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JOURNALS of Monte Friesner ~ Monday January 10, 2011

Financial Crime Consultant for WANTED SA >


With all the attention given by British media to the sentencing of offenders convicted in the cocaine trafficking case, known as Operation Eaglewood, let us not miss the central money laundering issue: it's all about that dangerous €500 note and bulk cash smuggling. I should know; longtime readers will recall that I testified, on 15 May, 2000, before the US Congress Subcommittee on Financial Instruments, opining that the upcoming issuance of the €500 banknote would be an extraordinary laundering tool, causing an open season for money launderers. Only the Guardian saw fit to publish my warning, and the note was adopted by the EU. Notwithstanding the decision of the United Kingdom to decline to join the Eurozone, that note, as we see in this case, has facilitated the operations of UK laundrymen.   

Let us briefly analyze the money laundering phase of this criminal operation:  


  • Criminal cash, both drugs profits and the proceeds of other illegal criminal activities, in the form of Sterling banknotes, would be delivered to a legitimate company, a business that rented out and repaired taxis.
  • The front company, using its own resources, would convert the Sterling into €500 notes. The operators utilized what looked to be a legitimate High Street bureau de change. This FX firm reportedly received large amounts of foreign currency from wholesalers.
  • Instead of selling the Euros in legitimate retail commerce, the operators transferred it to the taxi front company, where it was exchanged for the "dirty" Sterling.  '
  • Additionally, the laundrymen also reportedly had access to another legitimate source for Euros. They were thus able to service their needs, and those of their criminal clientele, for conversion into a form of value that was said to be 45 times smaller than Pond bank notes. This easily-transportable cash was then reportedly bulk cash smuggled out of the UK, right past Customs, and on into the Eurozone, and also used to purchase additional drugs. 


What are the FX AML compliance lessons to be learnt from this case? I would place these issues foremost on any list:


  • If you are a financial entity shipping currency, in any form, to FX firms, are you closely watching for any unexplained increase in volume, unexplained change in business operations, or actions inconsistent with the FX Company’s history or structure, or known client base? 
  • Have you thoroughly vetted the owners, managers and principal officers of your FX company bank clients? "Colorful" high risk individuals require Enhanced Due Diligence enquiries. Some of the players here appear to be in that category. Did you World-Check all these individuals?
  • Does your FX bank client have an MLRO, and is he clearly qualified to hold that position? Have you seen his bio?
  • Is there a regular external AML audit of the FX firm's compliance policies and procedures manual, and have you reviewed it? Were you provided with a copy?
  • Is the FX firm repeatedly requesting high-value bank notes, in a specific foreign currency? Have they supplied you with a valid reason for this request?
  • Has your relationship manager actually visited the FX firm, without prior notice, to observe the operation, and perhaps even to conduct a small purchase? What did his report on that visit conclude?

WANTED SA Thanks Mr. Kenneth Rijock of World Check and all the Parties, Law Enforcement and Securities forces who have contributed to this article and their sincere opinions and statements.

WANTED SA states that the facts and opinions stated in this article are those of the author and not those of WANTED SA. We do not warrant the accuracy of any of the facts and opinions stated in this article nor do we endorse them or accept any form of responsibility for the articles.