Cover image for The merger : the conglomeration of international organized crime
The merger : the conglomeration of international organized crime
Robinson, Jeffrey.
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Publication Information:
Woodstock, NY : Overlook Press, 2000.
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383 pages ; 24 cm
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HV6252 .R6 2000 Adult Non-Fiction Non-Fiction Area

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The bestselling author of "The Laundrymen" offers an insider's view of a global crime and pinpoints the factors that have led to the existence of global crime cartels.

Author Notes

Jeffrey Robinson, described by Britain's Sunday Telegraph as, "one of the world's leading experts on international financial crime," is the author of many highly acclaimed books, including The Laundrymen , The Merger and The Sink .

Robinson has written scores of newspaper and magazine articles on financial crime and given many keynote speeches and media interviews on money laundering, fraud and organized crime. He has appeared on NBC (including The Today Show and Nightly News), MSNBC, CNN (including Larry King), Fox News, BBC, ITN, Channel 4 News, the Canadian Broadcasting Corporation and Sky News, where he is has been a contributor on American issues, fraud, and international crime for the past 20 years. He has been published in dozens of magazines and newspapers, including Barron's (which earned him an Overseas Press Club Award), Playboy (two cover stories on crime), the International Herald Tribune, plus the Times, the Sunday Times, the Telegraph, the Sunday Telegraph, the Daily Mail and the Mail on Sunday in London, where he lived for 25 years. In addition to books and articles, he has written television dramas and documentaries.

He lives in New York.

Reviews 3

Booklist Review

Robert Friedman's recently released Red Mafiya: How the Russian Mob Has Invaded America [BKL Je 1 & 15 00] and Stephen Handelman's Comrade Criminal (1995) provide alarming evidence of the extent of criminal activity in the former Soviet Union and the growing influence of the Russian mafiya in the U.S. Robinson, however, cautions that almost every country has organized criminal activity and that crime has become a major global export. He previously documented worldwide money-laundering activities with The Laundrymen (1996), and he has written celebrity biographies of Brigitte Bardot and Prince Rainier and Grace Kelly. Now Robinson shows how the Japanese yakuza, the Sicilian mafioso, and Mexican, Nigerian, and Vietnamese gangs (among many others) now control drug trade, banking scams, computer crime, counterfeiting, and all sorts of other illegal activity. Although these crimes are disturbingly real, and Robinson does provide examples of cooperation among various of these groups, his dire warnings about a monolithic international crime structure are less convincing. --David Rouse

Publisher's Weekly Review

It's not only the free market that is being globalized, but illegal markets as well: transnational crime expert Robinson sounds the alarm in this well-researched and genuinely chilling treatise. Veteran author Robinson (The Laundrymen, etc.) pursues a provocative thesis: where the general public has perceived the influence of traditional crime syndicates as waning, disparate developmentsÄprimarily the end of the Cold War and banking's growing reliance on computersÄhave made it possible for discrete criminal entities to merge, much like legitimate corporations do. Robinson begins by recounting how "Lucky" Luciano used decentralized business techniques to create La Cosa Nostra in the 1930s; this, the author argues, allowed American organized crime to flourish through the early 1960s, with only sporadic law enforcement victories for years thereafter. Then Robinson plunges into a sordid history of global crime, identifying key players and the labyrinthine attempts by international law enforcement to play "catch-up." Chapters detail the nefarious activities of the Russian "Mafiya," Colombian and Mexican drug cartels, Asian Triads, Japanese Yakuza, Nigerian confidence rings, Hell's Angels, rogue factions of the St. Regis Mohawk tribe and the surviving, leaner and meaner Cosa Nostra (and its Italian relatives). He presents a wealth of evidence that these groups have found ways to accommodate one another in numerous activities worldwideÄin identity theft, credit card fraud, smuggling, bribery and counterfeiting, all of which are underwritten by enormous drug profits. More importantly, he explains, the cartels have been able to refine their money laundering, tax evasion and offshore banking crimes. All the while, Robinson provides an exciting and unsettling glimpse of our future as a wired and globalized paradise for thieves. (July) FYI: For more on the Triads, see review above of Martin Booth's The Dragon Syndicates; for more on the Russian Mafiya, see Robert I Friedman's Red Mafiya (Forecasts, May 8). (c) Copyright PWxyz, LLC. All rights reserved

Library Journal Review

An expert on international crime and author of the best-selling The LaundrymenDon the subject of money launderingDRobinson here turns his attention to global crime cartels, uncovering an intricate network of connections between such diverse organizations as the Chinese Triads, the Sicilian Mafiosi, the Eastern European "maffiyas," and crime groups from Colombia, Mexico, Nigeria, and Vietnam. Robinson's thesis, developed with a sure command of facts spiced with anecdotes, might be summed up in one sentence: "Crime is no longer a local issue." Digital communication, world markets, and the Internet, Robinson contends, have changed the face of crime forever. Indeed, he concludes, "The inability of modern society to deal with global crimeis destined to be a defining issue for the twenty-first century, much the way the Cold War was for the twentieth and colonialism was for the nineteenth." Jones makes a powerful case to show that legitimate businesses are not the only organizations globalizing. Recommended for all public libraries.DRobert C. Jones, Central Missouri State Univ., Warrensburg (c) Copyright 2010. Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.



Chapter One SPREADING THE VIRUS As legitimate business understood and adjusted to the complexities of this new global marketplace, so did international criminal organizations. --Arnaud de Borchgrave Center for Strategic International Studies                 The anus of the earth is cut into the jungle on the Paraguay side of the Paraná River--a home-away-from-home for the South American drug cartels, Chinese Triads, Japanese Yakuza, Italian gangsters, Russian gangsters, Nigerian gangsters and Hezballah terrorists--and is called Ciudad del Este.     A city of two-hundred-thousand hustlers, whores, hoodlums, revolutionaries, thugs, drug traffickers, drug addicts, murderers, racketeers, pirates, mobsters, extortionists, smugglers, hit men, pimps and wannabes, it was the creation of Paraguay's former dictator, Alfredo Stroessner. The same man who welcomed fugitive Nazis like Josef Mengele, he originally named it after himself and it remained Ciudad de Stroessner until he was deposed in 1989.     Its very remoteness is the major factor in its appeal. Despite a recent influx of tourists to the nearby Iguacu Falls, few people ever stumble into Ciudad. It's one of those places where, in order to get there, you have to want to get there. Which is why Ciudad has always been an ideal spot for secret meetings. High government officials mingled there with agents of Taiwanese and South Korean counterfeiters, filling their own coffers with kickbacks as the counterfeiters filled the town with phony goods. Military dictators gathered there to cement friendships while they ruled the Southern Cone of South America.     The world's organized criminals still break bread there, in harmony, with each other.     Hezbollah guerrillas based themselves in Ciudad while planning and carrying out the 1992 bombing of the Israeli embassy in Argentina which killed twenty-nine people, and the 1994 bombing of a Buenos Aires Jewish community center, which killed eighty-six people. In January 1999, the Uruguayans arrested Egyptian terrorist El Said Hassan Ali Mohamed Mukhlis when he crawled out of his hiding place--he'd been living in Ciudad like a Cold War mole for five years--on his way to plant a bomb in Britain. A suspect in the 1997 killings of 58 foreign tourists and four Egyptian nationals at Luxor, he is also believed to have knowledge of the bombings of the U.S. embassies in Kenya and Tanzania.     More than one hundred landing strips are scattered around the Tri-Border, as the region is known, none of them regulated by any authority, all of them in constant use by small planes. Convoys of trucks and vans and private cars nightly leave Rio de Janeiro--and other cities in Brazil and Argentina--arriving in Ciudad del Este early the next morning, creating a massive, noisy and fume-riddled daily traffic jam. The two-lane bridge from the Brazilian border town of Foz de Iguazu brings in thirty thousand people a day. Beneath the bridge, young boys shift boxes and crates from the Paraguay side to the Brazil side, often in plain sight of the police. They come to Ciudad because it's a market town where they can buy absolutely anything, caveat emptor being the only law of the land, as just about everything on sale in the five-thousand shops that fill the twenty-block center of this cesspool is fake.     Except the drugs. Three tons of cocaine move through Ciudad every month on its way to the U.S., Canada, Europe and South Africa. Colombian heroin comes through as well. Marijuana, grown in Paraguay, gets smuggled from there into Brazil and Argentina, while chemicals needed to refine cocaine are smuggled from Argentina into Ciudad--although "smuggled" might not be the right word, because fifteen hundred to two thousand TIR.-sized trucks drive across the bridge in each direction every month, and rarely are any of them ever stopped. Much of the money that the Colombians earn there is washed through an illegal betting racket in Rio de Janeiro, set up as a money-laundering sink-for-hire, under the ultimate direction of the American Cosa Nostra.     The weapons that are bought, sold and negotiated there are also real. It was in Ciudad that the Italian P-2 Lodge facilitated the sale of Exocet missiles and spare parts to the Argentines for use against the British during the Falklands War.     The lives that are trafficked there are real, as well. There is an abundance of cheap sex, cheap slaves, wholesale body parts for medical transplants and murder for hire. Killing someone in Ciudad costs as little as $1,000 for a nonwhite, only slightly higher for a Caucasian.     You can even buy a new identity. A Chinese Triad gang has cornered the market on counterfeit Argentine identity papers. Most are sold in batch lots to other organized crime groups with interests in alien smuggling. But anybody looking for a set of papers can find one, the benefit being that Argentina is currently the only Latin American nation whose citizens do not need to apply in advance for visas to enter the United States.     Today, Ciudad is not only the continent's most important black market, it is the city with the third largest volume of cash transactions, behind Hong Kong and Miami.     Counterfeit designer goods, counterfeit currency, counterfeit passports, pirated CDs, pirated videos, pirated software, stolen cars, drugs, money laundering and arms dealing have turned Ciudad into a $12-14 billion annual industry. By contrast, Paraguay's official GDP is only about $9 billion. It took man thousands of years to move faster than the speed of a galloping horse. It then took less than a century to move faster than the speed of a train. From there it was only a few decades to move faster than the speed of sound.     Today, satellites, faxes, cell phones, the Internet and e-mail enable us to send our voices, our images, our ideas and our money at the speed of light. The planet has been reduced to the size of a computer screen and the artificial borders which we once called nations have, for all intents and purposes, begun to evaporate. Long before the new century is over, it seems clear, those borders will serve little or no purpose except for the sake of nostalgia and, perhaps, the retelling of history.     They have already become nonentities for transnational organized crime.     During the final years of the twentieth century--an era when we have witnessed the disintegration of Communism and the Soviet Union, the end of the Cold War and our abject failure to raise a democratic, free-market Russia out of the ashes--we have lived through the greatest quantum leap in technology since man invented the wheel. Radical changes in transportation and communication have encumbered governments' ability to exercise controls over the movement of goods, services, people and ideas. During the final years of the twentieth century we have witnessed both the concluding stages in the globalization of markets and the initial stages in the globalization of crime.     We have also coined a new type of money--megabyte bucks--electronic blips on computer screens that are not tethered to central banks or geography. Money has always been a political force. But never before has it been so easily energized by criminal activity which burrows inside the confusion created by the global flood of goods, services, people, ideas and this new money itself.     For much of the half-century that followed World War II, Italian organized crime was, both in practice and in fact, the state. The Mafia's political power derived directly from the enormous mass of money it was able to launder, to reinvest in criminal activity, to hand out as bribes and to accumulate as profits. The Mafia used its money effectively to replace the government with a body politic designed in its own image. It stands as a model of corporate efficiency.     It is a model that has been replicated throughout the world.     Latin America's second largest export is cocaine. It accounts for 8 percent of Colombia's GDP, and something around half that in Peru and Bolivia. It is estimated that the industry employs five hundred thousand people, covering every aspect of the business from farming to production, distribution and financial services. For all intents and purposes, drug barons are the majority shareholders in Latin America Inc. Their economic power, and hence their political authority, is nothing short of staggering. Take, for example, Colón, Panama, the world's largest warehouse. Up to $2 billion worth of goods are stored there at any given time, some 60 percent of which come from Asia. The Free Zone turns over $12 billion annually. Yet if the wealth of transnational criminal enterprises was taken out of the picture, if the drugs, laundered money, counterfeit goods, illegal arms and other contraband that the Latin American drug cartels move through Cólon--especially the goods they trade with Italian, Russian, Chinese, Japanese, Nigerian and other transnational criminal organizations--were simply erased, the government of Panama and much of the rest of neighboring Latin America would promptly go bankrupt.     The picture is just as grim in what used to be the Soviet Union. Today, organized criminal groups are the only effective government in Russia. They control 40 percent of all private businesses, 60 percent of the state owned businesses and 80 to 90 percent of the banks. They exert executive control over key economic sectors, such as consumer products--including two-thirds of all alcohol sales, estimated to be worth $1.5 billion a year--petroleum distribution and pharmaceuticals. By its own estimate, the Russian Interior Ministry believes the annual black market revenues of these groups have now topped $18 billion, about the same that Russia was expected to reimburse its creditors in 1999.     Exactly like the multinational corporations they imitate--and have become--transnational criminal organizations realize what many politicians have never come to understand, that this is about one and only one thing: wealth creation.     To achieve that goal, the underworld needs the upperworld.     Consider the analogy of a pot of coffee. A pot needs to be large enough to hold enough coffee and, at the same time, there must be enough coffee to fill a pot. Without the professionals--lawyers, bankers, accountants and company formation agents--to prepare the stage for global criminals, they could never function on a global basis as successfully as they do. And yet, if there was not so much money to be made in global crime, there would not be professionals to accommodate them.     In that sense, a part of the upperworld needs the underworld, too. A marriage of convenience, it is much the same with the merger of underworld groups. Both phenomena are based on wealth creation. However, the globalization of crime differs in one important area. Where the upperworld professionals who service these underworld groups operate within diminishing boundaries--because those boundaries protect their professional monopoly on services--transnational criminal organizations operate beyond boundaries because that's where jurisdiction no longer applies.     Law enforcement, as we know it today, is a local remedy to local problems. It is a statement of sovereignty, as represented by government, and therefore by definition confined by borders. It is the state that says, you may not comport yourself in that manner while inside this imaginary line. It is, also, the state that pays the police to enforce the law and punish those who do not comply. Boundaries and budgets rule. As a result, the state winds up with borders that must be respected and neither the authority nor the money to go beyond them. Criminals create wealth by purposely functioning beyond sovereign reach.     In San Diego, the border is inundated by Chinese nationals, smuggled into Mexico by Asian organized crime groups, and from there smuggled into the U.S. by Mexican organized crime groups, using the same routes and methods that the Mexicans perfected to smuggle cocaine into the U.S. for the Colombian cartels.     To the south, in Veracruz, on Mexico's Gulf Coast, a group of French organized criminals, with direct links to traditional Italian and Corsican gangs, ran an international stolen car ring. They contracted with Mexican gangsters to car-jack luxury models, showing a particular fondness for Chrysler Voyager deluxe vans. They also contracted with a Cambodian faction in Florida to steal cars off the streets there. In both cases, cars were shipped to France with newly registered Mexican documents. Bags of cement, lime and plaster were sent with the cars, which suggests that the idea was to couple car theft with the smuggling of heroin inside those bags.     In Ensenada, Baja California, Mexican traffickers and their Southeast Asian heroin-dealing partners--Thai and Laotian--worked out a drugs-by-mail scheme. The gang in Mexico shipped bath products to Thailand, where the envelopes were intercepted by Thai gang members working inside the post office. They emptied out the bath products, refilled the envelopes with heroin and stamped them "Undeliverable--Return to Sender." The envelopes entered Mexico without customs inspection because it appeared that they'd originated in Mexico. Mexican gang members inside the Mexican postal service then delivered the drugs to their cohorts for smuggling into the United States.     Further afield, in Central Asia's Turkmenistan, two thousand tons of kerosene--an essential ingredient in the manufacture of cocaine--was sold by an organized crime group there to a company in Argentina, which paid for the shipment entirely in cash. That company was a front for the Colombians. Even though kerosene is a non-controlled substance, they were willing to go that far away to hide the transaction's trail. The same company also bought large quantities of kerosene from Polish crime groups, paying for it with cocaine delivered to the groups' agents in Chicago.     In Cyprus, on the Greek side of the Green Line that divides the Mediterranean island into Greek and Turkish halves, more than $1 billion arrives every month from Russia, where it is washed through the nearly eight thousand Russian companies and banks that have been formed there since 1993. Another twenty-two to twenty-five thousand shell companies there belong, mostly, to Eastern Europeans. Once clean, some of that money goes to Britain. On the north side of the Green Line, Turkish heroin is bartered and sold like any commodity, and monies from that market have also been traced to Great Britain. In today's global economy, the City of London is merely one blip on a computer screen away from Wall Street.     In Washington, D.C., the U.S. State Department's Bureau for International Narcotics and Law Enforcement Affairs, which publishes an annual list as part of its International Narcotics Control Strategy Report, points a finger at the most reprehensible drug-money-laundering nations in the world. Among those given "high priority" status by the Americans are the obvious offenders: Mexico, Aruba, the Cayman Islands, Colombia, Cyprus, Nigeria, Panama, Russia, Singapore, Switzerland, Thailand and Venezuela.     Britain is also on the list.     So is Canada.     Until the political will is strong enough, sovereignty will be the rope with which we tie law enforcement's' hands behind its back.     In Tel Aviv, the "Law of Return" continues to see an influx of Eastern Europeans claiming to be Jewish who, in fact, are not. They get into the country with counterfeit paperwork--sold openly in Cyprus---and apply for Israeli passports to substantiate their new identity. In a country with no money-laundering laws, these people use the proceeds of crimes to invest in select politicians who may someday influence the disposition of the Israeli government. One group, in particular, is said to be willing to commit $2 billion with just this in mind.     As long as we live in a world where a seventeenth-century philosophy of sovereignty is reinforced with an eighteenth-century judicial model, defended by a nineteenth-century concept of law enforcement that is still trying to come to terms with twentieth-century technology, the twenty-first century will belong to transnational criminals.     Law enforcement could take lessons from these groups, as they open overseas branches to expand established markets, to gain access where they once were forbidden and to create new markets. Almost as if they themselves have learned their lessons at the Harvard Business School--and, in some cases they have--transnational criminal organizations approach logistics, personnel and accounting professionally. They research and develop new products. They hire experts to guide them through the complex and ever-changing maze of legal issues, marketing techniques and all things financial. They understand cost flow, reinvestment, franchising, time management and risk management. They have learned to construct and maintain networks of front companies, to negotiate prices, to decide delivery methods, to set schedules of payment and to build into all of this a philosophy that takes into account future market developments.     And, like any sound multinational corporation, they also seek out strategic alliances. Such as the Asian organized criminals who import heroin into Canada, then hand off their drugs to an Italian group that ships them in bakery trucks to New York, where they are distributed by a Puerto Rican street gang.     Like the Mongrel Mob in New Zealand who signed a deal to protect Chinese Triad gang members serving time in jail there. For their services, Triad members on the outside pay Mongrels on the outside with drugs. Relationships formed on the inside are then translated into joint ventures once members of the two groups get out of jail.     Like the seventy Italian organized crime cells active in Germany that deal weapons, traffic drugs and steal cars and are each tied to Mafia groups in Italy. Some of them have also been linked to Turkish organized crime, which supplies heroin; Colombian organized crime which supplies cocaine; Russian organized crime, which supplies weapons; and Asian organized crime, which offers them access to a network of Chinese restaurants for money laundering.     While their core activities remain the same--drug trafficking, weapons trafficking, car theft, fraud in all its guises, alien smuggling, counterfeit production and distribution, murder, kidnapping, extortion, money laundering, and the smuggling and sale of nuclear materials--organized criminals flourish in the global markets of transparent borders and meaningless trade restrictions. Unlike their predecessors, they do not limit themselves to single forms of illegal activity, but deal in anything and everything that can make money for them. By broadening their areas of operation and increasing cooperation with other groups, the pot of gold at the end of the rainbow has grown significantly in value. The man who pulled into the liquor-store parking lot that evening had never been to Harrods.     Nor had he ever been to London.     In fact, England was just about the furthest thing from his mind as he got out of his car, locked the doors, strolled into the shop--chimes sounded to announce he'd come in--and thought to himself it was lucky his wife had phoned to remind him about the wine.     The Vietnamese clerk behind the counter at the far end said hello.     The fellow nodded and glanced around.     The place was overstocked with bottles in all shapes and sizes, with large signs announcing that some of them were on sale, and huge wooden barrels filled to the brim with more bottles.     Eventually the man located a shelf marked Burgundy .     The clerk asked if he was looking for anything in particular.     The man said that he needed some wine for a dinner party, but, thanks anyway, he could find it himself. He perused the bottles in front of him, turned momentarily to the next shelf where the Bordeaux was, did some fast arithmetic, decided that would be too expensive, and returned to the Burgundies.     The six bottles he settled on set him back $78 and change.     The fellow behind the counter loaded them into two bags--explaining that this way they wouldn't be too heavy and break--then rang up the sale.     The customer pulled out his credit card and put it on the counter.     The clerk picked up the card, explained that the store had a special on champagne and motioned toward one of the wooden barrels.     The fellow looked at the champagne.     The clerk swiped the card through a reader under the counter.     After thinking about it for a few seconds, the man shook his head and turned back to watch the clerk put the credit card through a reader on the top of the counter.     When the little receipt churned up, he signed it, took his receipt, took his wine, said good night and went home to his dinner party.     Long before dessert, the number of his credit card, together with the encoded information from the magnetic stripe on the back of it, was e-mailed to Hong Kong. There, magstripe data from several hundred other cards--collected much the same way up and down the west coast of North America--was collated and e-mailed to Malaysia.     Within twenty-four hours, a brand-new credit card, issued in the name of the customer from the liquor store, was bundled along with 199 others and prepared for delivery to a customer in Italy.     A fresh carton of cigarettes had been carefully opened, as had each pack. The cigarettes were dumped out, and the cards stacked inside. The packets were then resealed--made to look as if they'd never been opened--and replaced in the carton, which was also resealed. At Subang International Airport in Kuala Lumpur, the courier taking them out of the country purchased a bottle of whiskey and put the cigarettes in the same plastic duty-free shopping bag. The following day, he walked straight past Italian Customs--no one cared about Duty Free goods--and delivered the specially prepared carton of cigarettes to a gentleman in Milan.     Twenty-five credit cards, including the card that otherwise should have belonged to the customer from the liquor store, had been presold to a Russian in Prague. Three days after they were delivered to him, one of the men on the team dispatched to London by the Russian in Prague walked into Harrods and used up nearly all of the $20,000 limit on the man's card.     The designer watches and Hermès scarves that he bought, together with designer handbags, jewelry, more watches, fine leather goods, digital cameras, French perfume and handheld computers--all paid for with the Visa, Mastercard, American Express and Diners Club cards that were in the batch of twenty-five--were packed in team members' luggage and checked onto a regularly scheduled flight to Prague. From there--along with other goods that had been purchased in Paris and Rome and charged to other credit cards controlled by the man in Prague---they were trucked to Moscow. Within a week, all of those items were on sale in specialist boutiques at the Gum department store, across Red Square from the Kremlin.     The credit card company had no choice but to write off their loss. They sent their client a new card with a new number and he never had the problem again. As far as he was concerned, it was just some weird mistake. But investigators at the credit card company knew better. It was fraud on a massive, global scale. Although they hadn't yet discovered the specifics--that members of an organized Vietnamese crime gang were being paid to double-swipe cards by a Chinese Triad society, who made counterfeit cards and sold them to a member of the Camorra Mafia, who, in turn, resold some to a Russian organized crime group--they did take a look at the store where they suspected the first step happened, but could never prove anything. And without at least one culprit, no law enforcement agency anywhere wanted to know.     Anyway, no one was ever certain in whose jurisdiction the crime been committed.     None of the diverse law enforcement agencies that might otherwise have become involved was willing to authorize the cost of investigating a Russian in Prague who'd ripped off some fellow in North America with the help of a gang in Hong Kong and another in Italy. Where national objectives were once defined by a government's ability to protect its citizens, territory and borders, they are now characterized by law enforcement's inability to defend those citizens and territories from threats outside those borders. Where power and authority were once defined by political polarities, such as East versus West, they are now defined by the control of or influence over markets, such as foreign exchange and essential commodities.     Whatever lines once existed between business and crime in many countries have been rubbed away. Take, for example, the former Soviet Union. There being no job security at institutions such as the KGB, operatives who hadn't socked away a nest egg, found themselves on breadlines. The assets they possessed were contacts throughout the world, networks of foreign informants and the phone numbers of moles planted in the West years ago.     The operatives who stayed on breadlines were the dumb ones.     With global networks already in place many of them used for criminal purposes under the guise of Cold War espionage--regearing to function as an organized criminal business became the KGB's pension plan. Some national security threats that should have passed away with the end of the Cold War have been placed on life support by the deliberate overlapping of traditional criminal activity with terrorism.     In New York, Greek criminals showed up with five tons of radioactive zirconium for sale. A critical ingredient in nuclear reactors, it had been smuggled to the West by a Russian organized crime group who used the Greeks as their agents. They also had plutonium and enriched uranium to sell.     In Tokyo, on March 20, 1995, the Aum Shinrikyo religious sect killed a dozen people and injured another five thousnd by releasing deadly satin gas into the subway system. At the time, the group had assets of more than $1 billion in secret bank accounts, $8.25 million in cash, a large quantity of gold bars, a farm in Australia where they'd been testing the gas on sheep and cattle, plus a clandestine chemical weapons factory in Tokyo that was so big it made the group the city's largest private real estate owner. Since then, Aum Shinrikyo has begun recruiting again, and has reportedly signed twenty thousand new members, all of them discontented Russian soldiers stuck on military bases in the far eastern reaches of their country.     As it became increasingly evident that the Soviet Union was in the midst of social and political meltdown and would soon disintegrate, a meeting was held at CIA headquarters in McLean, Virginia, to discuss what looked like the very real possibility of criminal nuclear proliferation. Senior managers were concerned that when the system crashed, former Soviet nuclear scientists would be out of work, and to feed their families they would offer their skills and knowledge to the highest bidders. It was known at the time that countries like Iraq, Libya and Syria were eagerly courting Russian expertise.     Because the CIA already knew who these Russian scientists were, they created a database to track them. They gave each one a number and set up a system so that they would always know who was where. This, the agency felt, was the best way to protect America from the spread of Russian nuclear expertise. And while they were zeroing in on the Russian nuclear scientists, no one was bothering with the biochem scientists or the crypto guys.     Iran began working on biological weapons toward the end of its war with Iraq. to develop as "the poor man's atom bomb," they'd been able to purchase strains of bacteria from Canada and Holland, plus the necessary laboratory equipment from the Swiss, Germans, Italians and Spanish. But they'd still not been able to breed the germs into deadly toxins. That is, until the Russians arrived. Within two years their program leaped from the developmental stage to production and the creation of delivery systems.     In Bulgaria, Russians have been hired to teach at a school where graduate-level students from other countries learn how to create and program computer viruses.     In Cali, Colombia, highly experienced Russian cryptanalysts are employed in a telephone company owned by a faction of the Cali cartel, their job being to intercept secure phone calls anywhere in the world made by the Drug Enforcement Administration.     In Britain, police computers are not compatible. The Metropolitan Police computer, in London cannot talk directly to the Strathclyde Police computer which cannot speak directly to the Thames Valley Police computer. That has prompted one senior officer to hang a sign on the bulletin board facing his desk that reads, "We're more disorganized than they are organized."     In Ottawa, the Royal Canadian Mounted Police (RCMP) has only just awakened to the fact that many of the computer programs running the Police Information Centre date to 1972 and are, therefore, obsolete. The database, which was designed to handle 60 million requests for information per year, is now handling twice that, making access to it more difficult and more time consuming for the fourteen thousand police, corrections and immigration or organizations in Canada who use it. When it's working, it supplies criminal records plus information on arrest warrants and stolen cars.     In Washington, the computer at the FBI's National Criminal Intelligence Center, a central clearing house for law enforcement across the country, is also overloaded. Criminals arrested in one state who should otherwise be identified as wanted in other states, often slip through the net because many agencies--especially local police forces--have neither the manpower nor the budgets to upload information into the system.     In all 140 chapters of the Hells Angels motorcycle gang--whose death's-head logo is a registered trademark, anyone who uses it without permission gets sued, the same way Coke and Microsoft and Nike take people to court for such abuses--computers are linked via a coded intranet. When the Los Angeles chapter does a deal with the Mexicans to deliver methamphetamine to a Chinese gang in Seattle, within a few hours of the deal being made, every chapter around the world has been informed and told to stay away. The Republic of Niue is a two-hundred-beers airplane ride from anywhere.     An uplifted chunk of coral rising out of the middle of the Pacific Ocean, Niue is a protectorate of New Zealand, which is twenty-four hundred miles to the southwest. There are no beaches, there is no continental shelf and the weather can be rough. A miniscule self-governing member of the British Commonwealth, Niue has eighteen hundred people who live there are otherwise struggling just to survive. They would like the rest of the world to think of Niue for skin diving. At least one senior law enforcement officer in Hong Kong thinks of Niue as "bird shit, telephone sex and money laundering."     The birds were there before the people. The telephone sex came much later, imported by the Japanese, taking advantage of technology and the international telephone payment system. Someone in Tokyo looking to get turned on dials a number and winds up having his ardor routed through an exchange in Niue, where the local phone company receives a share of the outrageous fees charged back to the poor guy on the other end of the line by the telephone sex company in Japan.     Niue is also into Internet domain names. All of its Internet addresses end in ".nu," so anyone who pays a fee to the government there will be granted the right call their Web site something like "" or "isanything. nu" or ""     Next stop appears to be Internet gambling. Customers sitting in front of their modem-linked PCs can play roulette or poker in cyberspace, with their losses--and presumably their winnings, too--racked up on their credit cards by a company somewhere on the planet duly compensating the host nation for the right to be a casino.     Again, those eighteen hundred Niuean souls have to eat.     The big banquet, however, turns out to be the murky world of offshore shell companies. Since 1994, Niue has been licensing international business corporations (IBCs)For a start-up of around $1,000, anyone can get the right to incorporate a company in any language, including Russian written in Cyrillic. Those IBCs are permitted to use any suffix that any other company anywhere else in the world can use--such as Ltd., Inc., GmbH, SA, NV, whether or not the company does business in Britain, the U.S. and Canada, Germany, the French- and Spanish-speaking worlds, or the Netherlands. To the list of suffixes add A/S, AG., B.V., and Aktiengesellshaft, rendering the IBCs' names virtually meaningless. It is impossible to decipher from the company's name what it does or, for that matter, where it does it. At the same time, it allows a company to pretend that it does something and is somewhere that it doesn't and isn't.     No minimum authorized share capital is required. An IBC is exempt from all local tax and stamp duties. Nor is there any requirement to hold general meetings or file annual reports. To maximize security of assets, IBCs are permitted to transfer domicile, plus reacquire and reissue shares for cash in any currency or any other form of consideration. Those shares can be bearer or nominative and, for really good measure, other companies can be listed as directors, meaning that there is absolutely no way anyone can ever find out who actually owns the company.     By charter, there are only a few things that an IBC cannot do. It is not permitted to carry on business with any residents of the island. Nor is it permitted to own property there, except for an office. In other words, the government of Niue will take your money, but they don't want you moving into the neighborhood or marrying their daughters.     But Niuean IBCs aren't about meaningful relationships. They're about total secrecy and absolute anonymity, and in some sense, about deception. Which are exactly the kinds of services a money launderer would pay for.     The United Nations got upset enough about Niue to put it on a list of countries where the possibility of money laundering was a real concern. The U.S. House of Representatives got upset enough about Niue to republish testimony from Washington attorney Jack Blum, a noted authority on money laundering. To wit, "The International Business Corporation, a corporation with anonymous ownership which can do no business in its country of incorporation, has no legitimate place in the international arena. IBCs are now the central tool of money launderers."     The Asia/Pacific Group of the Financial Action Task Force, an agency of the G-8, whose sole concern is global money laundering, is worried about Niue; as are the Australian Federal Police, who confirm, "We are monitoring developments in Niue and remain concerned that the establishment of an offshore register will lead to exploitation by criminal groups"; as is New Zealand's Serious Fraud Office, which convinced the government to send a representative to the island to try to explain the dangers of an offshore industry; as is the United States Department of State's Bureau for International Narcotics and Law Enforcement Affairs, which admits to being "very worried" about Niue's offshore industry; as is the Office of the Controller of Currency of the United States, which thought of Niue as the latest "flavor of the month" in the offshore money-laundering business.     The island's affairs, and cases related to it, are also allegedly being looked at, to varying degrees, by law enforcement in the U.S., Canada, Europe and the Far East.     Although IBCs formed in Niue can be bought over the phone from company-formation agents in central London, no one at the Commonwealth Office seems the least concerned. Adding to everyone else's growing anxiety, however, is the latest dish that the government of Niue has brought to the buffet--banking licenses. For under $20,000, you can buy your very own Niue-authorized financial institution, which, as one brochure touts, "provides access to the international credits market, as well as to the international mutual funds market and the securities market, [and] allows the bank to conduct FOREX transactions and, with minimal expense, to solve problems of liquidity."     At least three company formation agents easily located on the World Wide Web offer such banks for sale and list branch offices in Moscow and St. Petersburg.     Because organized criminal groups have come to understand that there is no reason to rob banks when they can own one, Russian "businessmen" are believed to have bought several thousand IBCs and banks registered in Niue. Copyright © 2000 Pennstreet Ltd. All rights reserved.

Table of Contents

Prologuep. 11
1. Spreading the Virusp. 13
2. Getting Connectedp. 29
3. Detour Through the In-Between Worldp. 56
4. The Maffiyap. 83
5. The B Teamp. 104
6. The Four Horsemenp. 126
7. Banking in New Yorkp. 152
8. Remapping the Earthp. 169
9. Connecting in Calip. 194
10. The New Melting Potp. 212
11. The Caribbean Cesspoolp. 229
12. Bank It Again, Samp. 251
13. End Runsp. 278
14. Chasing Ghostsp. 298
15. Millennium Bugsp. 316
Epiloguep. 337
Acknowledgmentsp. 346
Indexp. 377