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Money Talks: Modern Money Laundering
00:34:36
Joe Salama tells Felix Salmon what money laundering looks like these days and how he fights back.
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- [00:05]
A
Hello and welcome to Money Talks from.
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B
Slate Money, our interview series where we talk to the most interesting and fabulous people that we can find out there in the world. I'm Felix Salmon of Bloomberg and this.
- [00:25]
A
Week I am talking to Joe Salama. Joe, welcome.
- [00:29]
C
Thank you. It's a pleasure to be here. Felix.
- [00:32]
A
Joe, introduce yourself.
- [00:33]
B
Who are you?
- [00:34]
C
I am the chief compliance officer of Coinbase.
- [00:38]
B
That sounds really boring. Is that boring?
- [00:40]
C
It is not boring. It's actually really, really fun and exciting. It really is like, that's not a joke.
- [00:46]
B
It really is fun because like, you know, whenever anyone talks about finance and.
- [00:51]
A
Money and stuff, people talk about like.
- [00:52]
B
Back office operations in Tampa or they talk about compliance and that's where all the boring people go.
- [00:58]
A
But the fact is that you are not a boring person.
- [01:01]
B
You're kind of like burying the lead here. You are one of great Wall street experts on money laundering.
- [01:08]
C
Well, on prevention of money laundering, I'd say. But yeah, it is pretty exciting because there's not a ton of roles that you would find in the finance industry where I think you can have as direct an impact as you can in the compliance space. And it's constantly evolving. It's always a, you know, a question of making sure you understand the most recent typologies, how to detect them, how to prevent them. So it's a never ending quest.
- [01:37]
A
This is a good old fashioned, like white hats versus black hats, good guys versus bad guys race where each of you is sort of improving your technology.
- [01:46]
B
To try and stay ahead of the other side.
- [01:48]
A
You've got the money launderers and then.
- [01:50]
B
You'Ve got the anti money launderers and you guys will always be at war.
- [01:55]
C
Correct? I think that's, I think that's pretty accurate.
- [02:02]
D
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- [03:44]
B
So you are more familiar with what money laundering looks like these days than anyone else I know. And so I wanted to ask you.
- [03:54]
A
That because I feel like people, when.
- [03:55]
B
They think about it, they don't really know what it is. And maybe they think, oh, something, something bitcoin. Or maybe they think like rice pudding store in New York City where they're like, you can't possibly make money. It's gotta be just a money laundering front. What would you say is the number one median most common way for a criminal to take money that was illicitly obtained and make it look legitimate?
- [04:24]
C
There are a number of different typologies in that space. First thing I'll say is it's a pretty ancient profession. It's been around for a very, very long time and it's gotten increasingly sophisticated. But the basics of it are really essentially the same. You want to get the money into the financial system. That's a sort of placement stage. You then want to get layering in the financial system in order to be able to make the money look more legitimate. And then you want to sort of reintegrate it so that you actually get to use the money that you have, you know, so carefully placed into the system and layered through the system. So there are a number of ways to do that. I'm not going to besmirch the rice pudding place. The rice pudding is delicious and I don't know that there's anything illegitimate going on with the rice pudding store, but cash intensive businesses can be used for money laundering purposes. One of my favorite shows is Ozark and you can get a really good lesson on how the sort of cash based businesses can aid in money laundering. In that context, the formula is sort of fairly simple, right? Like you sort of, you're taking in A lot of cash as a business and therefore additional cash that might come from illicit sources can be co mingled with the cash from the cash business. And then you can make what look like legitimate payments to coming out of that business. And that then is the sort of process of essentially cleansing the money. Right. So that that money now moves on into, into the system and looks like it's coming from a legitimate source when actually its origin was, was a criminal source.
- [05:58]
A
Is there like when you say cash.
- [06:01]
B
Businesses and money laundering just because the word is right there? I think a lot of people think about laundromats. But like what, what is like the most popular? If like number one, is that still a popular form of money laundering? And number two, if it is, what is the most popular form of cash business to use?
- [06:17]
C
I don't think that that's driving volumes. It doesn't scale all that well as, or scale as well as other forms of money laundering. And so I think if you were to think about where you're seeing the scale, I think places like what we call trade based money laundering are more scalable. And so what that is is essentially utilizing international commerce in order to be able to move value across in what appear to be legitimate arm's length transactions. And so you might have for example, an over invoicing where you're transferring more value in one direction than the actual goods or underinvoicing the sort of flip side of it. And so in that way you have what looks like a legitimate trade and with big numbers, but actually you're moving illicit funds across.
- [07:05]
B
When you talk about scale and big numbers, I'm getting the feeling here that if I'm a rice pudding store in New York selling $10 million worth of rice pudding per year, that's like small beer for the kind of people that you're talking to and that you want $10 million per shipment to be laundered.
- [07:22]
A
Like tell me globally speaking, how big.
- [07:24]
B
Is the money laundering industry? And then if I'm a money launderer working for criminal and they come and give me some money to clean, like how much money on average are they going to give me per sort of gig?
- [07:36]
C
The scale is sort of frightening in terms of the global numbers, estimates are probably anywhere between 2 and 5 trillion annually.
- [07:44]
B
Trillion?
- [07:45]
C
Trillion? Yeah.
- [07:46]
B
Trillion with a T. Trillion with a.
- [07:48]
A
T. That's like the GDP of a large country.
- [07:50]
C
You're talking about a significant percentage of gdp. Yeah.
- [07:55]
B
Wow. Okay.
- [07:57]
C
And I wouldn't say that there's any sort of typical individual size transaction.
- [08:01]
B
If there's literally trillions of this going on. Then just by sheer mathematics, like even if it's hundreds of thousands of different launderings happening, each one is going to be in the large millions, like trillions, just that boggles the mind.
- [08:19]
A
Can I ask you just like where.
- [08:20]
B
Did these estimates come from and how reliable do you consider them to be?
- [08:24]
C
There's a number of NGOs that have come forward with these estimates just by saying that there's a range of, you know, 2 to 5 trillion, like that's a 3 trillion swing. So they're not all that reliable in terms of. They're not all that specific. Right. But I do trust the numbers in terms of the order of magnitude. I would be surprised if we think that it's a trillions problem and it's really a billions problem. Right. I don't think it's off that by that much.
- [08:51]
B
And so by definition, that is the, broadly speaking, the size of the criminal economy globally. Right. And what are the main sort of sectors there? Is it mostly drugs? What is it?
- [09:02]
C
Well, it's across everything. So you've got drugs, you've got scams and frauds is a massive industry. You've got human trafficking, which is also quite significant. It's across the gamut.
- [09:14]
B
So it's not like that 2 to 5 trillion is like overwhelmingly one thing. It's just like a whole bunch of different criminal enterprises and they are all generating some form or another of cash. It's like, is that the thing they have in common is that criminals always love cash and that they are always going to be like running around with $100 bills.
- [09:35]
C
So a lot of it is hard cash. Especially when you're talking about drug trafficking, human trafficking, there is a ton of that that is moving around in cash. Absolutely. And I would say probably just US Dollars alone. It's got to be in excess of a trillion dollars worth of cash flushing around. So that's definitely a big part of it. And you know, it is. The overwhelming majority is still in cash.
- [09:56]
B
I need to ask just because, as you know, I'm a little bit of a sort of art geek and you know, I used to work for this guy, Nouriel Roubini and one of his favorite things that he would love to talk about is how he considers the entire art world to just be a sort of money laundering front and that there's, you know, all of these paintings sitting in Geneva Freeports is just a way of creating sort of portable stores of wealth that aren't suitcases filled with hundred dollar Bills.
- [10:22]
A
I kind of like, intuitively I feel.
- [10:24]
B
Like this is a tiny rounding error in terms of the 2 to 5 trillion dollars of what you're talking about. It's another one of those things that can't scale. Would that be right?
- [10:33]
C
You'd have to sell a lot of rice pudding to generate the kind of money that changes hands with a nice piece of artwork.
- [10:40]
B
That's also true.
- [10:42]
C
So, you know, even a Bob Ross would be a lot of rice pudding. The art industry is an area that does have a particular vulnerability. In part it's because the high value, the transportability and the fact that historically there have not been really any kind of KYC requirements around auction houses and art dealers in order to be able to ensure that you know who is the recipient. Right. So that, you know, this notion of KYC that you have at the banks, which you know, you know, know your customer is the acronym, didn't fundamentally exist in that space.
- [11:17]
B
So banks have historically had these KYC obligations and if they fail to kyc, then they get fined large amounts of money by regulators. And banks are very regulated institutions, and the regulators make sure that if you're opening up a bank account, then the bank does diligence on you to make sure that you're not a criminal. There have been a bunch of attempts, reasonably successful attempt, to extend this KYC regime to include financial services companies that deal in large, you know, expensive things, which would include art dealers, auction houses and whatnot. But art dealers and auction houses are not regulated in the same way the banks are. So even if those laws pass, I'm going to just come out and say that it's not going to be like an everyday occurrence for, you know, a bunch of cops to turn up at Gagosian and be like, can we audit your KYC trail?
- [12:11]
C
Yeah, I think that's right. There is an enforcement problem in that regard. If you're a large financial institution, you pretty much have like on site supervision on a regular basis. You know, some of that, like how on site it was, has shifted a little bit with COVID But fundamentally you've got on site supervision. You can't scale that right across, you know, all art dealers, all accounting firms, all law firms. But it is being more broadly recognized that those are necessary choke points to at least have some mechanism. And then you've got to, you know, as is the case frequently, you mentioned the fines before. You've got to create an environment where even if you might not catch 99 out of 100, the one that you catch, you make an example out of. And you've got to instill a bit of fear of God by doing that.
- [13:00]
A
Can you outsource any of that?
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B
If I'm a regulator, can I outsource that to the banks? Used to work at a very large bank. And so could you just say to the banks, you know, if a big art dealer wants to open a bank account, you should say no, unless you're comfortable that they in turn have a robust KYC operation.
- [13:18]
C
There already is this sort of like the KYC obligation that sits on the financial institutions in order to be able to understand their customers. For customers that are effectively, you know, processing large flow of funds, you would have your controls commensurate with the risk profile of the customer. And every customer that comes in gets risk rated. Higher rated customers undergo a more severe amount of, you know, interrogation and scrutiny in order that you would understand their business.
- [13:46]
A
Does that mean that it's hard?
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B
If I'm, if I'm a big money art dealer in New York or London or Geneva or Hong Kong, is it actually surprisingly difficult for me to open up a bank account?
- [13:56]
C
I wouldn't say that it's surprisingly difficult to open a bank account, but once you're in the door, you're subject to a level of scrutiny that's different than a regular mom and pop savings customer. Every transaction that happens that flows through a financial institution, same true with Coinbase or with a bank undergoes transaction monitoring. There are a number of different ways you can run the system. The traditional way is essentially you've got a number of rules, you've got thresholds, and so you would actually run your system to be more sensitive on a high risk client than on a low risk client. And that would then kick up a substantial number of alerts, those get reviewed and investigated. And so you then have a higher likelihood that you're gonna detect conduct from a high risk client because you've identified that risk and you've got that framework in place.
- [14:46]
A
So would you say like in terms.
- [14:48]
B
Of legitimate organizations that move large amounts of money around, so Coinbase or Gagosian Gallery or you were mentioning law firms, that kind of thing? Insofar as they wind up being caught up in this multi trillion dollar money laundering economy, is it mostly because the criminals have managed to dupe them, it has managed to persuade them that there's nothing going on here and they're like completely innocent, or is there, to what degree are they complicit in much of that activity?
- [15:22]
C
I think when you're talking about large institutions, certainly when you're talking about Coinbase, there's absolutely no complicitness or complicity or whatever the word is.
- [15:30]
B
But we definitely know from various prosecutions of like Binance and various other large crypto companies that it is relatively common for crypto companies to be fined, investigated, prosecuted for extremely blatant AML fails like that has been sort of endemic to the crypto industry for as long as the crypto industry has existed.
- [15:53]
C
I think if you look across the financial space in general, you will not find a traditional financial institution of any scale that has not had an AML related, finer issue.
- [16:06]
B
Right.
- [16:06]
C
So I don't think it's a crypto specific issue. I do think that what you've seen, seen both in traditional finance and in the crypto space is a evolution of maturity of the control framework. And at various points in both industries there have been companies that have focused more on the growth of their business than the growth of their controls. I'd say that our company is somewhat unique in its positioning because it's always made a sort of bedrock or foundational point that we want to be the most trusted and compliant in the industry. And the way that these things sort of work, as you can imagine, is if you can introduce more friction than your peers, then the illicit flow of funds is going to navigate to the more frictionless path rather than the more.
- [16:51]
B
Friction path, which kind of implies that it doesn't actually do much good. Right. All you're doing by beefing up your compliance is moving the money laundering somewhere else. You're not actually reducing the amount of money laundering going on.
- [17:03]
C
If you're looking at any individual company, you can make that argument. It's sort of like saying if I lock my door or put good security cameras, it's going to make it more likely that my neighbor gets robbed and then I get robbed. But you create a bit of a, hopefully you create some strong trending around everybody increasing the levels of controls and that just makes it net, net harder for the criminals to succeed.
- [17:27]
A
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- [17:34]
B
Multi hundred billion dollar question, which is what is even the chance of anyone getting caught doing this?
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EVERY gallon on your first tank of gas, using promo code SLATEMONEY. If we want to see how hard it is to launder money, and we only want to look at one number to try and work out how hard it is to launder money, the number that we would look at is how much does it cost to launder money? If you have to pay 25% of your ill gotten gains to launder it into legitimate cash, then that obviously implies that it's a very expensive and dangerous and difficult thing and that the compliance is working. On the other hand, if you have to pay like 1%, then obviously, you know, all of this AML work has basically done very little. So tell me, what has happened to the cost of money laundering over the past few decades?
- [24:22]
C
Yeah, so I can also contest the foundation of the question. Right. So look, the price has dropped, but I don't think that it's because money laundering has become easier that the price has gone down. The dynamic in particular is with respect to the Chinese money laundering organizations that have really moved in on the space and have been able to undercut price because of the fact that they're actually making money on both sides of it. And what I mean by that is not only do they have people who have dirty US Dollars that they want to clean, but they have a very strong market for people, particularly Chinese nationals, who want US Dollars. And as a consequence of that, they get so much money on the second side of that equation that, that they're able to really drastically cut prices on the front side of that equation. And this is pretty well documented.
- [25:16]
B
And so this is related to basically currency controls in mainland China, that there are lots of people in mainland China who would love dollars, but if you're a regular Chinese citizen, you can't just walk up to your local bank and convert your renminbi to dollars. So you will then need to deal with something vaguely illicit or criminal in order to be able to obtain those dollars. And once you, you're in that world, then you are basically providing the demand for dirty dollars that money launderers are trying to meet.
- [25:46]
C
Right? Exactly. So, so you might, in order to get access to U.S. dollars, you might be willing to pay, you know, 5%, 6%, 7%. And then that just allows the money launderers to charge less to those who are, you know, want to launder funds. And that's how they've captured market share essentially.
- [26:03]
B
So what is the price now for laundering money? And what if I'm a criminal in Africa?
- [26:07]
C
Yeah, and I'm not sure that there's scientific data on this. Probably all of the surveys that have gone out to the criminals have gone unanswered. But I think at this point it's, you know, probably in the order of like 5 cents on the dollar.
- [26:20]
B
And because the Chinese launderers do have this incredibly lucrative market of Chinese nationals who want dollars and are willing to pay like 100, you know, 5 cents for a dollar. Does that basically mean that money laundering as a occupation has largely disappeared outside of China?
- [26:40]
C
I think that the overwhelming majority of it is China based. I would suspect that it's not exclusive. So I don't think that we can stop worrying about other places where money laundering can thrive. I think we keep our focus everywhere.
- [26:55]
B
But.
- [26:56]
A
Okay, so just to be clear, when.
- [26:57]
B
You'Re saying that money laundering is somewhere in the 2 to 5 trillion dollars range, that's the amount of laundered, right?
- [27:04]
C
Correct.
- [27:05]
B
And if the money launderers are charging 5% on that, then, you know, we're basically saying that's a few hundred billion dollars a year that they're making.
- [27:14]
C
Right.
- [27:14]
B
And most of that money is just going straight to sort of Chinese GDP basically at this point.
- [27:20]
C
Well, is that a question or is a statement?
- [27:22]
B
That's a question. That's a question. I mean, that's part of the Chinese.
- [27:25]
C
Economy now, I guess, in a manner of speaking.
- [27:29]
A
I mean, this is, you know, I feel like this story of, you know.
- [27:33]
B
Chinese businesses coming up and undercutting the Americans and the Germans and everyone else who's been doing this historically, you know, it's happened in clothes, it's happened in electronics, and now it's happening in money laundering. It happens all over the place.
- [27:47]
C
This one's got a slightly different flavor to it, but I hear your line of argument.
- [27:52]
B
I mean, I'm not saying it's a good thing, but then again, I'm not sure it was a good thing in clothes either.
- [27:57]
C
Well, again, you know, I'm not qualified to speak to the sort of dynamics in the textile industry, but I'll take.
- [28:04]
A
Your word for it as a stylized fact.
- [28:06]
B
If I'm a criminal somewhere in the world and I find myself with a bunch of cash that I want to launder, broadly speaking, what's going to happen to that cash is that one way or another it's going to make its way into mainland China. And in return, I'm going to receive some kind of legitimate funds in a bank account somewhere that no one can tell is tainted, which is just.
- [28:30]
A
How long has this been the case?
- [28:32]
B
How long has China dominated this industry?
- [28:34]
C
Oh, oh, how long is it? Because China is dominating. Geez, Are you probably talking about this is being. I think this is a development that's been mostly within the last decade, right? I mean, like FinCEN, which is the US Financial Intelligence Unit, put out a pretty extensive advisory just in August of this year. That's not to say that it's the first time that it's been discussed, certainly not the first time it's been discussed or identified. But I would say that this is a pretty modern evolution relative to the long history of money laundering.
- [29:06]
B
And insofar as much of this, most of this is happening in China and therefore much less of it is happening in the US or in the West. Does that just mean that from your point of view as an executive in like a Western bank or a Western crypto company or something, your job weirdly becomes easier just because no one's really interested in using you for money laundering in the first place?
- [29:29]
C
No. So I want to be clear, it doesn't happen in just China. It's a global operation that is traced back to China based organizations and there is a China leg to it or involvement in terms of Chinese nationals. But a lot of the activity takes place onshore. So if you've got US dollars, a typical kind of scenario is the money laundering organization will employ a whole bunch of what we call money mules, which may know or may not even know what they're involved in. Those money mules will then deposit the funds either into accounts that are theirs or into accounts that already are the ultimate beneficiaries that are trying to get access to the US dollars. And so you'll see that kind of pattern happen through US bank accounts with these money mules. And they're going to be very, very widely dispersed, small dollar transactions. And so there is an activity that's taking place largely onshore.
- [30:32]
B
So given the scale of this activity, given the, and obviously like, you know, if I'm a criminal doing crimes in America, then I'm going to be getting my illicit dollars in America. And they need to wind up, at least in the first leg is going to be American. Probably the first two or three legs are going to be American. So with this multi trillion dollar industry going on around the globe, what's the chance, if I'm a money launderer, what's the chance that I end up getting caught? How many of these folks ever get caught each year?
- [30:59]
C
So it's a great question on the global scale of this. I could speak of it in terms of recoveries. It's sort of frightening some of the statistics, right? So we talked about the multi trillion dollars of money laundering. The estimates in terms of recoveries are probably in the tens of billions. So to give you a sense of.
- [31:14]
B
Scale tiny, like less than 1%.
- [31:17]
C
And just to give you a frame of reference in comparison to that, the banks are spending in the Hundreds of billions. Banks and financial institutions, other companies in the space are spending in the hundreds of billions on the compliance side of it. Right?
- [31:33]
B
So, so you guys, you compliance folks, you're making much more than, than the, like being recovered.
- [31:39]
C
There's just a lot of us. I don't think they were making a lot. It's just a lot of us. But in all seriousness, right, So I once gave a talk on this and posited the question of like, would we all just be better off writing checks out to the victims because, you know, instead of spending the money on the controls, you know, you can get 10 times the recovery of the victims by just writing them a check. Straight up. It was a rhetorical point and a lot of what we're investing in is the deterrence point that we had talked about before. But I think fundamentally, and the rhetorical point I was trying to make was there's got to be a lot more value we can capture for that investment and there's got to be a better system that we can pursue. And one of the things that attracted me to Coinbase is that I think actually the crypto space and blockchain provides a lot of opportunity to make advances in that direction and to start turning that. You talked at the very outset about this sort of battle between good and evil and to really try to turn the tide on that and have us catch up to the criminals. So I think when you combine the transparency of blockchain with now the capabilities through AI, you have the data set and you have the capability to really analyze that data set and make tremendous progress. And I think you see even there was a very big seizure this year by the US of estimated 15 billion in Bitcoin that was related to some of these scam centers.
- [33:10]
B
That wasn't the Razzlekhan one, I don't think.
- [33:14]
A
I feel like the Razzle Khan one.
- [33:16]
B
Was just like, it happened a long time ago. And so when they seized it, it was suddenly worth like billions of dollars.
- [33:21]
C
Yeah. So I think there's some, there's some element of asset inflation in there. Right. But still fundamentally, it's a jaw dropping number. And when you look at a space where, you know, total asset recoveries are in the tens of billions annually globally, a single seizure that you're able to accomplish that's got a value of 15 billion is a massive chunk. And I think that sort of speaks to, you know, U.S. government hasn't exactly detailed how they were able to do that. But the advantage of the blockchain is that you have full Transparency to be able to follow funds in a way that you wouldn't before. It's sort of like what DNA did to criminal investigation. The ability to have absolute certainty of traceability is something that we've never had before in the financial system, certainly have never had it with cash.
- [34:02]
B
But it's also a reason, if I'm a money launderer, just not to use crypto, Right?
- [34:07]
C
Correct. And so if you're pitching that we should move everything to crypto, I'm going to have to agree with you violently.
- [34:14]
B
But obviously, if I'm running a crypto scam, then there's going to have to be crypto involved somewhere along the line. But if I'm not running a crypto scam, then maybe don't even bother. Right.
- [34:24]
C
And I think you see a lot of criminals that thought that it was a safe space to play that have moved out of that space. And I think there's been some statistics with respect to terrorism funding that certain terrorism organizations have moved away from crypto because it wasn't quite the ease with which they thought they would be able to operate.
- [34:44]
B
All the same, it does sound like.
- [34:46]
A
It'S quite a good business to be in.
- [34:49]
B
You know, if I'm making hundreds of billions of dollars, if this industry is making hundreds of billions of dollars a year, it's losing maybe a tiny fraction of that to recoveries, an even smaller number of, like, actual individuals wind up getting prosecuted, then, yeah. I mean, it seems like I can make good money as a money launderer and with a relatively low chance of my money being seized and an even lower chance of me personally being caught.
- [35:14]
C
In terms of the money being seized versus the getting caught. That's probably correct. If you're looking at it from a pure economic vantage point, taking all morality out of the equation, then it may be the case. That's a logical calculation. I will say, yes, you have a high chance of not getting caught, but if you do, it's not going to be a great life for you. So you've got to weigh the downside of that equation. And I do think that we do have the ability in the next five to 10 years to fundamentally shift that equation. It requires a lot of cooperation, it requires a lot of innovation, and it probably requires some amount of legislative reform. But we can get there and we can really turn that equation around.
- [36:00]
B
How much cooperation from the Chinese authorities would you need in order to do that?
- [36:05]
C
What I would say is we can do a lot of things to cooperate better, even just in the United States. And, you know, the US Government is at the forefront of creating mechanisms for that cooperation. And that's both between financial institutions as well as, you know, sort of centrally coordinated. There's a lot of information sharing that goes on both bilaterally and sort of multilaterally with the government and financial institutions. But I do think that there's more that we can be doing in terms of information sharing. There's things that can be done through utilization of more advanced technology, both on the side of the institutions as well as on the side of the government. And then I'm not going to sort of pinpoint that this is like a Chinese government thing either, right? Like these are Chinese nationals who are operating global industries and they're operating in multiple regions. I mean, we talk about that seizure of 15 billion that wasn't onshore in China. It was scam centers that I think were operating in maybe Cambodia that were being orchestrated by Chinese nationals. And so there's a limited amount that I think even the Chinese government can do. We do need better international collaboration across the board and international standards to be lifted and to create pressure, I think, through international bodies like fatf, which is an international standard setter. And they go around and they evaluate sort of different countries on their AML programs. And it's quite effective in terms of creating pressure on countries to be able to uplift their systems. Because what they'll do is they'll place countries on watch lists effectively that then if you're a financial institution, you've got to treat that as a risk factor in dealing with transactions or individuals from those countries. So there's a lot that can be done to pressurize improvement, but it's still, you know, what I would say is loosely coordinated and there's a lot of room for improvement.
- [37:58]
B
I think I'm just going to end with this because this is a really, really interesting place. And I want you to come back. You're saying that over the next five years or so you are optimistic that there will be significant advances made in terms of combating money laundering. You're also saying, correct me if I'm wrong, that that will require sort of an improvement in international cooperation. And I'm looking around the world going, there's absolutely nowhere on the planet where there's an improvement in international cooperation. So I'm already a little bit skeptical that this is going to be. But I want you to come back in five years and tell me, like, has this happened? And so what are the, like, one or two numbers that you would look at when you come back in five years time, you'll be like, this number's gone up, this number's gone down. And say, like, look, it has worked. I was right.
- [38:47]
C
I want to see the recoveries go up. I want to see the overall headline number of amounts laundered going down. I want to sort of increase the numerator, decrease the denominator so that you're driving that larger percentage. I think that's the game changer.
- [39:00]
B
I mean, that's interesting, right?
- [39:01]
A
Because the amount laundered, to what degree.
- [39:04]
B
Is that just a proxy for the amount of crime that is happening in the world? Like, people are going to be doing crimes regardless of what the AML situation is, right? And then they're going to take that money and they're going to try and launder it. And then.
- [39:17]
A
So are you saying on some level.
- [39:19]
B
That if your job and your colleagues around the world who work in the AML space are just going to make crime less lucrative and so people are going to do less of it?
- [39:28]
C
That's the goal. That's definitely the goal. But I think you hit on a very important point, which is that all of what we're talking about is after the crime is committed. And obviously it's not the only ingredient in driving down the rates of crime. Right? So the more effective we can be at shutting down these scam centers, as an example, then that creates less proceeds that people will attempt to launder. The more we're able to sort of track, trace and stop the flow of funds post those crimes. We reduce the incentives on the crimes also. But yeah, I mean, it's got to be the case that the primary mechanism that would be the most effective is always going to be stopping the crime in the first place. Right. That much, I think is outside of my control, but I am happy to collaborate with whom it is within their control.
- [40:17]
B
If I had to say, like, just, you know, if we're talking again about like the vibes in terms of the numbers, do you think there's a world in which, like in five years time, do you think if I come back to you in 2030, that your recoveries will have gone up BY like from 10 billion ish to 100 billion ish, and that the total amount of money being laundered will have gone down from sort of 2, 3 trillion ish to, you know, 1 trillion ish, at which point you are now recovering like 10% of all of the money being laundered? And that's a big deal.
- [40:48]
C
That would be huge. That would be huge.
- [40:49]
B
What do you think is the likelihood of us getting there anytime soon?
- [40:52]
C
I think probably the easier to say that there's a good likelihood on the recovery side. But to your point earlier, reducing the amount by 2/3 in terms of the total amount laundered, that I think is probably a bit of a tall ask. And you didn't even index for inflation.
- [41:11]
B
Yeah, but that's the problem, man. Because if the increase in recoveries is just a function of inflation and more crime happening, no one's happy about that.
- [41:21]
C
No, no, no, I was. Yeah, you're right. Look, I do think that you can knock that overall number down. I think to knock it down to a third of what it is today is probably not realistic in a five year time frame. And practically speaking, I think that number historically has only gone upwards. So it's an uphill battle. But I do think that we can make progress again.
- [41:39]
A
Joe Salama, thanks so much for coming on Money Talks. This has been eye opening and lots.
- [41:44]
B
Of fun and we will definitely be.
- [41:47]
A
Have you back in five years time to see if your optimistic predictions have come true.
- [41:52]
C
That sounds great. It's been a pleasure to be here. Thank you so much for having me.
- [41:55]
A
Yeah.
- [41:56]
B
So thank you.
- [41:56]
A
Thank you to justmin, Molly and Shannon Roth for producing and thanks for being, you know, a good, loyal listener of Money Talks.
- [42:04]
B
We do appreciate it.
- [42:05]
A
Send US emails on slatemoneylateg.com and we'll be back on Saturday with a regular slate.
- [42:20]
E
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