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- [00:06]
A
Most people imagine crime as something obvious. Drug cartels trafficking cocaine, corrupt politicians stealing from the state, gangsters stuffing suitcases full of cash. But crime on that scale has a problem. Sooner or later, the money has to enter the legitimate economy. And yet the financial machinery that launders criminal wealth wasn't built for criminals alone. It was built for anyone with enough money to hide. Oliver Bolo is a journalist who has spent years investigating this hidden financial underworld. In his new book, Everybody Loves Our Dollars, he shows that the financial architecture that allows billionaires to dodge taxes and corporations to hide profits also allows drug cartels, kleptocrats, and sanctioned regimes to launder their money. There isn't a separate criminal financial system. There is just the global financial system. And governments around the world have proved remarkably bad at controlling it. I'm Thomas Small. This is my conflicted conversation with Oliver Bolo. Hello, Oliver. How are you? Welcome to Conflicted. Thanks for coming on the show.
- [01:43]
B
I'm really pleased to be here. I'm great and looking forward to having a good chat about all the most important issues in the world.
- [01:51]
A
Oh, me too. Now, Oliver, I first came across your work. You sort of landed on my radar for the first time, I guess, about four years ago now with your book Butler to the World, How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats, and Criminals. And now you have a new book out called Everybody Loves Our Dollars, How Money Laundering Won. And from the titles alone, I think our listeners will have a very clear idea about what it is you've become a world expert on, that sort of murky underworld of criminal organizations, corrupt elites, you know, kleptocrats, and all these sort of shadowy things which are less shadowy these days, I think, because, you know, figures like Jeffrey Epstein and the world that he represents is clearer to us. So that murky underworld is what you know best. So I'm really looking forward to hearing about it from you today.
- [02:52]
B
Yeah, I mean, I've been on a. Yeah, a bit of. A. Bit of a journey, I suppose. I started out. My first book about financial crime was. Was Moneyland, which was even before Butler to the World, which grew out of work. I was doing journalistic work in Ukraine after the revolution in 2014, when suddenly there was this amazing opportunity to see the business records of the former political elite. You don't get to see that very often. And I was so astounded and appalled by the way that they were completely embedded in the Western economy. They used Western lawyers, Western shell companies, Western Banks and all that, that the idea that we have this sort of stated disapproval of autocracy and corruption, which was completely unmatched by our actions, the words of Western governments were one thing, and our actions were something very different. These people were as integrated into our economies as any multinational corporation. And I was, you know, so appalled by this that it struck me that the problems would probably be solved before I'd finished writing the book. Right. I mean, this was so serious and urgent that there was no way that the world's governments could tolerate this happening. But actually, you know, over the last decade and a bit, I've realized that actually that isn't the case, that these problems are serious and urgent. And for curious and not entirely explicable reasons, our governments tolerate the degree of corruption and financial crime that's going on. And I suppose if this book has a question that it's answering that everybody loves our dollars, the question is, why is it, if we have so many laws against financial crime and corruption and so on, that they are totally ineffective? Why are we failing? Yeah, it's a big question.
- [04:46]
A
Well, reading your books, I do wonder if, if globalization in the end just amounts to these global financial networks schemes, dodges, tax dodges, offshore, you know, refuges, all these things, whether that's really what it comes down to the ability of rich people and criminal people, who are often rich people, and the two categories rather overlap, you know, to take advantage of global structures, finance structures, trade structures to get around their, let's say, tax obligations and just to facilitate their criminality or at least their greed. Right now we see the United States and its ally Israel and other allies in the Middle east attacking Iran in a big way. We saw in January that remarkable operation in Venezuela which removed Nicholas Maduro from power. We are told that the two are linked to some extent. Venezuela was a target to prepare the way for the Iran war, given the fact that Venezuela has been a useful media, you know, sort of medium for illegally gained revenues for the IRGC in Iran to launder their money and everything. So that came on our radar then. And then, you know, around that same time, Bloomberg releases this article about the overseas wealth accrued to the. The now the new Supreme Leader of Iran, Mojtaba Khamenei. But it reveals what you've just said, that in. In the case of Iran, and not just Iran, but in the case of Iran, it is Western banks, Western offshore islands and offshore territories and things that actors like the IRGC use to launder their money. So the two are the Two worlds are actually totally intermixed.
- [06:40]
B
Yeah, it's such an important point. The core flaw in our global architecture is the fact that money is globalized and has become globalized over the last 50 or 60 years or so. But law enforcement, so as it were, the democratic response to money is still national, it's still local. So there is a mismatch between the capabilities of the owners of wealth and the capabilities of democratic states that would seek to restrain them in what they do. And this really goes to the heart of so much that has gone wrong with society and the economy, you know, certainly in the years that I've been alive. And I think that that's really demonstrated by, as you mentioned, this remarkable investigation by the journalists in Bloomberg about the new Supreme Leader of Iran, though at the time they were writing he was still just the son of the former supreme leader, that he has managed to profit massively. I mean, if the investigation is correct, and it certainly seemed astonishingly robust to me that he and his friends have been able to profit massively from the oil trade out of Iran and taken that wealth and spent it not in Russia or in North Korea or in the kind of places that are referred to as the axis of resistance or the axis of whatever we're going to be calling them this week. They spend that money in the United Kingdom, in the core of Western states. And that has been true across the board. We, you know, we saw, you know, as Putin, Vladimir Putin gradually turned Russia from a flawed democracy into an autocracy and his rhetoric became very stridently anti Western. You know, if you looked at the behavior, however, of his friends, you know, although they would talk about Orthodox nationalism and the need to preserve the Russian nation and so on, where they spend their money, rather gave the lies to what they were saying. They were spending their money in the south of France and in Miami and in London and in Switzerland. You know, the same is true in pretty much every autocratic regime. They like to do the same things that rich people like to do everywhere. And so although the political rhetoric, whether that's rhetoric coming from the White House or Tehran or Moscow or Pyongyang or wherever, the political rhetoric is all about this, you know, clashes of civilizations, these great divides between us and them, whether between the godless west and the God fearing East, or between the democratic world and the autocratic world or whatever, if you look at the money, if you look at what they do rather than what they say, they're in business with each other.
- [09:40]
A
As a sign of this, that Bloomberg report revealed that funds linked to Mojtaba Khamenei, the new Supreme Leader, were rooted through banks, not only in the UK, but Switzerland, Liechtenstein and the US So those jurisdictions handled the transfers. But then also the money was hidden in sort of corporate structures, shell companies in St. Kitts and Nevis and on the Isle of Man. So again, a sign that behind the geopolitical sort of smokescreen, there is still a globalized world of finance, where people on both sides of the divide are getting very rich. Now, Oliver, treat me like I'm a moron. And when it comes to finance, I am. If you saw my checking account, you'd know what I mean by that. Tell me, what is money laundering? I mean, that sounds like an idiotic question because everyone is supposed to know what it is. We certainly hear about it all the time. TV shows are made about money launderers. But I actually don't really understand the, the mechanism of money laundering. And maybe you'll go back like, let's say to the beginning, like the classic decades of the 70s and 80s where I have, you know, Scarface in my, in my head of like, you know, piles of cocaine being turned into piles of, of greenbacks. And then, you know, the mob have to put that money somewhere. But how does it actually work?
- [11:08]
B
So I'm going to go back a little bit further to the 1920s, Al Capone's Chicago, you know, the Prohibition era in the United States. They're making, you know, a huge amount of money from selling whiskey. And they needed a way to make that money look legitimate. You know, they were making money in a criminal way. It was very obvious that they were criminals. They needed to try and make it look legitimate. So the story goes, they bought up laundromats, launderettes, and just claimed to be doing more laundry than they were really doing. You know, instead of they were washing not 20 shirts a day, but 500, and then you could claim you were making that much more profit. And then you've essentially taken criminal wealth, money with a criminal origin that's hard to justify in a legitimate way, and explained it in a completely rational way. This isn't money we made from selling whiskey. This is money we made from washing shirts.
- [12:01]
A
And this is necessary because it's around that time that institutions like the IRS are founded and nation states in general are becoming stronger, more centralized, are taking, you know, let's be honest, a larger share of the natural, of the national wealth in order to redistribute it through social programs and military buildup and whatever. So Once that happens, criminals have to sort of. Or people have to reveal how much money they have, how much money they're making, and criminals have to find ways of hiding the sources of their money.
- [12:32]
B
Yeah, I mean, it should be said that that isn't why we call it money laundering. I mean, it's a kind of post facto rationalization that it doesn't really. It never did involve laundromats. It's just a nice story, actually, it's called money laundering. It's just a metaphor which I was sort of created in the 1970s. Basically, you know, you're washing dirty money and making it clean. That's. That's it. So. But the process, you know, it would be a nice way of laundering money. You know, you're essentially taking dirty money. You're making it look legitimate by washing it through bank accounts, through businesses, through anything. I mean, money launderers are incredibly entrepreneurial. My personal favorite example of how anyone laundered money was by buying lottery tickets for cash. This was in a big thing in Puerto Rico back in the. In the 1980s. They would essentially say, if you've won the lottery, we'll buy the ticket off you at a premium. And then the money launderers could claim, oh, no, we didn't make the money from selling marijuana or cocaine. We made the money from winning the lottery. You know, it is a, you know, an entrepreneurial, global, very, very flexible industry. And it has, I mean, you know, it is a, you know, a constant arms race between criminals and authorities. The criminals earn money and want to make the money look legitimate. The authorities want to stop them doing so so they can identify their earnings and take them off them. And so, you know, back in the good old days of, you know, I don't know if you remember the TV show Miami Vice.
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A
Absolutely.
- [13:55]
B
Definitely a highly glamorous one for any kid growing up in mid Wales in the 1980s, I can tell you, or
- [14:01]
A
in suburban California, I can tell you,
- [14:02]
B
actually talking to detectives who worked in Miami in those days. You know, I'm not claiming it was a documentary, but it was much accurate than you would have anticipated considering how ridiculous it was. The way that you laundered money in Miami in the 80s is you just took it to a bank, handed it in, and they gave you a check. That was it. That then was cracked down upon and they had to become imaginative and fly their money to Panama. And that was cracked down upon and they had to become imaginative. And now there is an incredibly elaborate, extraordinarily complex global criminal economy that Operates, you know, in multiple different, very flexible ways. It is, you know, essentially, why does it matter? Why do we care that it is possible and indeed easy for criminals to take money they've earned, illegally wash it through this washing machine, and come out with clean money they can spend? Because this is what makes crime possible. If you didn't have money laundering, it would be obvious who was stealing money. It would be obvious who was people trafficking, it would be obvious who was a kleptocrat or a corrupt official. You know, all of those things would be immediately obvious. They had money they shouldn't have, and you could take it off them. So this is the support industry for all the problems that are afflicting us at the moment as a society. Whether that's people trafficking or kleptocracy or terrorism. You know, without money laundering, all of that stuff would be much, much, much harder for the. To perpetrate for criminals. And that's why it's a big deal that as a society, we're totally failing to stop it.
- [15:28]
A
One thing that I found really fascinating and learned from your book was how that period in Miami, which was so glamorized by Miami Vice and Scarface, the 70s and 80s, that the. The efforts that the United States federal government took to crack down on that crime, to crack down on money laundering, was one of the reasons why offshoring as a kind of strategy, grew in popularity amongst people who were trying to hide their money. I'd never really made that link.
- [15:58]
B
Yeah, I just think it's a really important point to make and something which I think is often overlooked. But it's a point that has run through all of my books, because it becomes very obvious when you're researching this, is that the structures and the systems, the offshore structures and systems which are created to allow money to move, as it were, outside the formal economy in a way that does not have detection, tend to be invented not for criminals, but for wealthy people and corporations. They are the, you know, the British Virgin island shell company was not invented for cartel buses. It was invented for wealthy Americans to dodge taxes. You know, the. The offshore money markets in the city of London, which is sort of the grandfather of all offshore markets, they were invented not for, you know, cartel buses, Russian kleptocrats, whatever. They were invented for, you know, essentially British banks who wanted to find extra ways of making profits to. And to allow their clients to evade scrutiny. So it is a. There is not a single, like a criminal market and a legitimate market. You know, it is one market that the money doesn't care who owns it. The money doesn't care, you know, where it's going. It is essentially, if the money could be described as having a desire, its desire is to move around the place with the minimum of friction and the minimum of interference and scrutiny. And that's what, you know, the offshore financial system provides for the owners of wealth, whatever that wealth is, whether they are the supreme leader of Iran or whether they are just, you know, a billionaire from California who doesn't like paying
- [17:36]
A
taxes very much or some, you know, Puerto Rican drug dealer in Miami, they don't really care at all. I mean, I think it would make a very funny sitcom to be, to be, you know, sort of take place in one of these offshore banks, because the kind of characters that come through the, the door, or at least their agents. But here's the question, Oliver. Why do governments struggle so much to stop this? I mean, I know that you reveal in your book that in the late 80s, the G7 created an initial mechanism to crack down on offshoring and that sort of money laundering, tax dodging efforts by the rich and the criminal. It didn't really go very, very far, I guess. I mean, here's the thing. Obviously, on the one hand, rich people benefit from these tax dodges effectively. Criminals benefit from being able to launder their money. I've always operated under the assumption that this isn't being tackled because governments, whether in the free world or in the unfree world, are in hock to rich interests. A basic kind of cynical view of the world. And yet the governments do employ people to combat financial crime in this way. So why are they failing to do so?
- [18:49]
B
Yeah, I mean, it goes to the core of what I write about. You know, there is an agreement globally pretty much that money laundering is something that we should stop, that criminality and the misuse of the financial system by criminals is something that we should stop. So that is agreed then the question is, who is going to stop it? To which the answer is we should all stop it. We should all do this. We should all work extremely hard. Now, if you are building a fence around, you know, an amusement park, a city, whatever, then the higher the fence, the fewer people can get in, but also the more you can charge if you own a ladder. So if you are, you know, the more restrictions that there are essentially being put in place on how criminal money can use, the more profitable it becomes to allow people to evade those restrictions. And so you've got a sort of a situation where everyone wants to do Something, but at the same time, everyone wants everyone else to do it so they personally can make money from, you know, allowing rich people to evade those restrictions. And we've seen this in, I mean, I'm from the uk and it's very clear that in Britain there has been essentially a development strategy for the UK in general, but particularly for the UK's offshore territories that they will be in the business of enabling tax evasion, criminality, kleptocracy, and so on, simply because it's a very profitable business to be in. The British Virgin Islands grew from a subsistence economy to really quite, you know, a relatively well off place on the back of this kind of behavior. The same is true of the Isle of Man, Jersey, the Cayman Islands. The Cayman Islands, you know, grew on drug smuggling, drug money smuggling from the 1980s onwards and so on. You know, this is a, you know, it's an open secret. But the same is true of other places too. You know, in the United States there is a, you know, it is astonishingly easy to get a shell company in the United States. Incredibly easy. Those shell companies are useful for, you know, kleptocrats, cartels, all of that stuff. But they don't, they're not marketed for cartels and kleptocrats. They're marketed so ordinary Americans can dodge taxes by structuring their affairs via an llc. You know, that's why they exist. And it is, there's a sort of strange, essentially alliance of convenience between the wealthy citizens of rich countries and in fact, wealthy citizens of any countries and criminals, which is that they all want to evade scrutiny in various ways. They might want to evade scrutiny because they don't want to be criminally prosecuted. They might want to evade scrutiny because they don't want to pay tax. Whatever the reason is they all want to evade scrutiny. And they all evade scrutiny in the same way, which is by using shell companies to hide who they are, using bank accounts in murky jurisdictions and whatever. And so you have this essentially an agreement that something must be done, but not an agreement of who should do it. And you have essentially the real problem, the problem when it comes to money laundering, the movement of criminal cash is really in a very small number of countries. It's the United Kingdom, it's Switzerland, and it's the United States, you know, Singapore, Hong Kong, maybe the Netherlands, places like that, you know, and yet, you know, most of the effort that gets made in terms of forcing people to do stuff doesn't happen in those countries. It happens in small Poor countries which have far less diplomatic resources. Places like the Marshall Islands, you know, I don't nui places that get victimized for not having the right laws on their books, while other countries have the right laws on their books, they just don't enforce them.
- [22:22]
A
And as you say, there's a lot of money to be made by individuals with expertise in how to game this system. You know, obviously Jeffrey Epstein has been in the headlines for months, even years. And we all know now, you know, he was this very rich man. And people ask, where did this money come from? Well, it seems obvious. It comes from the fact that he was extremely adept at helping rich people use the mechanisms available to hide their money to evade tax, to, you know, all of those things. But not just the Jeffrey Epstein's of the world. And I think it's. It can be argued that all the focus on Epstein has made it seem like there was just one guy who knew how to do all of this. But even someone like me, I do not move in very, you know, exalted circles. But you know, working in the media in London for many years, you end up just working for companies or encountering people. And there's always that one guy and you, and he's called like a financial advisor or he's called the CFO or something. And you realize that what he knows how to do is how to create a shell company in this jurisdiction and then how to hide something within that shell company. And it's all sort of legal and he is saving someone lots of money along the way. So there is money to be made by those experts who know how to game the system or how to play the system.
- [23:40]
B
Yeah, I mean, you need to imagine a constellation of thousands, tens of thousands, hundreds of thousands of people. I'm not saying they're all as grotesque as Jeffrey Epstein. I think he is a, you know, hopefully anyway, an outlier in terms of the grossness of what he got up to. But in this sort of theoretical sense, the idea that essentially you've got very large numbers of people who are thinking all the time, how can we get an edge? How can we find a way to make life easier for people who can afford to pay me to make their lives easier, and there are essentially lots of people pitching rich people all the time, I can shave off a little bit of a percentage on this, I can shave off a bit of that. I can help you evade scrutiny on that. I can get this law passed here. You know, it is a giant, entrepreneurial, incredibly flexible, endlessly mutable system that it isn't that these people are evil, I don't think, I don't like to think of people as evil. I think everyone is the good guy in their own story. It is just that they are personally incentivized to make fees from saving rich people money. And if you do that, and if you keep moving in that direction, it's like a ratchet that keeps moving in that direction, then you will inevitably end up with a world that is more comfortable for wealthy people, less comfortable for the, for the rest of us.
- [25:02]
A
And as the global economy became financialized, as they say, there was just so much more money around. And so as you say, you know, if you can promise to shave a quarter of a percent off of some multi billionaire's wealth, you know, that's still a lot of money. Tell us or try to explain how the development of a financialized economy globally impacted these money laundering sort of methods. Because you know, you started talking about Al Capone and Miami drug dealers and there you're talking about cash. But as we know, in the meantime, finance and money has become so much more sophisticated as technology has evolved and as unlike things have happened. So explain how money laundering has developed over the last, say, 35 years.
- [26:05]
B
Well, I mean, just, I mean to start that, I want to stress the continuing significance of cash. I think that, you know, we in a way can be at risk of being distracted by the new shiny thing. And I think we can get onto the new shiny thing, which is crypto, which is a very big deal. But the old non shiny things still exist, they're still important. Cash remains the single most useful tool for any criminals out there. It is a fascinating fact of sort of weird statistical importance to me that although ordinary people everywhere on earth pretty much are using cash less and less in their day to day lives, I
- [26:51]
A
mean, I never use cash anymore, Oliver, never.
- [26:53]
B
In the UK, fewer than 10% of transactions now involve cash. And those transactions are on average smaller than transactions that do use cash. I think the latest figure from the US is, I think it's 14% of transactions are cash in some countries it's a bit more than that. Germany and Austria remain pretty attached to cash, but still the percentage is falling all the time. So because cash is essentially something we can buy from central banks and then sell back to them if we don't want it anymore for the same amount we paid for it. You would imagine since we're not using cash anymore, that we would be essentially putting it back in the bank and not taking it out anymore. And that Central banks would end up with a real problem, which is what do they do with all the cash people don't want anymore? They'd have huge rooms full of banknotes and trying to figure out, you know, if they can use them, this toilet paper or something. That isn't what's happening. If you look at the statistics, the amount of cash in circulation just goes up everywhere year after year after year.
- [27:46]
A
In the uk yeah, this, my jaw hit the ground when I came to that chapter in your book that there's actually more cash in the world just as people use cash less often. So the question is, who's using that cash? Why are governments printing the cash?
- [27:59]
B
Where's it all going? I mean, I visited the factory. Well, there's two factories in the U.S. there's one in Washington, an old one and a newer one which was opened in 1990 in Fort Worth where they print the US dollars. And it is an awesome operation. I mean, just the speed and efficiency with which they're churning out US currency is incredible. But despite the fact that they've invested in new printing presses, they're unable to keep up with demand. They're having to open a whole new factory in Maryland which is, is going to open in five or six years because the amount of US currency in circulation doubles every decade. It has been doing that as long as I've been alive. And I mean they call this a paradox of banknotes in central banks. The idea that people aren't using them and yet somehow there's this endless bottomless demand for them. There is more than $7,000 of outstanding US currency for every single person in the United States. It's an incredible amount of money. And where is it? Well, I mean, it isn't in the United States. Most of this goes overseas. A lot of it crosses the border into Mexico. A lot of it will be sent outward by ship. And it is being used essentially as the float for a global criminal economy. I mean, I don't want to let other countries off the hook. I mean in the UK the amount of sterling banknotes went up by about something like 8 or 9% last year. In the EU, the total hit an all time high in December. In Switzerland they have a 1,000 franc banknote that's, you know, I don't know what's that, $1,300 in a banknote?
- [29:26]
A
Yeah, the high denominations are a sign that the cash is being used illicitly. Really, because what ordinary person needs a thousand euro banknote? I mean, I actually think that the EU at one point cracked down on Euro 500 banknotes being usable in shops, and yet they still make these high bank notes.
- [29:44]
B
So they stop printing €500 in after the terrorist attacks in Paris in 2016. They still have 200 and 100, which are big enough $100 bills. I mean, it's pretty unusual to see one in the US to be honest. I mean, but they are more than eight, something like 80% of all the currency being printed is in form of $100 bills. It is amazing, this hiding in plain sight the fact that we have this gigantic, astonishingly intrusive and very expensive system that has been built up to try and tackle money laundering via the financial system, while at the same time governments are printing almost bottomless quantities of the most useful tool for evading those very restrictions. It's like with the left hand or the left foot they're stamping on the brake and the right foot they're stamping on the accelerator.
- [30:26]
A
Okay, so cash is still important, but what about all these techno wizard like kind of financial tools and instruments we're always hearing about these days, I guess, like bitcoin and all that kind of stuff? What's the story there?
- [30:41]
B
So the important thing to think about is that when the techno wizardry comes in, whether this is the use of shell companies in the British Virgin Islands or the use of cryptocurrencies, which are the new thing, it's not an either or. They're not saying, oh, we're going to stop using cash, we're now going to use cryptocurrencies. Everything builds on everything else into this sort of fractal complexity whereby everything becomes more sophisticated and more complex. And the d. The joy of cryptocurrencies, particularly what are called stablecoins. So these cryptocurrencies, not bitcoin, but cryptocurrencies which are pegged to a real life asset.
- [31:17]
A
Yeah. So bitcoin's value is always fluctuating. The whole point of a stablecoin is it's more or less pegged to the
- [31:23]
B
US dollar, almost always the US dollar. There's a couple of other ones, but normally the US dollar, the big ones, the US dollar anyway, they are incredibly cheap to use, instantaneous for moving money from country to country, you know, almost entirely unchecked. I mean, stablecoin companies would say otherwise, but essentially they are almost entirely unchecked. And so you can essentially, you have a system now where street level crime takes place in cash and the money launderer will essentially buy your cash off you for cryptocurrency. For stablecoins. And then you, as a criminal gang can use those cryptocurrencies to buy more drugs, to buy, you know, whatever. You can send that overseas. You can do what you like with it. And so it is a, you know, essentially a sophisticated new form of the old tricks. The old tricks haven't gone away. They've just become more sophisticated and more developed because of new innovations. And it is a real problem that we've essentially not only failed to stop the old techniques, but incentivize criminals to create ever new techniques which just make it harder and harder to stop what they're doing. And it's a little bit like treating a disease with antibiotics, but stopping before the end of the course. You know, you don't treat, solve the disease, but you encourage the disease to evolve resistance to that antibiotic. You know, every time, with these incomplete techniques that are used against money laundering sort of performative techniques, you just encourage the criminals to come up with a new response to them without actually stopping the original technique. And so the criminals become ever more elaborate and entrepreneurial in what they're doing and ever harder to stop.
- [33:09]
A
Mentioning crypto and stablecoins and all that stuff inevitably makes me think of not just Donald Trump, but Donald Trump's family. Now, there are all these allegations, you see them all the time, that the Trump family are engaged in some pretty extreme forms of what seems to be corruption because there's so much political partisanship involved in all sorts of things to do with Trump. I never really know what's going on, but it seems clear that the Trump administration is trying to put forward stablecoins as almost like an extension of the United States currency, but that his family is directly implicated in big profit making in this regard. What can you tell us about this world and the Trump family's exposure to it?
- [34:05]
B
Well, I think the first point to recognize is the radical change that happened in how crypto was approached from a law enforcement and regulatory perspective. Between the Biden and TRUMP White Houses, Trump 2, White House there had been essentially attempt to regulate cryptocurrencies as if they were any other financial instrument under the Biden White House to treat them as they are, as a crucial vector for money laundering and for fraud. And that was very, very unpopular with crypto people, as you would imagine. They didn't like being regulated. They wanted not to be regulated. So the crypto industry as a whole, particular individuals in particular, were very generous to the Trump campaign. He had previously been very skeptical about cryptocurrencies. But when the funding came in, when people started offering him quite a lot of support, he changed his tune and started talking about the fact that the United States needed to be at the forefront of financial innovation, at the forefront of cryptocurrencies. And he created, or his family created, their own company is a company called World Liberty Financial, which, you know, people invest in. It doesn't really do very much as a company yet, as far as we can tell, certainly isn't very successful as a developer of crypto products. But if you invest in it, you're essentially giving money to the Trump family. And that has been very profitable for the Trump family, particularly his sons, who run the company on his behalf. And they've done really well out of it. I mean, in terms of what the latest estimate is of how much money they've made, I can't remember. I think there was an estimate from the New York Times that suggested his family had made $800 million in the first six months of his first of his second term. We're talking about a really astonishing amount of money. And that's just the cash returns. We're not talking about paper returns which go onto that as well. It isn't just the Trump family making money from this. Zach Witkoff, who is the son of Trump's envoy to, well, pretty much everywhere, but particularly as envoy to Russia, is it also involved in World Liberty Financial? And Howard Lutnick, the Commerce Secretary, he used to run a financial institution called Cantor Fitzgerald that is now run by his sons. That company is very closely tied to Tether, probably the most significant crypto company, possibly the most profitable company per employee there has ever been. He, his account of Fitzgerald has about a 5% stake in that. And so, you know, we are in a situation where with the best will in the world, if your family is looking at, you know, a multi billion dollar profit from an industry, it is going to make it difficult for you to step in and regulate that industry in such a way that's going to cost you money. That's just human nature. So we have a very close business alliance between senior members of the families of, you know, Trump himself, his, his envoy to Vladimir Putin, his Commerce secretary. You know, all of these people are, you know, involved in regulating crypto, involved in crafting the regulations around crypto, while also their families are profiting massively from that. And, you know, you can call that what you like. A lot of people call that corruption. I think you can certainly say that there's a conflict of interests there and a very troubling one, particularly considering the companies. Sorry. Particularly considering the groups around the world who are using crypto. You know, this is being used to launder money for the Colombian drug cartels. So at the same time that the Trump White House claims to be essentially declaring war on the cartels, they're also taking the leash off the most useful tool for the mad scale movement of money. The Iranian Revolutionary Guard is using crypto to move money around fraudsters in Southeast Asia. The Russian authorities, you know, when they're looking to evade sanctions. All of this is happening all the time, that the geopolitical, the professed geopolitical enemies of the United States and of the west more broadly are all using crypto to evade Western financial restrictions. So that is supposedly people that we are opposed to. But if you look at the money, these are very much people who are then essentially in business with the elite in Washington. It's a really worrying time and pretty unprecedented, actually, because generally speaking, as long as money laundering has been something that anyone takes seriously, the United States has been at the forefront of efforts to tackle it. It is a new and very worrying development that the United States is now not at the forefront of efforts to tackle it anymore.
- [39:02]
A
So from the United States, let's swing to China, the other great global behemoth at the moment. So China has very strict capital controls in general, which incentivizes people in China to do what they need to do to get their money out of the country, to hide it, to invest it elsewhere, et cetera. And for that reason, a pretty complicated underground banking network, globally linked to Chinese, linked to Chinese money basically has grown up. So from America now, tell us about China and the way that it is exposed or how it, you know, how it uses these global shadow finance networks.
- [39:46]
B
Yeah, I mean, it's always difficult to know with China of how much of what is going on is happening essentially because of the government, in spite of the government, with the active collusion of the government, with the indifference of the government, you know. But it is unmistakable that certainly in the last 10 years, possibly a little bit longer, a gigantic international, globalized money laundering system has grown up controlled by Chinese gangs. They are referred to Chinese money laundering networks or Chinese money laundering organizations. You've seen them in the United States, in Europe, in Canada, in Australia, all over the world. Essentially, wherever there is a Chinese trade presence or business presence, there is a Chinese money laundering presence. And the core driver of this, as you mentioned, is that it's actually very difficult for wealthy Chinese people to get their money out of China, if they want to go and spend money on Louis Vuitton in Paris, that's not easy for them to do. So there is a demand for them to have an informal system whereby essentially they can arrive in Paris and be handed some money to spend on designer goods, or they can arrive in London and have some money to spend on property, or arrive in Vancouver and have some money to spend in the casino. You know, that is, you know, really almost bottomless demand for money which these gangs are supplying. And that is very convenient to criminals in Western countries who have a very large amount of money they want to get rid of. You know, they have a large amount of criminal wealth that they want to launder to make it look legitimate. So there is this whole new money laundering model. Where previously the problem was, if you had a lot of criminal wealth, the difficulty was getting rid of it. How do you make it look legitimate? That isn't a problem anymore. There is a huge demand for this wealth. So there is essentially a really efficient matching of the supply of criminal wealth from criminal groups, drug gangs and so on, and the demand, which is from wealthy Chinese people. And this means that it is much cheaper and more efficient now to launder money than it has ever been because of these Chinese groups. And this is great for criminals. It means it is far more profitable to commit crime than it has previously been because the money side is just completely taken care of.
- [41:57]
A
So how does this actually work? Say I am a Colombian drug lord and I have a billion dollars in cash and I want to get rid of it or do something with it. What do I actually do to sync up with these, with this Chinese network of illicit finance?
- [42:17]
B
So that, I mean, the cash that you as a Colombian drug lord has probably won't be in Colombia. The chances are you will have generated those profits in the United States or the eu, the United Kingdom or wherever. So you have got substantial quantities of cash which you have generated in those countries. So there is a lot of criminally derived cash on the streets somewhere. Now that is collected in a central place by a courier who collects that money. They normally identify themselves by the means of a low denomination banknote. They will have shared the serial number of it in advance, and then you could hand over the banknote to axis identifier and receipt.
- [42:56]
A
So it's like a kind of key card in a way. This one you have like a $1bill, it has a serial number. You've told the serial number in advance so they know it's you.
- [43:04]
B
Yeah, they call it a token. This system is used around the world. It's amazing. I don't know whether it was invented independently or whether it's spread like good ideas do, but essentially, it's amazing. You essentially use a banknote as a simultaneous receipt and identifier without identifying who you are. It's very clever. And so that cash has now been collected by a courier who's got a big bag of cash that he's collected from you, and he will pay for that cash with. It could be a luxury goods, it could be with crypto, it could be with services, it could be anything. But essentially, the. The cash will be paid for, but then the cash is taken and either
- [43:41]
A
put in, say, the cash will be paid for. You mean someone is gonna buy that cash off of you and give you in return something?
- [43:49]
B
Crypto, you know, a nice car, whatever. I mean, stuff of some kind. And then the cash. Now that can either be put into bank accounts in small quantities, and those bank accounts, often controlled by Chinese students who will rent out their bank accounts.
- [44:03]
A
Wow, that's interesting. Goodness.
- [44:04]
B
Oh, I mean, often Chinese students who've now left, they don't study in Western countries anymore will just sell their bank account, you know, which will exist like a zombie bank account. And you put money in there, and then that can be moved around, or else it can be useful in cash. A lot of people like cash. You know, you can just hand over cash to a wealthy Chinese person, a wealthy Russian person, a Russian espionage agency, you know, Russian propaganda outlet, whatever. Anyone who wants cash and is excluded from the financial system, they want the cash. So then the challenge is, you know, so you've got a debt in the west between the wealthy person who's received the cash and the drugs gang who are now owed something. And now the challenge is, how do you pay for that? And that is arranged at the other end. In China, you would arrange for transfer of money from one side to the other in China, and then goods will be shipped internationally to pay the debt. So what you have is the transfer of value, which is what we're really talking about, not money. It's all about value. The transfer of value happens in the form of stuff that could be in the form of drugs being shipped from Colombia to the UK that could be in the form of counterfeit goods being shipped from China to Colombia, could be in the form of luxury goods being shipped from the UK to China, whatever. The form of value that's moving around the world to make all these transfers net out is in the form of physical stuff or in the form of crypto isn't in the form of money moving via the financial system, because the financial system is very closely monitored. But what's super interesting about this system, and the Chinese didn't invent this, this is also how value transfer system worked in the Middle east with hawala, or in between South America, North America with what was called the black market peso exchange. This is how the Medicis used to bank in the Middle Ages.
- [45:42]
A
Yeah, I love that in the book. You realize how ancient these strategies are.
- [45:46]
B
If you went, went into the Medici's office in Florence in the Renaissance Italy and handed over a bag of cash and said, I want that cash to turn up in London. They didn't just ship the bag of coins to London and then give you them there. You know, they'd give you a piece of paper which you would take to London or Bruges, hand over, and then you would collect bullion. In those countries, it wasn't the same bullion. They just had bullion in both countries. And now then there's a debt from Florence to London or vice versa, which they would net out by. In the trade system, they would either move more silk in one direction or more wool in the other direction, and everything would net out. And that's how it worked. And that's. This is the same system that Chinese money laundering gangs use. It's about moving value via trade, not moving value via banks. And that's something that in the west, we have forgotten about, because that's not how we do things. You know, we use banks. But that is a very ancient, very robust, and quite hard to penetrate system that we really need to relearn because, you know, at the moment our enemies are using it. Whether that's terrorists in the Middle east, whether that's, you know, Russian spies, whether that's Chinese kleptocrats, it's what everyone's using.
- [46:55]
A
How do the various regimes of international sanctions work in this whole world? So if you're sanctioned by the United States and its Western allies, like Russia is sanctioned, like Iran has long been sanctioned, like China, in fact, every now and then is sanctioned, how does that incentivize those countries like Russia, Iran, China, to create ways of getting around sanctions? So in a way, by sanctioning big rich countries, you are incentivizing those countries to create for themselves essentially global criminal networks of money laundering so that they can get around the sanctions. So I understand that after many decades now of living under sanctions, Iran, the IRGC especially, has built up sophisticated ways of getting around the sanctions and then can actually help other people do the same thing. So like, I don't know, corrupt African warlords or again, drug dealers in South America can go to Iranian financial shadow financiers and say, can you help me get around various laws? So to what extent, as a kind of unexpected blowback to sanctions, as a tool of international policy, is this adding to the problem?
- [48:12]
B
Yeah, I mean, it is happening all the time. It has been, we, you can see it in, in real time really at the moment with the sanctions against Russia, which have been very extensive since 2022. You know, the Russians have created their own form of cryptocurrency, their own stablecoin, which they're now using extensively. They are using. They've got a lot of assistance from the Iranians, a lot of advice in how to do this. Iran has a lot of practice. Talking to Iranian businessmen about how they move money around despite sanctions is fascinating. It's incredibly quick and really as efficient as using the Western financial system. It's not quite as quick, but it's not far off. In a couple of hours, money from Tehran to London. Not at the moment, but this was before the current war and it is a really, I mean, it's a sort of predictable result of sanctions and it's already boneheaded. The extent to which the Trump White House now is now overusing sanctions. I mean, they have been sanctioning, say judges from the International Criminal Court because they investigating people that they didn't want them to investigate. This is essentially just teaching your adversaries that they shouldn't use anything connected to you and that they should create a whole new financial system which has been what's happening. The Chinese money laundering network grew up because of the capital controls imposed by China, but now they're extremely useful for anyone to move value absolutely anywhere outside of the scrutiny of anyone. And what this means is that terrorist groups now have a whole spectrum of techniques they can use to move money outside of the scrutiny of Western countries. I mean, previously when international finance largely meant dollar finance, all of those transactions cleared via New York and America had oversight of those. But because of, I think the overuse of sanctions as a tool, almost like the go to tool, that capability has gone. I've always felt that sanctions should have been used always as the last resort, like a button on the dashboard of a spaceship that you hit when you're in real trouble and you need to escape from the bad guys. But you want to have spaceship which can go super fast before you have a boost on the spaceship. It feels to me like sanctions just became the only answer to everything. It didn't matter what the problem was. Use sanctions. And that has essentially incentivized baddies everywhere to create their own financial system outside of the reach of Western sanctions. Which again, to go back to the metaphor about antibiotics, it's a little bit like overusing antibiotics. When you've got a bit of a sniffle, you know, you're going to essentially teach the bacteria via evolution. You're going to teach them essentially to be resistant to the antibiotics.
- [51:03]
A
I can also see a big geopolitical dimension to this phenomenon, because if America's global hegemonic kind of regime during the period of unipolarity and globalization and liberal internationalism and all of that, if America's ability to govern the world to the extent that it had that ability, was linked to a global financial system tied to the US Dollar, basically, and the ability of New York and other cities linked into that system, London, Frankfurt, et cetera, to kind of coordinate that global finance, that licit global finance system. But if, in the meantime, underneath it has grown ever more powerfully competing, illicit, I mean, just illicit from the point of view of America, illicit financial systems and networks, this would weaken, you know, America's global order. It would be a rival to it. Now, I wonder, and this isn't to excuse any kind of profiteering that members of the White House and their family are benefiting from as a result of this, but it might explain why there are these moves afoot for the United States itself to get involved in this murky underworld somehow to regulate it, just to have a bit of skin in that game in order to claw back some of its global power that it's lost to these illicit financial networks. I mean, does this make sense, what I'm saying?
- [52:34]
B
Yeah, I mean, it does. You know, I suppose the. The difficulty that I have with it. And this is again, going back to, you know, one of the core themes of Everybody Loves Our Dollars is that the. The effort against money laundering and the effort against Russian kleptocracy or Iran or whatever, so much of that effort has been outsourced to financial institutions. They've said they've published a list of these people. These companies are sanctioned and they aren't allowed to move money. And it is your job as a bank to identify all the accounts connected to them and not to move money for them. And, or, you know, here is a series of rules around money laundering. And if you see these, you need to report these suspicions and block These transactions, that's your job. And essentially, financial institutions are not law enforcement agencies. They're not good at it. They're not. That's not what they're for. They don't exist to stop criminal finance. They exist to make a profit. And so any system, whether that is, you know, involves crypto or whether that involves anything that replicates that model of outsourcing the checks and the enforcement to profit making institutions is always going to fail for the same reason that the one we have now is going to fail. This. If you really want to stop the movement of Chinese, Russian, Iranian wealth via the financial system, it isn't enough to say to the financial system, you need to do this yourselves. You need to really get stuck in. You need to get involved diplomatically and legislatively and in an intelligence setting or whatever it is, across the piece, full spectrum response that is required. But so far, for far too long, the response has just been like, we're going to issue a press release about who isn't allowed to do this stuff and we're going to rely on the banks to stop them from doing it. That doesn't work and it hasn't worked and it won't ever work. And that is, to my mind, a lot of the problem with sanctions as a response, a lot of the problem with how we've gone about tackling money laundering, too much of it has been outsourcing the work to people who don't want to do the work and actually aren't set up to do it either.
- [54:49]
A
Well, Oliver Bolo, thank you so much for coming on to Conflicted. Dear listeners, I promise you you will learn a lot by reading Everybody Loves Our Dollars. It's available in all good bookstores and through all good booksellers. So please buy a copy and and learn about this incredible world that most normal people like me don't know very much about. Oliver, thanks so much for coming on Conflicted. It's been a real joy.
- [55:13]
B
Thanks for having me on the show. It's been brilliant.
- [55:16]
A
That was Oliver Bullough. Do check out his new book, Everybody Loves Our Dollars. And remember, for deeper dives into the ideas we explore on this show, including extended conversations and Q&As with my CO host, Eamon Dean. Check the show notes for details on how to join the conflicted community. I'm Thomas Small. Conflicted is a Message Heard Production. Our executive producers are Jake Warren and Max Warren. This episode was produced and and edited by Thomas Small.
- [55:56]
C
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