism, Transnational Crime and Corruption Center (TraCCC).  Mr. Cassara has authored many articles and six books, his most recent being China Specified Unlawful Activities: CCP Inc., Transnational Crime and Money Laundering.  

Email: john@johncassara.com

Website: johncassara.com

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Transcript:

Leah Wietholter:

Hi, I'm Leah Wietholter, and this is The Data Sleuth Podcast. In this season of The Data Sleuth Podcast, From Numbers to Narratives, our host, Justin Burns, the director of Operations for Workman Forensics, discusses a broad range of forensic accounting cases, from embezzlement to money laundering, fraud against family members, and so much more. In each episode, he's joined by an industry expert to help tell the story behind the numbers.

Justin Burns:

Thank you, Leah. I'm Justin Burns, and I'll be your host for this season of The Data Sleuth Podcast, From Numbers to Narratives. Together with some amazing guests, we'll take you beyond the spreadsheets and into the human side of fraud investigations. Let's dive in to today's episode.

In today's episode of The Data Sleuth Podcast, I'm going to speak with John Cassara about anti-money laundering tactics. John began his 26-year U.S. government career as a CIA case officer during the Cold War. He later served as a Treasury special agent in both the U.S. Secret Service and U.S. Customs Service, where he investigated money laundering, trade fraud, and international smuggling. He was an undercover arms dealer for two years. While he was assigned overseas, he developed expertise in the Middle East in money laundering, value transfer, and underground financial systems. Since his retirement, he has lectured in the United States and around the world on a variety of transnational crime issues. He has been a consultant for government and industry and has testified as an expert witness before congressional committees. He is on the board of directors of Global Financial Integrity and the International Coalition Against Illicit Economies. He's a fellow at George Mason University's Terrorism, Transnational Crime and Corruption Center. Mr. Cassara has authored many articles and six books, his most recent being China - Specified Unlawful Activities: CCP Inc., Transnational Crime and Money Laundering.

Hi, John. Thanks for joining me on today's episode.

John Cassara:

Thank you. Delighted to be here.

Justin Burns:

So, you have spent your career investigating money laundering, trade fraud, and international smuggling. I think one of the best ways to discuss fraud and its impacts is through stories. And I know you have many interesting cases from your long career to pull from. And during today's conversation, I'm looking forward to hearing some of those stories, some of those cases that you're going to share with us.

So, first, I know you do a number of other things, but as we mentioned in your bio, today we want to focus specifically on money laundering and your work in the anti-money laundering realm. Can you just kind of give us a little bit of a tour, a walkthrough about what kind of impact money laundering has on the global economy, the U.S. economy, how it eventually affects consumers?

John Cassara:

Yeah, it's a good question because I don't think most people realize how much money laundering directly affects them. First of all, if you're talking about money laundering and its effects, I think we have to talk very, very briefly about the magnitude of money laundering, because once again, I don't think people realize how big it is. And I should say right up front, nobody knows for certain because money laundering, by its very nature, it's hidden. And it's very, very difficult to get good numbers. But academics, law enforcement, nonprofits, the big people that examine this stuff generally fall back to an old IMF estimation of a number of years ago that says somewhere 3 to 5% of world GDP is laundered. In very round numbers, that equates... I use a number of about $4 trillion a year. $4 trillion a year out of basically about $115 trillion economy.

So, part of it then comes down to, "Well, what's included in the count?" So, for example, in many jurisdictions, say, tax evasion is a predicate offense or a specified unlawful activity for money laundering. It is not in the United States. They're talking about it, but we're not there yet. But in the United States, we have hundreds and hundreds of specified unlawful activities or predicate offenses to charge money laundering, narcotics trafficking, human trafficking, all the stuff you read in the news about e-commerce fraud. All of these things are predicate offenses for money laundering.

How much money laundering goes on in the United States? Once again, nobody knows. There's old USG estimates that go back 15 years or more, $300 billion a year or so. It's much more than that. I would say it's probably in the area of about a trillion dollars a year now. Again, depends on what's included in the count. And most of that, or not the most of it, the largest predicate offense for all that is fraud of various sorts, particularly government fraud. Most people say, "Oh, it's narcotics trafficking." But in today's world, it's basically fraud.

So, to get back to your question, how does that affect consumers, basically, it's twofold. We're talking about money laundering, but people don't launder money without the specified unlawful activity. It's all those hundreds of crimes that lead into the money laundering. People commit crime for money. Once they have the money, they have to launder it, hide it, disguise it. Okay? So you have to say it affects them because of the crime. And the second reason I think it really affects them is because of the costs involved, the enforcement costs, which are enormous, and even the regulatory costs. And consumers end up paying for that in the long run. For example, total financial crime compliance costs globally is well over $200 billion a year. So, I mean, it's an enormous amount of money.

Justin Burns:

Yeah. So, I mean, you talked about needing a crime to predicate the need for money laundering. So, I mean, that's pretty much any crime that involves getting money out of it. So, what are the ways that people typically launder money?

John Cassara:

Right. The Financial Action Task Force, I think most of your viewers, listeners understand the FATF, the Financial Action Task Force, has been around since about 1989. And they're the international standard setters when it comes to AML, anti-money laundering. They came out with a study a number of years ago and said there's three primary methodologies, if you will, for criminals to launder money, the big three, the FATF big three. Number one, through financial institutions. Number two, through bulk cash, bulk cash smuggling. And number three, trade, trade-based money laundering.

Now, certainly, there are many, many others. We say in law enforcement that the bad guys are only limited by their imaginations, the way they can launder money. And certainly, things are in the news today, for example, use of cyber and all this. And I think cyber is a problem. It's getting to be a big problem. And I think a few years from now, it's going to be a very, very big problem. But right now, the point I try to make is that we're still getting killed by these big three, the old-fashioned ways of laundering money, because they're still very, very, very, very effective. And as long as they're effective for the money launderers, the bad guys are going to continue to use them.

Justin Burns:

Can you just kind of give us a brief overview of how each of those three work?

John Cassara:

Well, through financial institutions, it's the placement, layering, and integration that you're so familiar with, the three stages of money laundering, getting the dirty money into the banks. They do that a wide variety of ways. Most commonly is through smurfing, through putting it in smaller amounts, getting it deposited in banks, non-bank financial institutions, even money service businesses. And then they layer it. They try to hide it. They disguise it. They'll transfer it from one bank to another, from one offshore to another, from one account to another, from a dollar account to a gold account, to a silver account, to a foreign-currency account. And the reason they do that, obviously, is because every time they do that, taking advantages of issues for venue and jurisdiction and just the complexities of it all, lack of transparency, information, makes it extremely difficult to follow the money trail.

And then bulk cash. Bulk cash is not as common in this country as it was, say, 15 years ago. But more commonly than not, it is, bulk cash, think of, imagine the proceeds of narcotics transactions on the streets, the $20 bills, $100 bills, large amounts of currency. And one of the ways they've done it traditionally is basically, just like narcotics, say, come north across the U.S.-Mexican border, they send dirty dollars south. So it's bulk cash smuggling. Again, there's been restrictions on it. It's not quite as common. But nevertheless, it still happens. And it's not just the U.S.-Mexican border. It happens globally as well, in other locales.

And then finally, trade-based money laundering and value transfer. It's basically the use of trade goods to transfer value through fictitious invoicing, over and underinvoicing, through value transfers. And this is something that I've written about, I've talked about, I've investigated for a long time. And I think it's probably one of our most challenging money laundering methodologies today.

Justin Burns:

Okay. So, with those sort of big three, I guess those are the main focus of the anti-money laundering community. And you spent years combating money laundering. So, what sort of methods and tactics are being used to combat money laundering?

John Cassara:

I think the largest, most important countermeasure that we have is financial intelligence, the Bank Secrecy Act data. I've been doing this for 30-odd-plus years, and I've seen the steady growth of financial intelligence, the formation of FinCEN about 1990, the U.S. Financial Intelligence Unit, the establishment of Egmont, the Egmont Group of Financial Intelligence Units. I think there's roughly around 180 in the world today, foreign FinCENs, if you will. But just in the U.S. alone, I think roughly there's about 26 million pieces of financial intelligence filed with Treasury's FinCEN every year, including about 5 million SARs, about equally divided between financial institutions and money service businesses. It's an incredible amount of information. And not only just for money laundering, it's used for other things as well. For example, SARs started in this country about 1996. I remember I was at FinCEN when those things first were available, and I was amazed at the wealth of information that could be found in these forms, the narrative that a bank compliance officer would fill out. Real, real help for money laundering, for anti-money laundering purposes.

But I think right now, what's happened is, circa 2025-ish, 2026, is that we're drowning in information. It's almost too much. And you can tout artificial intelligence or analytics and all this kind of stuff. But the bottom-line challenge that we have right now is that we don't have enough investigators. Because you can have the best information in the world, but it's still going to require a criminal investigator, say, at the federal level, a special agent, whatever it is, to take that information and to work it in the street. And that's where we're falling down. We don't do that as much as we used to.

Justin Burns:

Yeah. So, I mean, you still need to have that human element. And, I mean, I know everyone is, the conversation around AI and, I guess, the fear of it, it's just going to take people's jobs or it's going to make people obsolete. But when you have a job like this, where there's judgment involved, because you're talking about 126 million reports filed or SARS filed each year in the US, okay, well, obviously, you can't have a human read every single one of those. Maybe you can have an AI to kind of sort it out and pick up on key things. But you still need a person there to have those judgment calls because they're not all fraudulent or criminal. They get filed for any reason as long as it meets a certain dollar value or something like that, right?

John Cassara:

Well, that's correct. For example, we're talking just SARS. Yeah. I mean, by definition, they have to be suspicious to be filed. It doesn't mean that they're criminal. They're just suspicious, something that would make the average person say, "Hmm, somebody should look at this a little closer." The problem that we're facing, though, with so many SARs being filed is that institutions of all sorts are filing these defensively. They're called offensive SARs, sometimes called garbage SARs, because they don't want to be second-guessed, because they don't want to have a regulatory agency go after them saying, "Well, why didn't you file a SAR in this case?" So they're erring on the side of overfiling, which just kind of junks up the system.

Justin Burns:

Yeah. Because we've seen some fines handed down to some of these financial institutions. I remember HSBC got hit with a fine. I feel like some of the other banks have also been hit with fines for either not following up on them or not filing them. So, I guess, as you're talking about a defensive measure, they're trying to stay away from those fines and avoid them. So they're just filing more than necessary, maybe.

John Cassara:

They are. And I've been around long enough to remember when some of the first big fines were levied against banks way back in the 1980s. I think it was the Bank of Boston, was basically the first big hit against a financial institution in this country. And they didn't have SARS back then, but they weren't filing currency transaction reports. And the Bank of Boston, I forgot what the fine was, but it was peanuts in comparison to today's money. But the Bank of Boston started filing and all other financial institutions kind of got religion real quick because it was the negative publicity involved. Because the headlines read, "X bank is conniving with money launderers and drug cartels," and they don't want those headlines. So, that, and amongst other reasons, is why industry, financial industry, wants to cooperate. Generally, by and large, at least in this country, I'm not talking about... I could name a few countries overseas, but their financial institutions are pretty good. There's still ways to go, but they're much, much better in comparison to the way they used to be.

Justin Burns:

Yeah. So, John, you spent 26 years in various U.S. government agencies investigating money laundering, like we mentioned specifically. How have you seen the tactics used to combat money laundering evolve over that time?

John Cassara:

There's been some remarkable changes. I remember, for example, in 1990, I was sent overseas to our embassy in Rome, Italy, to combat Italian-American organized crime, the mafia, by looking at the flow of dirty money going back and forth between Italy and the United States. We called that Operation Primo Passo or First Step. The reason I was sent out there was because, obviously, Italy had a big problem with the mafia, so did the United States. So we wanted to cooperate. And we did it. It was an early example of the use of financial intelligence to target the mafia.

But to go to kind of answer your question by giving you an example, at that time in 1990, Italy didn't even have an anti-money laundering law. They didn't have financial intelligence. They didn't have a Financial Intelligence Unit. They kind of learned a little bit from what the U.S. was doing. They learned a lot from the FATF 40 Recommendations, this type of stuff. And we worked with our Italian counterparts on... and we learned from them as well as far as having to follow the money and value trails. But from that very humble beginning in 1990, Italy, to use just Italy as a case example, today, very sophisticated. They do great work in a wide variety of financial crimes.

Here in the United States, I think what has been the biggest impression upon me as far as what's worked, what hasn't worked, is the fact, again, I go back to just this flood of information that we now have that we didn't necessarily have so many years ago, most of that being financial intelligence of all sorts, SARS being the most important, but there are others as well. But then the use of other types of, all different kinds of data. I mean, there's just been an avalanche of data from all different kinds of sources that skilled analytics people can bring into these investigations. We didn't have that years ago. But once again, I go back to, are we really making any progress?

Because remember I said that roughly 4 trillion or so is laundered globally every year and roughly, for example, 1 trillion is laundered in the United States. Out of that amount of money, we actually recover, we recover, not just seizures, but actually forfeit, we get back, well less than 1%, well less than 1%. So, as a colleague of mine, a friend of mine, Raymond Baker of Global Financial Integrity, once said, "We're a decimal point away from total failure." A decimal point away from total failure. Now, that doesn't mean we should give up, because we can't, but that puts everything in perspective. If you look at the magnitude of the problem by what we actually successfully recover and use that as a deterrent, we're not doing very well.

Justin Burns:

Yeah. I think those points about the growing need for sophisticated data analytics, the uses of things like AI and especially the collaborative piece of what you mentioned, collaborating with other countries and their anti-money laundering and financial crimes units, I think that's all been very important in helping us be successful in the fight against money laundering or not failing in the fight against money laundering, as you mentioned, because you said we're just a decimal point away. But it's good that we're at least chipping away at some of it.

John Cassara:

We're definitely chipping away. And I don't want to undermine the efforts, because we do some really good things. And I have the utmost respect and admiration for my law enforcement colleagues and my intelligence analyst friends that are out there, that are working and working very hard. But it's just the magnitude of the problem is so great, and the lack of resources is so acute that we're barely keeping our nose above the water.

Justin Burns:

Yeah. Yeah. I mean, it feels a lot like just the general fraud statistic of, well, every report to the nations that has come out since I joined the ACFE, the global estimate is always 5% of revenue is lost to fraud globally. And there's more people in the field now. There's new tactics in the field now. There's a lot of focus on it. But I'm just waiting for the next issue to come out next year, and it's still going to say 5%. It's probably not going to go down to 4. We're just fighting to hang on to that 5%. And you guys are hanging on to to make sure it doesn't climb above 4.

John Cassara:

Yeah. It's a real challenge.

Justin Burns:

Yeah. And I think with that, it's a good stopping point, bring us into our ad break.

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Justin Burns:

All right. So, we're back with John Cassara talking about money laundering and anti-money laundering tactics. John, before the break, we talked about the U.S. collaborating with other countries to fight money laundering. How important is that collaboration with other countries and their financial crime investigative units and their law enforcement?

John Cassara:

Yeah. When we talk about international money laundering, by definition, it's international. So if you're following the money and value trails overseas, you really need foreign assistance. And we've been increasingly, over the last 20-30 years, been getting it. And it runs the gamut from the exchange of financial intelligence, for example, vis-a-vis the Egmont Group Financial Intelligence Units, it could be joint investigations where our agents, for example, the FBI legal attache in one office or another, the DEA attache office in one country or another, the HSI attache in one country or another, literally rolls up their sleeves and cooperates with another country's counterparts. And they work these joint investigations. It could be the exchange of formal information through a letters rogatory or mutual legals assistance treaty. When somebody is actually going to... there's a court proceeding, somebody's going to stand trial, this evidence needs to be introduced. So you get it exchanged officially so this stuff can be introduced. There's just a wide variety of ways, let alone, for example, things that most people don't see. It could be, for example, the intelligence community can weigh in and can give us some good information that can be used for law enforcement purposes.

So, yes, international cooperation is vital in combating international money laundering. But we are certainly aware that criminals are attracted to the weak links. They just are. And we might have the best cooperation. Say, for example, I use the example earlier about between, say, the example of the United States and Italy. We do great work together. Or the United States and the UK, or the United States and this country and that country. But there are plenty of other countries out there that do not cooperate or cooperate very minimally. And that's where a lot of the criminals do their dirty deeds. For example, it could be a North Korea. It could be Russia or China, places in West Africa, other places around the world, where we get minimal cooperation at all. And it's very, very difficult to hold people accountable to follow the money trails and whatnot. So, it's still a challenge.

Justin Burns:

Yeah. And I know you mentioned the story of working with Italian authorities to bring down or fight money laundering through organized crime and the mob. Do you have any other stories where you've successfully worked with another country to solve a case?

John Cassara:

Oh, I've got lots of stories. I think when I was active in the field... Again, this was primarily in the '90s. For example, when I was based in Rome, we covered 53 countries out of our attache office out of the embassy in Rome. And I was on the road a lot, primarily to countries in the Middle East, Sub-Sahara Africa, and some other places in South Asia and Europe. And at that time... For example, let's talk about the Middle East. This is before 9/11. And I was out there as one of the very first, in fact, I probably was the first in most of these countries, to preach the anti-money laundering gospel and to try to tell our friends, whether it be Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, whatever, of the importance of anti-money laundering.

They weren't necessarily all that receptive at the time. Once again, they didn't even have anti-money laundering laws, certainly no financial intelligence or anything like that. But they, in their way, would cooperate with me when I'd go into a country officially and I would say, "Hey, my name is John Cassara and I'm with the Department of Treasury, with U.S. Customs, and I need information about this particular individual, if you would, that is laundering money back in my country. What's happening here? What's the background?" whatnot. And invariably, in one level, they would say no because they didn't have the procedures to give me that information. Once again, there was no official way to pass that information to me because they didn't recognize money laundering at the time. But unofficially, unofficially, I was getting quite a bit of assistance. Unofficially, I was able to develop some good sources out there. And human-source information, I think, is, by far and away, the most efficient, the most important ways to make cases.

And I could give you some more examples of specific cases. For example, one of the biggest cases I ever made was in the Middle East. And it had nothing to do with narcotics. It had nothing to do with weapons or high technology. I've worked all those cases. It was actually a very pedestrian case. It was, in fact, a boring case. It was textile fraud. It was basically garments, for example, shirts, manufacturing in China and India. And they had quotas in the United States on how many could be imported from China and India. So what the bad guys were doing is, I'm simplifying things, they would take the Made in India label out, Made in China label out, and putting in Made in Kuwait, Made in Oman, Made in the UAE, Made in Tanzania, Made in Jordan, et cetera, et cetera, and then ship these things into the United States as a product of those countries.

Incredible amounts of money involved. And it was definitely an international conspiracy. There was a freight forwarder in Dubai. And basically, he was coordinating all of this. And he was getting these garment manufacturers to send in to him invoices that then he would manipulate and he would, in effect, counterfeit other types of things. They would send these garments in. They would be in a 40-foot shipping container. They would go in port. Sometimes they'd just go to a free trade zone. Some, they would actually go into the manufacturing facility of these countries. And literally, they would put in those new labels and stuff, and they would have all these supporting documentation made available for those that were trying to detect that type of customs fraud, which is a huge predicate offense for money laundering. It was well over $100 million. Anyway, developed a lot of sources, got cooperation from the governments involved, and in effect, broke up that network. Again, not a sexy case, but these are the kinds of things that are important to keep things honest.

Justin Burns:

Yeah. I mean, the way you're talking about it, my first thought with, I mean, of course, today's political and economic climate, I'm thinking, "Oh, that's a good way to dodge tariffs."

John Cassara:

No kidding.

Justin Burns:

That's immediately in my mind when I was like, "Oh, they might be doing that now."

John Cassara:

Well, they are, for example, China. And again, I'm out of it now. I don't see the numbers, but I was listening to some commentators, and they said that was a way... Again, NAFTA, they were doing some of that, but also, for example, if, say, China's manufacturing all this stuff, all these consumer products, I don't want to pick a particular country, but, say, for example, it was Vietnam or it was some other country in Southeast Asia, they would send this stuff into the United States as a product of Vietnam, where it was really a product of China.

Justin Burns:

Yeah. I mean, talking about China, I think, is a good segue into the next topic that we want to talk about. You have a book that was published in 2023 called China - Specified Unlawful Activities: CCP Inc., Transnational Crime and Money Laundering. In that book, you talk about how China has become this overwhelming presence when it comes to money laundering. Can you tell us more about that?

John Cassara:

Sure, I'd be happy to. I started getting concerned about China and money laundering, oh, long time, 15 years ago. I was doing a lot of traveling, a lot of training, a lot of mentoring my overseas colleagues, primarily in the Third World, Africa and these types of places. And I would see the growing Chinese presence. A large part of it was because of the Belt and Road Initiative and their exploitative presence in the developing world. And I was becoming very concerned. And I realized that the host governments didn't quite get what was happening to them, and particularly the negative influences that the Chinese presence was bringing to that country, everything from corruption to exploitation of natural resources, and then the ways that they would repatriate the proceeds of crime back to China in ways that the host government didn't see, underneath the anti-money laundering counter measures that were in place. Used a lot of fraud.

Anyway, those personal observations and a lot of reading and studying led me to believe, "Well, we're not talking about China." The West was just... I mean, again, I'm going back to, say, 10 years. And I didn't understand why. I mean, over the years, we've looked at Italian-American organized crime. We've looked at Russian organized crime. We've looked at Colombian organized crime, the Mexican cartels, Jamaican gangs, Salvadorian gangs. But somehow or another, we were prohibited to talk about China and Chinese crime. So, anyway, I started doing research for this book, trying to go into it with an open mind because I didn't know whether it was me or whatever. And I didn't want to write an academic book. I wanted to write something that was common sense from a law enforcement perspective that the average person would understand.

So, I looked at the 12 largest categories of transnational crime, SUAs for money laundering, specified unlawful activities. Narcotics smuggling and human trafficking, counterfeit goods, intellectual property rights violations, weapons proliferation, fishing, environmental crimes, wildlife crimes, all these different things. And in every single specified unlawful activity, with the possible exception of one, China led the world or leads the world. The numbers are staggering. In every single category of transnational crime, China or Chinese actors lead the world. And you can say, well, with the CCP, that's why I call it CCP Inc., with CCP Inc. behind all this, in certain categories, there's absolutely no doubt. We know that for a fact.

For example, IPR theft, intellectual property rights theft. Absolutely, the Chinese government's behind it. Counterfeiting, absolutely behind it. You can say illicit tobacco. Is the government behind it? I mean, I don't have the time to go into that. You can argue yes, you can argue no. But illicit tobacco is a huge deal in China. China produces more illicit tobacco than any other country in the world. But the Chinese, it's like counterfeit. They're reluctant to crack down on it because it's such a overwhelming percentage of their GDP, this criminal activity.

But in addition to looking at these 12 specified unlawful activities and trying to document the Chinese involvement in all this, I also looked at what I called Chinese-centric money laundering methodologies and enablers. So it could be things like Chinese underground banking systems, Feiqian or flying money, kind of their equivalent of hawala. A lot of people are familiar with hawala. It could be Chinese capital flight. China leads the world in capital flight. A lot of that comes into the United States, buys up real estate. There's nothing wrong with any of that, except when that capital is mixed or co-mingled with illicit monies and the whole thing is tainted and we're not asking the right questions.

I've been concerned about Chinese financial institutions and their kind of lackadaisical enforcement of anti-money laundering laws, rules, and regulations. Concerned about, again, once again, the Belt and Road Initiative, what they're doing, creation of free trade zones and areas overseas that are, I don't want to use the word facilitate, but I think kind of go hand in glove with some of these issues of concern we're talking about, including trade-based money laundering and value transfer. And many, many other issues, such as corruption. China exports corruption overseas wherever it goes. They have a lot of internal corruption. They export it overseas as well. They bring their intelligence agencies with them. It needs a book to explain all this, and I tried to do it. But at the end of the day, what struck me... Again, I'm not a sinologist. I am not a China hand. I was looking at this to try to learn myself. And honestly, I was just absolutely stunned, overwhelmed by the magnitude of this issue. It was just absolutely shocking for me.

Justin Burns:

Yeah. I mean, one of the things you just said that stuck out to me was, I expected you to point out IP infringement, counterfeit goods, human trafficking, Chinese nationals buying up real estate in other countries. I didn't expect counterfeit tobacco or the tobacco issue. That's surprising to me. What is it about the tobacco that's so lucrative for them?

John Cassara:

To answer that story, I'm going to go back to my days in Italy. And you're going to say, "What the heck?" But when I was in Italy... Again, from the early 1990s, I was working with the Italian Guardia di Finanza or fiscal police. And the Italian, the Guardia di Finanza were telling me at the time how they, in Italy, were getting deluged by fake tobacco, smuggling tobacco, nonpayment of taxes on tobacco. And it was such a huge deal for the Italians.

We were debating this. And I kind of had this, I don't want to use the word snobby attitude, but it's like, "Oh, tobacco. I'm used to hard drugs," not used to it, but "criminal investigations dealing with hard drugs and all this kind of stuff." And the Italians started to educate me. And they said, "You know what? These organized crime groups that we are so concerned with here in Italy, most of them got their start in the trade in illicit tobacco." And they would form the connections, the smuggling routes, and then they would graduate from that, say, for example, to drugs or weapons or people or whatever. It's the same thing. These networks overlap.

So, I think, in a sense, that's almost what happens with China. If you go to almost anywhere in the world, you will see counterfeit Chinese cigarettes. Or more commonly, you will see local cigarettes that are made, manufactured with Chinese assistance. Everything from the packaging, the holograms, the tax stamps, everything, all available vis-a-vis Chinese suppliers. It's extremely lucrative for those involved. And once I said, getting back to the Italian stuff, it's kind of the precursor, but I use that word advisedly, kind of the precursor to other forms of, say, more venal types of criminality.

Justin Burns:

Yeah. It's just, like you said, you would expect the trafficking of harder drugs and things like that. But tobacco? Really? Wow.

John Cassara:

Yeah. Yeah. Yeah.

Justin Burns:

Yeah. And so, you've been talking about CCP, Chinese Communist Party, these government-sponsored... I mean, that's sort of the gist of the book, is that there's government-sponsored money laundering going on. How does that work with it being government-sponsored? What's your analysis of that, I guess?

John Cassara:

I think as far as government-sponsored goes, I think it goes back to what I said earlier. If you look at it... I analyzed this vis-a-vis those 12 specified unlawful activities. All right? So, there are certain ones we know for a fact that the CCP Inc. is behind, have encouraged. There are others. Maybe the link is tenuous at best. But one thing I think it's important to remember is that CCP, the Chinese Communist Party, the government of China, is a command state. It's an authoritarian state.

So, I go back to, for example, the fentanyl crisis. If the Chinese government wanted to stop the trafficking of fentanyl and fentanyl precursors and all the stuff that goes into the makings of this stuff, they could do it. They know how to do it. They could just shut off the supply. There are websites, hundreds and hundreds of websites in China that advertise the sale of all this stuff. The Chinese are an authoritarian government that are experts at monitoring every kind of electronic social media, the internet in general. All this stuff is censored. If they wanted to, they could flip a switch and take these sites down. They choose not to. So it's that kind of involvement, if you will, that really bothers me.

Justin Burns:

Yeah. Earlier, we talked about the collaboration with other countries and the successful methods to combat money laundering. Why don't those same tactics work when combating Chinese money laundering?

John Cassara:

I think for a couple reasons. Number one, remember I told you that the top three FATF money laundering methodologies, financial institutions, cash, and trade, I think China is a world leader in two of those three categories. For example, trade. China and trade is synonymous. China is the largest trading nation in the world, pretty much. And even if most of that is legitimate, there's a healthy portion that is not. And trade-based value transfer goes hand in glove with Chinese underground financial systems and other types of Chinese-centric money laundering methodologies that I describe in my book. And another thing is cash. And Chinese around the world are becoming the money launderers of choice for cash. We used to talk about following the money trail. Now we're talking more about following the money and value trails. But with China, the money doesn't necessarily even leave the country. For example, in this country, the drug money doesn't leave the country. It stays here.

And then, I'm simplifying things, a like amount of money is then paid to the cartels or paid to the owners of the cash, say, in Mexico or Colombia. It's a riff, in effect, on the old Black Market Peso Exchange. Money transfer without money movement, to coin the definition of what hawala is. So, the money actually stays put. The Chinese have pioneered all this, and they're completely undercutting their competitors. So, the cartels are turning more and more and more to the Chinese. And this is just not just a North American issue. This occurs all around the world. The Chinese are experts in it comes to this area.

So, what does this mean? It means that our... Remember we talked about our traditional countermeasures. Our traditional countermeasures, primarily financial intelligence, it doesn't work here because this goes around those countermeasures. Cash goes around, the way the Chinese do it, around financial transparency reporting requirements. Trade-based money laundering and value transfers, for the most part, go around our traditional countermeasures. And then we're also dependent on, we talked about it, cooperation. Despite what they say in various administrations and political conversation, our cooperation with Chinese law enforcement is bad. It's really bad. They just are not cooperating. And I don't think that's unique to the United States and China. I think that's pretty similar with countries around the world. They want information from us. They're reluctant to give us information that we want. It's extremely frustrating.

China doesn't have a financial intelligence unit, for another, that belongs to the Egmont Group. There is no exchange of financial intelligence unit. They have not cooperated to speak of with issues that are important to us. For example, like the fentanyl trade and all this type of stuff. Things are changing a little bit now with the change of administrations. But going back four, five, six years with the fentanyl issue, it's been disastrous. So, anyway, China is a unique challenge.

And the other unique challenge is that there are language issues from an enforcement standpoint. There are cultural issues. We don't have a lot of Mandarin, Cantonese FBI agents. We just don't. We don't understand their, thought process isn't the right word, their ways of doing business, these culturally unique ways to launder money, to transfer value. And I'm not saying it's good, bad or whatever. It's just that it's not in our normal experience. And we don't have that expertise yet. China knows that. And they are very, very good at going around our known countermeasures. So, the Chinese target, from a money laundering perspective, from an enforcement perspective, from an anti-money laundering perspective, is extremely challenging.

Justin Burns:

Yeah. Without that collaboration and the open sharing of information, obviously that makes it nearly impossible. Especially if it is state-sponsored, well, there's no way we're getting that information.

Well, John, I think that's all the time we have today. I appreciate you taking the time to educate us on the world of money laundering, anti-money laundering, and the threats we're facing today. So, thank you for joining me.

John Cassara:

Thank you. It was a pleasure to be here. And thank you all, everybody, for listening in. Thank you for giving us a gift of your time. Really appreciate it.

Justin Burns:

John, if any of those listeners want to get in touch with you, talk to you more about your book or just talk more about money laundering, how do they do that?

John Cassara:

I've got a website up, johncassara.com, C-A-S-S-A-R-A, or just send me an email at john@johncassara.com. I'd be delighted to hear from you.

Justin Burns:

Okay. We'll post those links in the show notes. Again, thank you. And that's our show.

Leah Wietholter:

Thank you for listening to The Data Sleuth Podcast. If you enjoyed this episode, please leave us a review wherever you listen. The Data Sleuth Podcast is a production of Workman Forensics. To learn more about our investigation, services, and resources, please visit workmanforensics.com.