“It’s slow going, but it’s going,” grunted Mel, a clean-shaven young analyst, when I’d introduced myself.
“Why? Because of the volume?”
“No. We only started three hours ago, but from what we see already, the documents reflect years’ worth of international banking activities. Now add the fact that I already counted four or five foreign languages that were used, and you’ve got a complex audit on your plate.”
“Any computer files?” I asked.
“Yes, we seized McHanna’s computers. We’re waiting for the tech people to hook them up so we can quickly search files electronically.”
“Can I take a look at some of the files?” I asked.
“Help yourself,” he said, and quickly explained their Organization system so that I wouldn’t disrupt it.
I went to the mountain of stacked crates and pulled out the top box. I put it on an empty desk. The label was marked 1990. After going through several hundreds of pages I saw nothing that immediately showed any relevance to our case. I took another box, marked 1993. A few hours later, I felt a creeping frustration. There was nothing there that could be important to my investigation. I looked around the room at the other analysts; their faces were patient, but unenthused. I decided to change course. Instead of looking for a smoking gun, I decided to understand the business logic of McHanna. How were they transacting business, what was their profit center, and how were they actually making money? That is, if they were making money. And if they weren’t, who paid for McHanna’s fancy office, and why?
I realized it’d take me more time, but that was a commodity I had. Bob Holliday agreed to ease my caseload, and I immersed myself in my new project: McHanna Associates.
Three days later I began to see a pattern. McHanna Associates was in fact a clearing house for charitable donations. Money in small amounts was collected in certain Islamic centers throughout the United States for various charitable causes and brought or transferred to McHanna Associates. Next, McHanna transferred the funds in batches smaller than $10,000 through a New York bank to banks in several foreign countries, some in Europe and some in the Middle East. One or two days later, the receiving banks would wire similarly sized amounts to McHanna’s bank account in New York.
Why were they doing it? I wondered. Why send the money back here? And if there was a reason, why couldn’t they simply offset the incoming and outgoing amounts? The back-and-forth transfers made no business sense, other than to the transferring banks, which made hefty commissions off the transfers. And while I understood the reason for transferring amounts to the Middle East to support charities, I couldn’t understand why there were incoming money transfers to the United States.
I decided to take it yet another step forward and see what happened to the money received by McHanna from the European banks. It was routed to charities in various states throughout the United States. Several names of the U.S. receiving institutions surfaced repeatedly. There were two in Texas, three in Michigan, five in Brooklyn, and four in Florida. One common denominator of all receiving institutions was that they were Islamic charities. They also had something else in common. The checks made out to them weren’t endorsed.
That was a finding that bewildered me. I checked the entire contents of the box. There were many bank statements, but among the attached checks made out to the charities, I couldn’t find even one that was endorsed.
I turned on my chair and loudly asked the other analysts, “Guys, has anyone been through any bank statements yet?”
“We all have,” said Mel.
“Have you noticed something odd?”
“Like what?”
“All the checks I’ve seen that were made out by McHanna to charities are stamped as paid, but none carried an endorsement signature on its back or any stamp of a financial institution, and none of the checks appeared on the bank statements with the check number on it as having been cleared.”
Three analysts answered at the same time: “I saw that too.”
“Do you have any idea how this could have happened?” asked Mel.
“I’ve seen it before,” I said. “That’s a trick money launderers use to hide the source or destination of dirty money.”
Mel said, “Maybe they just recorded the money as outgoing locally, in cash, but in fact it was sent outside the country.”
“Maybe what we could do is select at random a specified period and check all bank accounts managed by McHanna Associates,” I suggested. “Then we could see if the wired incoming amounts match with the outgoing amounts at the end of the day. I don’t mean literally daily, but over a period of time-say a week.”
Two hours later we had interim results. Every single analyst in the room confirmed that the incoming and outgoing amounts roughly matched. The difference was about 5 to 8 percent.
“That’s for the administrative costs,” I said jokingly, but in fact I was dead serious. I had a hunch that the excessive commissions were in fact a channel to bury even more deeply the fact that the transfer of the money created a profit that could be escrowed by any of the foreign banks and then transferred internally to another account. That other account could accumulate the graft to line someone’s pockets, but it could also be used as a terrorist slush fund. A foreign bank account is, of course, immune from audit by a U.S. regulatory or law- enforcement agency.
“OK, I’m going to try to synthesize this in a report for Hodson. I assume you guys will do the same.” As I began walking out the door, I stopped. I knew what bothered me-not something I’d seen in the boxes, but something I hadn’t.
“Wait a minute,” I said. “Have you seen any records containing the transactions with Al Taqwa and Tempelhof Bank? I saw them in Switzerland, but there weren’t any here.”
They all shook their heads. So McHanna must have cleaned out his office, or he may have had additional records elsewhere.
“I’ll be back,” I said pensively. I went out to the street, remembering that I was hungry. It was the middle of the night, but I found an all-night deli.
There was no question that we’d hit on a money-laundering operation. But we still had to see how it actually worked, and for what purpose. I sat at the corner table and wrote down on a napkin points to remember. I spilled some mustard on the napkin, painting my comments in yellow. But even without the stained napkin I knew exactly what to do next. I returned to the analysts’ room.
“Mel, may I suggest something else?”
“Sure.”
“Let’s focus for a moment on the route of the money. We’ve got records telling us that there were small deposits coming from people and small businesses into McHanna Associates’ bank accounts. Next, McHanna transfers roughly the same amounts to several banks in Europe. Next, roughly the same amounts-less up to 8 percent return to McHanna Associates-from Europe, not necessarily from the same banks to which McHanna originally sent the money. Now McHanna Associates writes a check, always in an amount smaller than $10,000, to various Islamic charities in America and the Middle East. Let’s talk about American charities first: the check made out to them was never cleared through the banking system or even endorsed. Nonetheless, there’s a ‘paid’ stamp on it. How did the charity get the money?”
“In cash,” we both answered at the same time.
“Did you see any receipts?” I asked.
“Yes,” answered another analyst. “But only a few. In some instances there were receipts signed by individuals with typical Arab names, such as Ahmed or Ibrahim, without a surname or street address. In other instances there were grocery receipts, with a handwritten signature of a purported recipient.”
“Do we have any proof that the charities in fact received the money?” I asked.
Most of the analysts shook their heads.
“And even if they did receive some money, who benefited from the 8 percent difference in the funds sent to Europe and returned here?”
“Probably the guys in between,” came the answer from one of the analysts.
“So we’ve got an intricate bidirectional money-laundering operation orchestrated by McHanna, benefiting anonymous entities or even individuals here, and unknown entities or individuals in Europe and the Middle East, not
