How one of the world’s major money laundering networks operates | Hacker News Reader

How one of the world’s major money laundering networks operates

nytimes.com

110 pointsbookofjoe87 comments

Money Laundering Story Time:

- In the early 1970s, my father (Italian immigrant to the US) was coach / manager of a semi-pro soccer team in Massachusetts.

- His team had a game in Worcester, Mass and one of his players introduced my father to a "friend" who was actually part of the New England Mafia.

- After some polite conversation, mafia-guy says, "I could pay for your team's uniforms, pay your league dues. I could even give your players a little travel money for games ..."

- My father says, "what do we have to do...?"

- Mafia guy says, "We'd like you to apply to the State of Massachusetts and declare your team to be a non-profit organization. Once you're a non-profit, Massachusetts will allow you to run a 'las vegas gambling night' fundraiser twice per year. I would run those fundraisers for you."

- My father didn't exactly understand the scam, but he politely declined and that was that.

In retrospect, it was pretty obvious that the guy wanted to launder money through the soccer team and the Las Vegas Night fundraiser was the 'vehicle' to cleanse the dirty money.

This doesn't really detail any money laundering scheme. This is just how to access scammed money. Simply cashing out a large deposit of tether isn't laundering money. You still need a legitimate way to explain how you earned the money for it to be considered laundered.

Although I'm not sure it matters in Cambodia, for 3rd world country scammers the challenge is just getting the money at all.

In my area people launder through AirBnb. Put a nice listing up, then have a 3rd party "rent" it with cash purchased AirBnB gift cards. You get a very clean 10-99.

AirBnb does minimal validation on guests, and their gift cards are "closed loop" so no AML / KYC regulations at the grocery store.

Not much incentive to stop it, AirBnB and state / local governments all get a nice cut.

The obvious potential issue is that the data on the AirBnB side looks sketchy as hell if anyone ever actually looks at it. Nearly all guests via gift card, nearly all those gift cards purchased locally (presumably) at only a few locations (presumably).

But I guess they don't have any incentive to be proactive.

Yeah the other easy one is "recording studio". It's $1500 an hour to rent our laptop and midi keyboard. And also, the music you recorded here is pretty good so we will sign you and advance you back 80% of your studio fee. Now you can show income to finance a Dodge charger.

> This doesn't really detail any money laundering scheme

Yes, there are reasons to avoid providing a detailed manual on the exact workings of a successful large-scale money-laundering scheme. For the same reason why an article wouldn't explain exactly how to e.g. make explosives or cook meth at scale.

You can always find out if you try, of course. But NYTimes level journalism does hesitate to explain those details.

It doesn't even really allude to money laundering though.

Yes, I was disappointed by the article too. It used "money laundering" and "scamming" pretty much interchangeably. But there's a difference. It needs to have a clean origin and this article doesn't describe how that comes into being.

Turo is a good mechanism for this too.

Around my area there are dozens of mid range cars, most prevalently the Chrysler 300C, that are "available" to rent for $600/day. Not that you can find availability, even if you wanted to rent that car at that rate...

Dealer gives trusted client money to rent their car (spoiler: car keys never change hands). Client rents the car for extended periods. Dealer helpfully sends client starting and ending odometer pictures and such to close out the rental. Rinse, repeat.

Unfortunately, outlawing cash transactions really isn’t good for people. I know the cause sounds good here but the method isn’t wonderful.

Cash transactions are vital under authoritarian regimes that would otherwise have potentially total surveillance and control over financial transactions, or for people who may be unable to open a bank account for whatever reason.

In most developed countries cash is too inconvenient for regular people to bother with it anymore except when they have to - it is just simpler to pay for things digitally or with a card. But even “free” governments already have total surveillance over digital transactions. So as the remaining legitimate uses (and users, since I think most regular people who would be legitimately harmed by going cashless are very very elderly people who would struggle to adapt) for cash die off pretty much the only remaining reason to use cash is to commit crime - the vast majority of which is tax fraud, which effectively harms every citizen who isn’t committing tax fraud.

Basically, eventually cash will basically become the “crime mode” for its respective currency. I don’t see why it makes sense to continue to allow cash at that point. FWIW I do think privacy for transactions is important but I think we should be trying to make digital transactions more private rather than clinging to a mostly obsolete (in 20 years will anyone be unbanked or transacting in places with no internet?) technology.

>Basically, eventually cash will basically become the “crime mode” for its respective currency. I don’t see why it makes sense to continue to allow cash at that point.

Well, it depends on what the government in question defines as criminal activity. Just because something's made illegal doesn't mean it's immoral, wrong or in any way bad. Many regimes have in the past made all kinds of transactions illegal specifically for the sake of their own criminal persecution of targeted minority groups. This is why argument about "only criminal activity" are both idiotic and naive.

People get scammed out of cash just as easily. See "The Day I Put $50,000 in a Shoe Box and Handed It to a Stranger. I never thought I was the kind of person to fall for a scam." https://www.thecut.com/article/amazon-scam-call-ftc-arrest-w...

Discussed here https://news.ycombinator.com/item?id=39382981

I don’t understand why digital financial transactions are so heavily regulated and scrutinized while cash still exists. Governments have even basically soft-killed Monero which is pretty much the only way to get actual cash-like semantics digitally. Yet cash is still given preferential treatment over traditional digital payments.

I understand the rationale behind both camps ie “to prevent personal/tax fraud, money laundering, and cut off funding to terrorists we have to give up privacy” vs “personal privacy extends to transactions and the benefits justify the increased difficulty in fighting crime”. What I don’t understand is the inconsistency between physical and digital payments. Anybody committing crime can just use cash so why even bother with all the annoyances with digital transactions?

IMO we might as well outlaw cash because typical law-abiding citizens already have basically zero financial privacy, but are missing out on all the tax revenue and supposed safety from actually fully tracking transactions. The way I see it, cash right now basically only exists so that small businesses/individuals can cheat on taxes and to keep criminals on the USD.

Cash is grandfathered but (in the US) it's really essential for some old people who don't use tech, homeless people, anti-government survivalists, and "mark of the beast" conspiracy theorists. (A similar constituency is blocking federal IDs and digital IDs.) You wouldn't think that's a powerful bloc but apparently it is.

That is fair and I thought of that “old people might legitimately need it” case too when writing my other comment. But even that might only be the case for another 10-20 years.

I would actually be surprised if homeless people remain cashless for much longer, if a substantial number are even cashless now. I am pretty sure even people without permanent addresses can open bank accounts and almost every homeless person in the US has a smartphone. Any homeless people not being directly handed cash or working under the table/doing low-level crime would probably have no reason to use cash. Over time, they probably will not be directly handed cash as much because I don’t think most people will keep carry cash if their only use for it is to give it to beggars.

The other use cases you mentioned are definitely pro-privacy but clearly those blocks are not influential or powerful enough to get governments to allow for private digital transactions. Time will tell but I think it’s really only old people who’d struggle to adapt that are keeping us on cash.

Yeah, I'm inclined to agree with this. The fact that Sweden, Japan, and China went 99% cashless shows that it can be done.

BTW there's a new scam where a homeless person asks for a small donation via EMV but they charge thousands of dollars and then when you chargeback the card issuer asks for your receipt which of course the homeless person didn't give you.

Japan did not, a few things even require it.

Maybe India more than Japan

You generally cannot open a bank account without address. It is trivial for criminals to do with darks. Last time I was between addresses no one would open me an account even with a US passport as it failed kyc with no address.

KYC does fuck all to curb crime and mainly used as a tax dragnet and control mechanism for the mostly honest.

A lot of drugs are cash only. Even marijuana in legal states like Michigan.

It is not just for old people, homeless people, etc. I do not have a credit card or a smartphone and I always pay in cash.

You're a survivalist (whether you admit it or not).

Very simple. 1. Orders of magnitude. Digital transactions can be billions in single transaction. While making large cash transactions in cumbersome and unrealistic. 2. Because they can. Regulating digital transactions is simple. Regulating cash - next to impossible.

Cash still exists since there could be war, massive catastrophe, your bank might have offline hours, there could be internet failure, electricity failure. Cash always works. Getting rid of it is plane stupid and asking for troubles.

I feel like you're forgetting that cash can also be destroyed, whereas an offline wallet with keys engraved into a metal card is a lot more safe.

>> The way I see it, cash right now basically only exists so that small businesses/individuals can cheat on taxes and to keep criminals on the USD.

sigh Cash is the barrier for interest rates going negative for too long. sigh

I use cash for small purchases probably five days a week--lunches, small stuff from the store, sometimes books. I am certainly not cheating on my taxes with by spending cash. I don't see how the vendors are by accepting it, given that most of them will give me a receipt.

Cash is being made more and more inconvenient over time, presumably to push more people towards monitored transactions.

Where I live, there is a chain of "vacuum repair" shops. There are like 4 - 5 of them in an area no bigger than 60 square miles. I've always assumed they were a money laundering front. Are that many people repairing their vacuums?

Some of it might be a competition thing, where clustering is a Nash Equilibrium to prevent the other guy from taking unclaimed territory/customers.

https://www.youtube.com/watch?v=jILgxeNBK_8

Doubtful, yet they'd probably rebuild your vacuum if you brought it to them.

There are a glut of hyper-specialized businesses around here. Russians run all of the appliance repair shops. Israelis ran all cell phone repair places until COVID (now we have few at all). These all took digital payments.

Iranians/Turks around here run a bunch of rug shops that never get any customers yet linger for decades. I don't know a single person that owns a rug.

The Chinese run donut shops that are cash only, never see any foot traffic, sell terrible stale donuts, and don't even have seating. Vietnamese run all the nail salons and both change owners and personnel every few years.

Disney race-swaps protagonists of old movies that predictably flop instead of creating the next Frozen, and Concord burned $400m on a game that only 25k people wanted ($1m revenue). How is this sustainable?

It could be money laundering, but some of these businesses look like they're intended to fail. I'd sooner suspect some other financial engineering going on. H1-B fraud or SBA loans-for-foreigners schemes.

170 firewalk studios employees collectively burning $400mm to get H1-Bs. What next? Are they going to buy the nation of Mexico so that they can cross the border illegally? They could all have EB-1c in if they wanted to at those rates haha.

A little kink in the logic: prop 13 in california. If your folks bought a vacuum shop in 1970 you might be paying no mortgage and that 1970 tax rate today. Making all sorts of otherwise seemingly impossible businesses possible due to severely underpriced overhead relative to other areas.

"I'm looking for a dust filter for a Hoover max extract pressure pro model 60"

(from Breaking Bad)

Could also be a vehicle for importing illegal drugs.

So... I started scimming through the artcle, and they basically convert the money to cryptocurrency? Don't know if the article really contained anything other interesting details.

The interesting bits are before that happens. You need money mules, you need brokers to find the mules for you, you need escrow companies to stop the brokers from running away with your money, etc.

So much work. makes me wonder why not just earn it legit. It's like cheaters in school who use AI software and other tools. It would be less work to just study. I guess it does work or esle it the scams would not persist.

> It's like cheaters in school who use AI software and other tools. It would be less work to just study.

It's not about the amount of work. If it were about the amount of work then ADHD would hardly exist.

> So much work. makes me wonder why not just earn it legit.

Because they make orders of magnitude more money than they otherwise would. The regional drug lord wouldn't be the next fortune 500 CEO if only he chose to not break the law.

Not sure if I fully agree on that. Using AI as a tool can usually reduce the total time it takes to complete an assignment or project by like 50%, not to mention it also reduces the amount of time spent pulling your hair out feeling stuck by like 80-90%. Of course, you lose out on most of the learning experience but it's not like the old days of smuggling in rolled up papers or writing inside a water bottle -- "cheating" (if you can even call it that) has basically never been easier.

That's great! Now try getting hired with nothing but a degree when everyone knows half the class did this shit.

That's why companies have leetcode interviews.

A lot of the people running these scams have been kidnapped and moved to lawless zones forced to scam people. They don’t really have the choice to do legitimate work.

Grok makes a better, more coherent text when asked to explain the steps involved in money laundering based on this article.

This is the plot of the movie, ‘The Beekeeper’.

Only partially. This is Scambodia. The plot of The Beekeeper is US-based, and the head of that operation is the son of the President (or candidate? can't remember exactly anymore).

The F.B.I., China’s Ministry of Public Security, Interpol and others have tried to combat scammers, who often lurk on social media and dating apps, luring people into bogus financial schemes or other ruses.

It's the IRS and FBI that does the overwhelming bulk of the investigative work and also opens the investigations. Interpol hardly does anything by comparison and have much less doggedness (it was the US who found Bin Laden for example). It typically helps the US, not actually initiates the investigation. At best its like a sidekick.

The question is, does the US get involved. If not, then laundering will work, because the vast majority of countries have neither the inclination or resources to do much. Otherwise, all bets are off. Because the US is unrivaled at this sort of stuff.

The article in typical clickbait fashion overplays its claim in the headline and then walks it back in the content. It's not that effective if accounts are constantly being tracked and frozen and if the scammers' profits are heavily diluted in an attempt to launder the money. if anything ,this is a success by imposing a huge cost on scammers and reducing the profitability of said scam.

you realise that something's not just clickbait because you don't understand it? Huione is a behemoth in the laundering-sphere; it's intrinsically linked to Cambodian scam compounds, as well as handling every single step of the wash process in-house. These guys don't just receive the stolen funds, but they link international clients with mules across literally thousands of Telegram groups before converting said currency into the Hui-one coin and then onto Tether. All of this is done within Hui-one's infrastructure.

If you'd bothered to do just one iota of research into any of the topics covered in the article, you may have stumbled across chainanalysis' report on them from last year. Elliptic, also mentioned, have done comprehensive reports on them. Lazarus Group, who recently stole around a billion from Bybit, frequently move funds through these guys, so did Conti, and many of the other big cyber-threat groups.

To your point around it being a huge cost to the scammers, that's a given. Effective laundering is expensive because organised crime groups are most vulnerable at this particular stage of the fraud. A massive decentralised network of groups that can match criminals to a steady flow of international bank accounts that can handle fraudulent funds is pricless.

I have seen a few confirmations of this.

The article makes it pretty clear that China is the jurisdiction that is the hardest to evade.

> Interpol hardly does anything by comparison and have much less doggedness (it was the US who found Bin Laden for example). It typically helps the US, not actually initiates the investigation. At best its like a sidekick.

That's a strange take on a strange article, because the articles is mistaken in that Interpol "tried to combat scammers" - it can't, Interpol is an organization to coordinate cooperation between national law enforcement agencies. They are essentially a large clearing house where national LEAs exchange information and can use databases. Interpol has no agents or investigators.

Which makes your take strange too, because you sound very confident that it's "at best" a sidekick, because it doesn't do as much as the FBI and IRS. But knowing what Interpol is and what it does (or rather: what it doesn't), it's pretty clear that you don't know what you're talking about.

The article has found its target, your patriotism was tingled and you accepted its premises but felt it necessary to proclaim that the US does much more than the organization that doesn't do that type of work at all.

Where does your knowledge come from? With respect, how do we know you're right and they're wrong and not vice-versa? They spent a lot of time on it, went to Southeast Asia to see it for themselves, have editors, etc. That doesn't mean they get it right always, but neither do people on HN.

Seems like the easiest way to launder or bribe someone is still crypto. Might not be an investor's paradise, but certainly a launderer's.

or you can just bring a bag of cash to buy a condo in NYC https://theweek.com/articles/736313/how-foreign-investors-la...

Vancouver is also more than happy to help you out https://www.sanctions.io/blog/the-vancouver-model-of-money-l...

There have been changes in recent years that complicate this model because you are now required to register the beneficial (meaning the de facto, not de jure) owner of real property in BC. There was also an investigation into the casinos which culminated in the Dirty Money report [0]. Quite a few reforms came about as a result of that, chief among them that a source of funds declaration is required on buy-ins of $10,000 or more and mandatory identity verification is required on transactions of $3,000 or more.

> At B.C. casinos, BCLC requires anyone buying-in with cash, a bank draft, or a certified cheque of $10,000 or more in a 24-hour period to complete a source of funds declaration and provide proof of where the money came from. Suspicious transactions in B.C. casinos have declined since this policy was introduced. Additionally, BCLC requires casinos to verify people’s identities for all buy-ins of $3,000 or more in a single transaction. [1]

[0]: https://news.gov.bc.ca/files/Gaming_Final_Report.pdf

[1]: https://www2.gov.bc.ca/gov/content/justice/anti-money-launde...

Spreading misinformation hurts everyone.

At least Germany recently changed their laws (initiated by the Green Party) that prevents buying real estate with cash. But this has been a money laundering practice for the mob for decades.

You’re forced to take out a bank loan in Germany if you want to buy property?

Nope, but you can’t buy property with literal cash, crypto, or precious metals anymore. In Germany people use SEPA payments as the primary means to transfer money, and that is the intended way to handle big transactions.

I believe there are numerous ways to transfer money without using physical bills; disallowing cash for large purchases doesn't imply a loan. Personal or certified Cheque, money order , wire, interac / email transfer are some of the options, I'm sure there are others.

Note, all other criticisms about privacy still apply, thisbis where cash is king of course. But it's not forcing loans :-)

Australia just implemented laws where you have to show where the money came from when buying property, gold, and some other stuff with cash.

Are you referring to Australia's AML/CTF Tranche 2 reforms? If so, these actually come into effect on 1 July 2026.

The Brazilian media reported that the Bolsonaro family bought at least 51 properties with cash.

https://noticias.uol.com.br/politica/ultimas-noticias/2022/0...

Paying for things in cash is banned over a certain price (usually $10k) in some parts of the world.

It used to be that you only had to declare the actual owner of a LLC purchasing a property if the value at sale was over, IIRC, $1.5 million. In NYC that's a typical 1-2 bedroom apartment.

They (Treasury Dept?) recently lowered that to $300K.

Reminds me of the line from an old NPR podcast:

"If you are not a US citizen, the US is one of the best countries for money laundering due to our strong privacy and banking laws."

Buy crypto, convert it to Monero, transfer it around a bit, convert it to your destination currency. Done.

This is missing the most important step though, which is to actually launder the money. Concealing the source of the money is only half of the ordeal, making the money seem legitimate is the second, usually considerably trickier bit. If you suddenly receive $100k from a crypto exchange with no trace of how you came to own it, your bank is going to ask you some questions.

If it's a one-time $100k you can just slowly withdraw small portions of it and probably nobody would notice. It depends how much you're trying to launder.

You really think that alerts in banks are that stupid? It doesn't matter if you are sending 100k at once or below some treshold. It will get alerted and spotted anyway. You just need to make transaction look plausible.

I have transferred tons of stuff to my bank over the years (all legal), none of it ever got "alerted" or something I had to describe.

Easy these days with fantasy football being advertised every 30 seconds. There are probably very sophisticated methods already out there running on those frameworks.

I wonder how much of these kinds of issues that we are told are "complex" and "multi-faceted", "no easy solution" etc could be significantly reduced if there was actual political will to do so.

I think a lot.

Agreed. It seems like billionaires are buying more and more of our means of communication. Makes it easier to control the narrative.

Its harder today than it was. It used to be you had most of america watching Walter Cronkite or otherwise on three channels and a smattering of radio. You control those few levers you have the country. And indeed the country was remarkably well controlled without even being aware of its tight leash up until we saw counter culture emerge, through production of their own media and materials and grassroots distribution outside this existing national system in the 1960s.

Many people are captured today by mass media but there are many more people in this space trying to cultivate their own cash crop of passive content cows. Makes it less efficient to break trough with more players to pay off for a unified narrative.

At least mass media isn't a clown show like the Rogans and twitters.

You can pretend that journalistic integrity doesn't exist (or didn't exist) with professional journalists.

But it's obvious you're pushing a narrative. So have fun with your algorithmically designed opinions.

What narrative am I pushing if it is so obvious? If anything it is mere media literacy I am espousing. Is that so controversial a position these days? Scary times if so.

Like I said, have fun with your algorithmically designed opinions. I'm going to stick with evidence based reporting and fact checking.

There seems to be political will to ignore it

https://www.reuters.com/world/us/us-treasury-department-says...

The politicians and the police get their cut of the money, and the victims are in other countries. There's a reason the scam industry operates out of poor places with dysfunctional government, like Myanmar and Cambodia.

The political will has to be globally coordinated and needs to mandate a basic standard of living for all.

Much like ending the human rights abuses perpetuated abroad by western companies requires political will to exist in multiple countries.

When there is money to be made, people will look the other way. And dehumanizing people on the other side of the world is too easy. We are all complicit in supporting companies that are responsible for child slavery and death, to make our consumer products. To pretend that "other people" are the truly heartless ones for running different kinds of exploitative rackets that happen to affect people we see ourselves as closer to, in ways we see as more likely to affect us, is myopic.

Until Westerners confront these inevitabilities, the odd person being scammed by people in poorer countries is just the price we will continue to pay for economic supremacy.

Groan.....

Yep, the gambling / casino industry is largely responsible. And they have their roots deep in the political system.

If we had political will we could just kill everyone who disagrees.

Hypotheticals where any resources is unlimited are pointless because resources are fungible sometimes if you're ok with conversion inefficiency.

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