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

https://www.npr.org/sections/money/2012/11/20/165590860/episode-418-how-the-government-set-up-a-fake-bank-to-launder-drug-money

by mdeck_ • 5 years ago

210 91 5 years ago

npr.org

fnord77• 5 years ago

text version

https://www.publicradioeast.org/post/episode-418-how-governm...

WarOnPrivacy2• 5 years ago

You are the man.

ptsneves2• 5 years 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• 5 years 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• 5 years 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• 5 years 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

vmception3• 5 years 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.

singlow2• 5 years 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.

vmception3• 5 years 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/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.

5424582• 5 years 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_• 5 years 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• 5 years 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-l...

suifbwish2• 5 years 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• 5 years 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• 5 years ago

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

saul_goodman• 5 years 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.

lainga• 5 years ago

So effectively they helped the biggest players by making it harder for the small to mid-tier [insert entity here] do conduct business

Well, at least the government is consistent. When all you have is a hammer...

suifbwish2• 5 years 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• 5 years ago

Feature or bug? Cui bono?

https://en.wikipedia.org/wiki/Cui_bono

joe_the_user• 5 years 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• 5 years 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.

mschuster91• 5 years ago

to raise public health by eliminating the personal health and social problems that drug addition creates.

If that had ever been the aim of any drug policy, drugs - including hard drugs - would be legally accessible at licensed stores, mental health care and social services would be accessible for everyone, and fact-based drug education in school be the norm, not the exception.

The reality is that drug policy has direct roots in racism - marijuana and crack prosecution intended to specifically target hippies and people of color.

Consultant324522• 5 years ago

I think it’s bold to assume the government even wants to nab the big guys.

One example is fentanyl is killing us by the thousands every year. We know who the guy is who owns the factor that’s providing most of the fentanyl and precursors to the cartels. He lives in China and runs an also legit chemical factory. He commits the crime right in the main factory in the open. We politely asked China to arrest him, but they said no. No real political pressure to do anything, no assassinations, nothing. Thousands dead every year.

WarOnPrivacy2• 5 years ago

In response to the Fentanyl/heroin issue, State govs clamp down on legit opioid Rx, leaving Dr's too wary to Rx any effective pain meds at all.

People in chronic pain now get to live their lives without any relief at all. They get ignored my news orgs who are obsessed with amplifying an opioid hysteria narrative.

Go Gov.

rkk3• 5 years ago

No real political pressure to do anything, no assassinations, nothing. Thousands dead every year.

Assassinating a Chinese citizen in China would be a huge overreach and a major violation of sovereignty. Not to mention it wouldn't stop the drug trade.

Instead of looking at the Liberal Hegemony playbook for a solution, they should de-criminalize and regulate. During prohibition many people were dying from additives/impurities in bootleg alcohol, now we don't have that problem.

sneak• 5 years ago

On average, approximately 7x more people die in the US each day from use of tobacco use than do from use of opiates.

sumedh• 5 years ago

The US govt didnt give any meaningful punishment to the Sackler family who live in the US for OxyContin, why should they go after someone in China?

cronix• 5 years ago

Right, like in Oregon they recently decriminalized "personal amounts" of all drugs. Crack, heroin, meth, fentanyl, etc. Whatever you want...it's now just a misdemeanor offense like a parking ticket as long as you're under some limit. So personal amounts are "ok," but how does one obtain a "personal" amount from someone else unless they have more than a personal amount? In other words, on one hand it's illegal to deal the drugs, but after you've obtained them illegally it's ok. That logic doesn't square.

Just because small amounts are decriminalized, it doesn't apply when a person has more than is specified under the law.
"Possession of larger amounts of drugs, manufacturing and distribution are still crimes," Fox said.

https://www.statesmanjournal.com/story/news/2021/01/31/what-...

verall• 5 years ago

At the very least, it makes it hard to prosecute low level drug offenders, which is where the most abuse (originating from the government) is in the system.

nicbou2• 5 years ago

That makes sense to me. Chasing consumers is a waste of time and money. The arrest itself might cause more societal damage than the drugs if it ruins people's lives or is used to target minorities.

kayodelycaon• 5 years ago

The point of decriminalizing personal amounts of drugs is to change police behavior because they are doing more harm than good in this area.

You want to arrest the people who are dealing drugs or causing other crimes, not permanently ruining the lives of people who are doing no harm to society.

hellbannedguy• 5 years ago

In a perfect world, I would like to see all drugs decriminalized. I would like to see drugs given to people by the government free of charge. Of course they would have to sit through a common sense education movies, titled "Ok you want to ruin your life with hard drugs--fine, but sit through this educational film."

Until we get there; I am fine with small amounts of illegial drugs being an infraction.

Spooky23• 5 years ago

The enforcement objectives are like a horseshoe.

The police have an incentive to get collars for petty possession, mostly to bank warrants for future trouble, and to go after big or brazen networks.

The people in the middle are mostly free of interference. I used to work in a building that was about a block away from the county court, 4 blocks from a police precinct hq. Yet I watched three guys sell drugs across the street for the two years that I worked there.

It has its ups and downs. In my state, with bail reform, woke stuff, and marijuana possession decriminalization, there has been a wave of shootings and murders as the gangs reorg and the cops are caught with their pants down.

strathmeyer• 5 years ago

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

mdeck_2• 5 years 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.

reedjosh4• 5 years 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

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-be...

et2o• 5 years 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.

croes2• 5 years 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.

haltingproblem• 5 years ago

NPR is using a clickbait headline. I fell for it just like you did. This conveys the opposite of what it actually is - "Govt Agents setup a fake bank in a sting to attract drug traffickers to launder money netting $90mm in cash and over 100 arrests".

reedjosh4• 5 years ago

No, I'm of the same opinion of croes and saul_goodman.

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.

TacticalCoder• 5 years 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.

Another one, maybe the biggest known one, is when the US sent 12 bn to 14 bn in the form of 100 bills (yup, in bills) using a military plane to Iraq and these bills mostly all mysteriously vanished.

12 to 14... billions.

At least 1.4 bn was found to have been stolen and stored in a bunker in... Lebanon (I don't remember if it was just located or seized). Overall an estimated 9 bn are unaccounted for I think.

(trying to insert the wikipedia and NY Times link to the story/stories but I get a "we have trouble processing your request, sorry" from HN)

There were wire transfer to the tune of billions too. But the 100 bills shrink-wrapped and flew in a military plane: you cannot make that up.

Shady stuff if any...

EDIT: like Iran-Contra, I'm pretty sure in the future movies are going to be made about these $100 bills.

elefanten2• 5 years ago

This comment begs for some sources and citations.

Edit: I have a recollection of this incident but certainly not as mysteriously inexplicable and shady as you make it out. There was some context I've forgotten. Your story rings false.

tigerBL00D• 5 years ago

To think that this money didn't end up financing insurgency is to be naive.

a1369209993• 5 years ago

(trying to insert the wikipedia and NY Times link to the story/stories but I get a "we have trouble processing your request, sorry" from HN)

Try base64 encoding them and pasting the results?

quickthrowman2• 5 years ago

However, evidence before the committee suggests that senior American officials were unconcerned about the situation because the billions were not US taxpayers' money. Paul Bremer, the head of the CPA, reminded the committee that "the subject of today's hearing is the CPA's use and accounting for funds belonging to the Iraqi people held in the so-called Development Fund for Iraq. These are not appropriated American funds. They are Iraqi funds. I believe the CPA discharged its responsibilities to manage these Iraqi funds on behalf of the Iraqi people."

You left out something pretty damn important, it was Iraqi money to begin with. Maybe they requested large pallets of cash, it shouldn’t matter since it’s their (Iraq’s) money!

I don’t doubt the government has had a hand in shady stuff (US history from 1946-now in particular proves this), but this isn’t what it seems. We didn’t just break off $12B of US treasury money and send it off to Iraq with no oversight.

EDIT: like Iran-Contra, I'm pretty sure in the future movies are going to be made about these $100 bills.

I highly doubt it, unless it is what Iraq did with its own money after they received it from the Fed, what would the movie be about even? Iraq requests it’s money and receives it is a pretty boring plot

guerrilla2• 5 years ago

Everyone is surprised to find the government does shady stuff

I really don't understand how this is still possible with everyone having access to the Internet. They're pretty consistent [1]. It must be a bubble thing.

1. https://github.com/dessalines/essays/blob/master/us_atrociti...

reedjosh4• 5 years ago

Wow, thanks for that link.

ljf2• 5 years ago

Man that has taken my breath away. I'm pretty aware of how terrible the west can be (and how we can lie about it) but the sheer volume there is immense.

pxlt• 5 years 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-me...

mdeck_2• 5 years ago

That was the impetus for my sharing this story :)

trhway• 5 years 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• 5 years ago

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

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

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