Written by Kim Marsh for ACAMS MoneyLaundering.com | 2014
The revolutionary “Arab Spring” began in December 2010, destabilizing and supplanting regimes in countries across the Arab league, reaching Libya in February 2011. Libya had been an anomaly among Arab nations. Internally stable and relatively progressive, Libya enjoyed relative religious harmony with no significant presence of the radical Islamists who were driving much of the turbulence in other affected regions. This stability was attributable in part to oil wealth and to the 42-year absolute dictatorship of Colonel Muammar Gaddafi.
Born to a Bedouin goat herder, Gaddafi was the first in his family to obtain an education. Upwardly mobile through military
service, he became a communications officer in the Libyan army’s signal corps. With role models widely ranging from Abraham Lincoln to Sun Yat Sen, Gaddafi’s principal inspiration was Egyptian president Gamal Nasser, who had been a prominent advocate for pan-Arabism and socialist revolution. After organizing a group of fellow officers, Gaddafi led a bloodless coup in 1969, during a time when Libya’s King Idris was overseas on holiday. Gaddafi’s power gradually consolidated in the new Libyan Arab Republic, which by 1977 had become the “Great Socialist People’s Libyan Arab Jamahiriya,” a name reflecting Gaddafi’s increasingly idiosyncratic ideology.
The Libyan Arab Spring protests calling for Gaddafi to step down escalated into civil war, but Gaddafi held out, repeatedly declaring that he would rather die as a martyr than leave Libya. Despite Gaddafi’s determination to stay, his wife and three children escaped to Algeria in August, and substantial state assets, estimated at up to $160 billion, were also reported
to have been smuggled out. In Sirte, on October 20, a mob dragged Gaddafi out of the drainage pipe where he had hidden, and executed him. Initial reports that he had been shot in the head painted a rosy picture of the slaying. He had been beaten by a mob, bayonetted in his anus and rolled off a moving truck. His final bloody moments were filmed and uploaded to YouTube.
The search was on for the $160 billion. International organizations joined to locate and repatriate the missing assets, while the new Libyan government contracted private financial investigators to locate assets and manage the legal hurdles of repatriating them. Several successful cases validated these efforts, including nearly $1 billion recovered in South Africa from Bashir Saleh, aka Gaddafi’s banker.
THE TEAM
I spent 25 years in the Royal Canadian Mounted Police (RCMP) before retiring in 1998 when I entered the private sector. Between 1983 and 1988 I was in charge of the Mounties’ national undercover program, and from 1988 to 1992 I was assigned to Miami with a mandate to work with U.S. law enforcement agencies on cases involving Canadians or Canadian investigations and interests. During my time in Miami I worked with a confidential source, also from Canada, who consistently provided high level information about contraband smugglers. These tipoffs enabled two high-value seizures with following criminal convictions.
After leaving Miami, I lost contact with this source until March of 2013 when I received an email from him. I had been easy to locate on the Internet with my new overt job description, working for IPSA International as a private asset tracing and recovery services consultant. The source needed this skill set as he had a friend who had a line on a large amount of cash that had been stolen from Libya and stashed in West Africa. The source told me he had a friend with connections to $240 million that had been shipped out of Libya to Abidjan, Ivory Coast, where it was now controlled by a former military officer who wanted it laundered.
Over the phone, the Canadian source introduced me to his friend, another Canadian, who was living in Thailand. He explained that he had met an employee of an African embassy in Bangkok, who had a cousin in the Sudanese Army who had helped pull $240 million out of Libya before Gaddafi’s fall. The cash was now secured near Abidjan’s international gateway, Port Bouet Airport. The lost assets were controlled by Ivory Coast military officers, who were prepared to pay 40 percent of the value to anyone who could export the cash, launder it and eventually park it in bank accounts they could access.
While the sources were all focused on the 40 percent, which amounted to about $96 million, I was troubleshooting the situation. Several things needed to be determined and resolved up front:
Was this accurate information, or some kind of scam? Was the money counterfeit?
What is the best way to deal with asset controllers in a notoriously corrupt country with no effective rule of law?
How to conduct a complex stolen assets investigation without a badge. It is a lot easier with the benefits, access and immunities that are granted to law enforcement.
Who was the client? Until the rightful owner of the assets was identified, there would be no contract and no legitimate right to take the money.
How to pay for all of this. Proper logistical support would be critical and costly.
How to keep it clean. Conducting a private international covert operation is tricky business. Secretly photographing a suspect may be okay in Hong Kong, but one could land in jail for doing that in Dubai. I was determined to be safe,
not sorry.
I quickly allied with attorney Martin Kenney, who decided, along with his British Virgin Islands law firm, to participate as an equal partner with IPSA. I was well acquainted with Kenney and his reputation as an internationally acclaimed asset recovery specialist. Kenney had been working with the World Bank and its stolen asset recovery initiative (STAR) and had recently presented on asset recovery to government officials attending a conference in Cairo. Kenney agreed to manage the legal issues while IPSA was going to handle the project operations.
The Assessment
The Bangkok-based Canadian source had already briefed an Australian expatriate who was going to assist with matters he needed help with. I met him first by phone, and learned more about the African diplomatic source. Over six to eight weeks, after establishing some basic ground rules and completing a first level check on the information that had been presented, I travelled to Bangkok to meet directly with all the sources.
The Bangkok-based Canadian and the Australian expatriate knew my plans were straight, and there was still going to be handsome reward money in it for them too if they successfully assisted the recovery. They provided additional details and covertly introduced me to the African source, a Sudanese national working in one of Bangkok’s foreign embassies. I was presented as a trusted friend who lived in the U.K. and worked in the financial industry. My covert character possessed the contacts, experience and ability to transport and launder the money. During the meeting, the Sudanese diplomat disclosed that his cousin was a former Sudanese Brigadier General who had known the asset controllers for years. The controllers, he explained, included a Malian national who had been a diplomat based in Libya. During the disintegration of the Gaddafi regime, the Malian national coordinated the transportation of the funds across West Africa to Abidjan and now the group was looking for the right people to take the cash and manage its placement and layering.
My team thoroughly analyzed the new information and checked out the individuals who had been identified. They decided to send the Sudanese source to Abidjan, so he could collect more details and see the money. I said it was necessary to verify the assets were real by viewing and photographing them and also explained I needed samples and more information about how the funds had traveled to the Ivory Coast.
First Trip
A couple of days after he arrived in Abidjan, the Sudanese source was taken to a bonded warehouse where he was shown a plastic wrapped, large cardboard box containing a steel locker packed with shrink-wrapped stacks of $100
notes. Photographs of the box showed Arabic writing on sealing tape and a label with the coat of arms of Gaddafi’s Great Socialist People’s Libyan Arab Jamahiriya. The asset controller said the box contained $20 million, and that there were 11 more boxes secured at another location. The assets could be flown out of the country, so long as one of their people was allowed to board the plane at the time of the pickup.
With no cases, there are no problems. Small cases have small problems, and big cases, like this one, often bring big problems. The Sudanese returned to Bangkok safely with the photographs he had taken, but only one of the five C-note samples he had collected in Abidjan made it back with him. He said he had left two with his mother and given two to a friend. The fact he had been able to pass four 100 dollar bills successfully did not prove the box had not been filled with counterfeit notes, so I contacted the leading experts on counterfeit U.S. currency—The United States Secret Service. After initially studying the photographs and deciding they thought the notes could be counterfeits, the Secret Service obtained the surviving sample note, revisited the photos and concluded that it was highly probable all the currency was genuine. They informed me that U.S. Federal Reserve Banks send bulk cash in $100 denominations boxed exactly like the ones shown in the photographs, except, of course, for the Arabic tape and Libyan crest. Bulk U.S. currency like this is routinely shipped to large banks in Zurich or London where it is then supplied to central banks located in Africa and elsewhere. The Secret Service was also able to analyze the serial numbers on the photographed notes and the sample to determine that they had been shipped from New York to Zurich in 2013, a troubling revelation considering Gaddafi had been executed in October 2011.
This anomaly merited a second viewing trip. This time, three people were selected to go. The Sudanese was going to fly out with the Australian where they would meet their third colleague “Banker Bill” who was going to be in Abidjan on other business. Banker Bill is a trusted former RCMP officer who was working as an investment banker in Hong Kong at the time. With the RCMP, Banker Bill had specialized in managing money laundering cases as an undercover cop. Wellgrounded and observant, Banker Bill was going to add accountability, discretion and survival skills to the operation.
Their objective was to inspect all of the boxes, acquire more samples, take more photographs, measure weight and dimensions and determine transportation logistics. If the assets were bona fide, Banker Bill was going to be introduced to discuss the finer details, including how the funds would be transported, laundered and disbursed.
Before the second trip, Kenney’s legal team was working out the details, dealing with the complex legal challenges and cross-jurisdictional issues that would arise if the team took possession of the funds. We still did not know the rightful owner of the assets; we were proceeding without a client or a contract. Because the $100 notes were genuine and all the evidence from the first viewing was consistent with how bulk cash is shipped, we decided to continue with the investigation.
One of the asset controllers said in a phone call that there were 12 boxes containing $20 million each and that their total weight was approximately 6,000 pounds. This confirmed with what the Secret Service had said would characterize that amount of cash. The team insisted they wanted to see all the boxes, collect random samples, shoot photographs, take measurements and gather more information for the removal stage. After being assured their demands would be met, the Sudanese and the Australian traveled to Abidjan at the end of October 2013. Banker Bill flew over a couple of days later and stayed at a different hotel, waiting for the viewing to occur.
Second Trip
The Sudanese and Australian arrived on Friday but were not shown any of the money until late on Monday, again at the same bonded warehouse. The controllers did not bring the 12 boxes as promised, but they did produce four, containing $80 million in total. The steel boxes were filled with $100 notes, wrapped the same as the first box and all displaying the Libyan crest from Gaddafi’s regime. Several photographs were taken, random samples were selected and counterfeit tests administered. All of the notes appeared to be genuine. As with the first viewing, three uniformed guards escorted the boxes.
With the notes looking good after the second viewing, Banker Bill met with the asset controllers inside a hotel lobby. They offered more information, the bills of lading on the boxes had falsely listed jewels instead of cash, and they did not have many questions, which seemed odd. They could not warehouse the money much longer and were eager for the cash to be removed from the country. They wanted 60 percent of the value deposited into accessible bank accounts and were prepared to pay a premium 40 percent for the successful laundering of the money. They also wanted $1.25 million to pay off customs
for the cash in the bonded warehouse. Banker Bill quickly adapted to this surprise. “No problem,” he said, “pull it out of one of the boxes.” This economical logic left no room for disagreement and the controllers did not rile after Bill’s retort. They also did not ask many questions about what was going to happen to the cash after it flew out of Ivory Coast, and this added to Banker Bill’s increasing suspicion.
He had been prepared to propose falsifying shipping documents to cover transporting the cash to a bank vault in Malta. Another option would have involved paying off one of a few Islamic banks, which had offered to take care of the first stage problem for 20 percent, including the private aircraft. This would have been expensive, but conveniently turnkey. The problem would be with the second tier distribution to more conventional western banks, which would use know your customer (KYC) and source of funds procedures that would likely raise red flags.
A better solution, the team had determined, would be to keep the cash in Africa, purchasing commodities, such as timber, cocoa and minerals, benefiting from Africa’s traditionally cash-based trading practices. The commodities could then be discounted and sold to legitimate overseas buyers and third-party payments could be made to “trading accounts” held in banks in western jurisdictions. Moving such large amounts of cash across Africa to make the transactions would invite exceptional security concerns though.
The best solution, Banker Bill was going to propose, would capitalize upon Africa’s endemic corruption. It would be possible
to approach some governments offering to co-invest alongside public-private partnerships to fund development of dams, roads, ports or whatever offered the lowest risk. The country requiring funding assistance (for UN or World Bank backed projects) would only receive the capital if they would accept the cash into their Central Bank, which would then make the country’s “contribution” to the project. The country would agree to make regular payments, including ongoing advisory fees, to the corporate entity established to make the deal with the country.
This careful troubleshooting would have been persuasive, but the asset controllers seemed cavalier and uninterested in the details.
As the team departed Abidjan, the sample notes they had collected were sent to the U.S. to be examined by the Secret Service. Like the first sample C-note, these six $100 bills were all genuine, and again the serial numbers revealed they had not left the U.S. Federal Reserve Bank in New York until 2013, well after Gaddafi’s fall in October 2011.
The investigation had been running for six months. Back in Bangkok, the Sudanese and Canadian sources were eager to close the deal. They were pressuring for progress to the removal stage so that everyone could have a payday. The money was real, but the team still did not know the identity of the rightful owner. In debriefing trip two, this detail combined with other impressions added up, encouraged a decision to disengage.
Concerns:
Over the six months there had been inconsistent stories about how the money had made it to Ivory Coast.
The circulation timeline determined by the serial numbers did not match the timeline ofthe assets’ purported liberation from Libya.
Without a credible explanation for the delay, the money was not shown until late onMonday after the team had been waiting in Abidjan for three days.
When Banker Bill met with the asset controllers, they did not show enough interest inhow the money would be laundered and parked.
At both viewings there were uniformed guards accompanying the boxes.
Finally, the asset controllers were now asking for $1.25 million to pay for customs kickbacks owing on the money that was being held in the bonded warehouse.
The presence of the uniformed guards especially raised questions. When Banker Bill stayed in Abidjan, his hotel was across the street from the Ivory Coast Central Bank, which was secured by guards who, he noticed, wore the exact same uniforms as the guards photographed at the viewing location.
Upon broader inquiry, the team learned of a “bait and switch” scenario being played out in several French West African countries. Military officers were allowed to borrow boxes of money for a short period of time to flash their marks in an “advanced fee” scam. Trusted sources in French West Africa revealed the ruse had started not long after Gaddafi’s fall. The IPSA team also learned they had been the second of two groups who had been shown the assets on the same Monday afternoon. They determined their viewing had been delayed until Monday because the “controllers” had to wait for the central bank to be open for business to coordinate the display.
All this information was turned over to appropriate authorities and the matter was placed under investigation. IPSA still has not received any feedback from the investigating agencies and does not expect to. People who can access central bank funds are well aware of the stolen money being sought by financial investigators. Some see this as an opportunity to lure legitimate professionals into a trap. It is unclear how the ruse would have played out for the IPSA team, but we did learn that others had been bilked out of considerable amounts of money and also wound up being criminally charged and jailed. IPSA’s street sense, attention to detail and clear perspective enabled us to deflect the demand for a funds storage fee/customs kickback, and to stay out of trouble. If we had been any less cynical or more ambitious, we could have been scammed.
Kim I. Marsh, CAMS, CFE,
As published in ACAMS Today
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