MSBs - Short Term Thinking versus A Long Term Solution

Word out of the UK this week is that drug barons are now forsaking banks to move drug cash through small money service businesses (MSBs).

The Guardian newspaper quotes DCS Michael Gallagher, head of Scotland Yard’s specialist crime unit, as saying his team suspects a network of 34,000 MSBs in the UK as the traffickers’ flavor of the month for cleaning money. Those MSBs include bureaux de change, money-transfer brokers and payday-loan services.

What worries me is that I covered this story in London 20+ years ago when HM Customs busted, for the first time, a bureau de change for laundering drug cash.

Plus ca change...

What also worries me if that by taking down these MSBs, if they can, all they’re doing is cutting out the middle man. They’re chopping off the tail of the beast and leaving the head. 

Gallagher was quoted as saying, “Banks have been subjected to tougher and tougher regulations to stop major criminals using them. So serious and organised criminals have transformed their business methods to beat the clampdown and now at least hundreds of millions of pounds is flowing through MSBs, which are less strictly regulated than banks.”

One obvious answer is, okay, so regulate them like banks.

But Gallagher’s response is only half the story. It’s true what he says about tougher and tougher regulations, but he’s leaving out of simple fact that there are no genuine prosecutions of banks in the UK for money laundering offenses.

At least no British banks.

The Financial Conduct Authority, which is genuinely useless, doesn’t criminally pursue British financial institutions because the way Parliament set the up the regulator. Funded by those same financial institutions, the FCA’s unofficial mandate is Hippocratic – ie, do not harm.

It has, on the odd occasion pursued a foreign financial institution. But even there, their mission is fines. While the banks see that as just the cost of doing business, the government encourages the FCA to be a cash cow.   

In the meantime, the National Crime Authority, and its Economic Crime Directorate, is intent on showing the public that it’s doing something, so they go for the tail option every time, writing that off as an aggressive anti-money laundering policy. It is, of course, nonsense.

One case, cited in the newspaper article, mentioned the arrest of two men, subsequently jailed, after handing over ￡82,000 in cash in a plastic shopping bag outside a central London MSB.

That’s all well and good. But that’s not an effective anti-money laundering strategy. In its purest definition, that may not even be money laundering at all. Putting cash into a washing machine is only part of the laundering cycle.

Gallagher went on to say, “It’s very difficult to regulate MSBs because there are so many of them.”

That is also, nonsense.

Years ago, when the Dutch shut down MSBs in Holland for moving drug cash, all they succeeded in doing was to move them across the border into Belgium. At the same time, the French found MSBs on the Champs Elysees moving drug cash and shut them down. Six minutes later, new MSBs opened up down the block. What was ignored in both failed measures, was that the MSBs in question were all foreign owned. And in some cases, the owners were the drug cartels themselves.

It was the same situation in the US.

When I wrote The Takedown, about the 15 year-long case against the Norte Valle cartel, wire remitters were sending money – in amounts structured to remain just under the imposed limit by a Geographical Targeting Order (GTO) – back to Colombia, using names and addresses of real people they pulled out of phone books.

Who owned those remitters? The Norte Valle Cartel and people close to the Norte Valle Cartel

Sure, Gallagher and his team should bust whatever MSBs they can. But that’s a short-term solution, if it’s even a solution at all.

My suggestion is to take a two-pronged approach.

First, outlaw all foreign owned MSBs. Licenses should require ownership by a British national who is also resident in the UK. Just as importantly, that citizen should maintain assets in the UK. No offshore shells allowed. Homes. Cars. Offices. Bank accounts. Real assets that can be seized. The idea is that the owner of an MSB must be someone who can be arrested, charged and prosecuted for offenses. Someone who can be held accountable.

Second, do the GTO trick. Limit cash transactions to a small amount. Say ￡1000 at a time. At the same time, require immediate electronic reporting of any cash transactions in excess of, say ￡500.

Require genuine identification of anyone moving money, and limit the number of transactions that can be made per day, per week and per month through a central data base controlled by the police.

And don’t tell me that can’t be done. The Metropolitan Police have a real-time data base on every black taxi in London. Setting one up to track money moving through MSBs simply takes the will, and the money.

Does a tourist need to change money six times a day? Probably not. Does someone in the UK wishing to send money home need to wire amounts just under the reporting limits seven times a week? Probably not.

Legally allow MSBs to do what they’re legitimately intended to do. But take away the foreign owned MSBs and eliminate any opportunities for them to continue the abuses Gallagher complains over.

That’s long term thinking.

Sadly, it relies on Parliament’s will to do something meaningful. If past history of British politicians and their attitude towards money laundering is an indication, DCS Gallagher and the rest of us shouldn’t hold our breaths.     

*****

? Jeffrey Robinson 2020

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