WITHOUT wishing to appear too pedantic, the recent Bank of Bangladesh/RCBC event is not really “money laundering” —it’s just simple theft. According to Interpol, money laundering is “any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources.”
Well, as I understand it, the money did originate from a legitimate source, the Bank of Bangladesh, it arrived in RCBC and then it vanished.
Eighty-one million dollars may be a lot of money to me, or even to some of this newspaper’s readers, but it’s not too significant in the international banking business which handles through its electronically controlled systems anything up to $14 trillion a day.
Mechanisms for controlling this sort of thing include the Large Value (Interbank) Transfer System, a tool of the national central bank utilized, amongst other things, to ensure that private banks have sufficient credit in their account with the central bank to continue to meet statutory requirements (the statutory requirements, by the way, are much less than the actual money which the bank is handling or has loaned out, but that is another story).
The way in which this lot all works is quite complex and depends very heavily on information technology systems by which transactions frequently pass through several banks, each of which has to account to their central bank, in order that the money gets from payer to payee in a short time.
It is really no surprise that things can go wrong or that knowledgeable computer people can work out ways of hacking into these enormously complex and all-pervading systems and then whizzing the money out to wherever they want.
The RCBC event is just theft and not money laundering, albeit once the funds got into the hands of whoever managed to withdraw them in record time then these stolen funds may well have been laundered.
All speculation on that so far points to one of the Philippines’ most remarkably successful economic development areas—the casinos. Frankly, I find it very hard to imagine being able to withdraw several million dollars or even pesos over a bank counter in the Philippines at the drop of a hat, retail banking transactions really are so slow—it must be the security procedures!
Real money laundering is, I am sure, carried out on a grand scale every day all over the world. Frequently though, the perpetrators don’t seem to get found out. HSBC got caught a couple of years ago in Mexico washing drug money into respectability to the tune of thousands of millions of dollars.
In one year alone, they shifted $7 billion on behalf of the Mexican drug cartels, over to the USA and then back to Mexico. HSBC was fined $1.9 billion for this, equivalent to about five weeks’ income for their US subsidiary. The way banking systems work with the use of interest payments on overnight deposits and the like, the fine was probably just a drop in the ocean compared to the money that had been made by the bank’s use of the drug billions.
And then there is money in the international banking system going to Iran during periods of sanction, to terrorist organizations, and on and on.
Laundering has been going on since the case of drug money being handled by the Bank of Credit and Commerce International in the 1980s; it can be said to be a well established activity!
The problem with all this criminal activity around banks and banking systems is that it makes it almost impossible for ordinary people—i.e., those of us who are not members of drug cartels, or funders of terrorist organizations, white slavery traders, genocidal despots or players in any other unwholesome sort of “business” area—to get a simple transfer of a few hundred or even thousand something-or-others sent and withdrawn in a straightforward way.
It puts me in mind of the trials of security surrounding air travel. Everybody is a potential hijacker until proved otherwise, imposing massive inconvenience on the travelling public. Now heightened security features around getting money out of banks—these additional security features suit the banks very well, of course, they can delay honouring their obligations to customers for days, weeks or even months, allowing them to play with their depositor’s money for a while longer, earning some more for themselves.
It doesn’t take much imagination to see that the RCBC event will require bank branches to buy even more white plastic chairs to accommodate the even longer waits that people will have in trying to do straightforward bank transactions. Let’s just hope that we don’t get to the requirement of HSBC in the UK who demanded customers to show letters or bills from third parties as a condition of being able to withdraw funds—they quickly dropped that bright idea a few weeks after it was introduced!
So once again, the banks can’t lose. They handle massive amounts of money generated by criminal activities, on which they make interest. They get caught. Extra security requirements are introduced allowing them to delay withdrawals, meaning that they keep the money for longer and can make interest on it!
Mike can be contacted at firstname.lastname@example.org.