(continued from Part 24)
What ties together cocaine in Arkansas, an assassinated Vince Foster,
Systematics banking software, NSA codes diverted to the Israelis, hidden
accounts at Pittsburgh's Mellon Bank, Iraq-bound technology from Westinghouse
and Kennametal (perhaps smuggled or escorted by Wackenhut security), and
bipartisan political payola?
One common thread concerns a global money-laundering operation run out of
Lima, Peru.
Just as two banks will not be sufficient to form an efficient foreign
exchange market, neither can a couple of isolated institutions effectively
launder money. Therefore anyone with large amounts of "dirty" money to process
must ultimately intersect with the global market for the flow of laundered cash.
A principal reason has to do with layering.
Classical money laundering involves three stages: placement, layering, and
integration. Placement is getting cash into the system. This usually
involves a friendly banker who doesn't fill out reporting forms. Layering
is a chain of transactions (these are often interbank transactions) at least one
of which needs to be invisible in order to effectively break the monetary trail.
Integration is getting the "clean" money back to the original owner. This
may take many forms, including offshore "loans" which are never repaid.
Here is a thumbnail sketch of some of the money-laundering inter- connections
among the various subjects of discussion that have arisen in this series of
Internet posts.
1. Cocaine smuggled through Mena, Arkansas and elsewhere (including,
currently, the cross-border flow from Canada and Mexico) generates huge cash
profits which must be laundered.
I first learned of the Arkansas drug-related laundry around 1983, about
three years after it had gone into operation. Nicolas Ardito- Barletta was
then a World Bank economist, but one who would shortly become President of
Panama (prior to General Noriega). Nicolas' brother took my class on
international financial markets at the Wharton School of the University of
Pennsylvania, and afterward wrote his advanced study project paper on Panama
as an international banking center under my supervision. The paper focused
on the economic incentives offered by the Panamanian banking system. But
privately we discussed the obvious demand for banking services generated by
the intercontinental cocaine trade. The Arkansas laundry was well-known to
Panamanian bankers.
2. Prohibitions on the export of weapons or advanced technology similarly
creates a profit opportunity for those willing to subvert that prohibition.
So another source of demand for laundering services comes from smuggled
nuclear technology, nuclear fuel, and arms shipments.
Pittsburgh--whose environs encompass Kennametal, parts of Westinghouse,
and Mellon Bank--was a focal point for the latter operation. Kennametal
machine tools and Westinghouse nose cones were shipped up the St. Lawrence
to Montreal for forwarding to Iraq. (Parts of the story of the arming of
Iraq may be found in Alan Friedman's Spider's Web; other parts may be
found in Time, "A Matter of Honor", June 21, 1993. There is still
much more untold.)
Has Westinghouse just been indicted for price-fixing? What about
Kennametal? Does some of the evidence involve the Mellon Bank
money-laundering operation? Has the money-laundering operation formerly run
through Mellon Bank now been moved to New York?
In the event the exchange involves arms for oil, the oil must be
brokered, sold, and the cash transferred to the relevant party. The
commodity divisions of investment banks are often involved in this part of
the transaction (a number of examples along this line involve the defunct
Drexel Burnham Lambert, one of my former software clients).
3. Prohibitions on the sharing of "classified" information create a
profit opportunity for those willing to sell restricted information. This is
commonly known as "espionage", and those who commit it--like Jonathan
Pollard, Aldrich Ames, and Vince Foster--often end up in prison or dead or
both.
In this case the amount of money involved is often small. Concealment is
important, nevertheless, so the payoff--if not in cash--often occurs through
channels otherwise used for the laundry.
Foster received deposits in offshore accounts for selling nuclear codes.
He was paid via covert channels. So also--one suspects-- were the hit men
who took him out.
(The fact that Robert Goetzman used the royal "we" in "we did Foster" on
the day of Foster's death--in Debra von Trapp's account--does not prove to
me that he was actually involved in the hit, even if the conversation
occurred exactly as related. After all, there are probably many people who
would like to enhance their prestige by claiming credit for the Foster
assassination. But the timing of the conversation would indicate Goetzman
knew about it at approximately the time it occurred. Did he have advance
knowledge of the hit? Does he even now know the identity of the contract
agents involved?)
4. The Cabazon Indian nation comes into the story because, being a
sovereign nation, it was a way to avoid export restrictions and to develop
new weapons technology. It was also one of the sites where Michael
Riconosciuto helped create a backdoor version of the PROMIS software. Even
those sources who tell me that Riconosciuto "lies a lot" confirm that he
worked on the PROMIS software to develop a mechanism for covert
telecommunications access.
The PROMIS software enters the story in three ways: it is a mechanism for
tracking people, a mechanism for tracking money, and a useful tool for
managing a global laundry.
5. The early 1980s mandate to track terrorists (a "terrorist" being
defined as anyone who does things normally reserved for government agencies)
involved tracking the money and tracking the people. PROMIS was designed to
track people. It was especially useful in tracking spies and other
outsiders, the natural users of the parallel monetary system, the global
laundry. Sales of the PROMIS software to security organization around the
world were made by Earl Brian, recently indicted in California and,
reportedly, also Canada (along with the noted alleged con artist, Ari
Ben-Menasche).
6. The PROMIS software was modified to track money, and sold to bank
back-offices across the country and around the world by a Little Rock
company called Systematics (now Alltel Information Services). The
telecommunications backdoor in the software was intended by the NSA to be
used to spy on bank transactions in real time. But there were also other
possibilities, soon apparent to enterprising souls.
If you run the back offices of banks, then you are in a position to
make--and keep track of--covert transfers through the "backdoor" mechanism
of PROMIS. That is, such transfers could take place in such a way that one
would not leave an audit trail, and in such a way that the funds would never
show up in the ordinary accounting reports. That is, the same software was
an excellent way to manage the global laundry.
7. Despite the distributed nature of the software-controlled back-office
operation, the laundry in the U.S. has been mostly concentrated in a couple
of dozen financial institutions.
How could this escape the scrutiny of the Federal Reserve? The answer is:
Through complicity at a very high level. What does Alan Greenspan have to
say about all this? (Did you get the letter?)
8. But the back-door created a massive security hole in the operation of
banking cash-management and wire-transfer services. Banks had gone out and
purchased a software vault with a massive steel door on the front, but a
secret entrance and exit to be used by enterprising thieves.
Did Alltel Information Services recently hire four more law firms to
represent it in the inevitable lawsuits to come?
Is this why Ross Perot is getting into the banking software business?
Swiss Bank Corp. recently acquired a 24.9 percent stake in Perot Systems
Corp., which will form a new division called Perot Systems Global Financial
Services to run the bank's computer operations. Perot Systems in turn is taking
a 40 percent stake in Systor, a Swiss Bank Corp. subsidiary that provides
banking software.
Meanwhile, a 28-year-old Vladimir "Vova" Levin of St. Peterburg, Russia, was
recently reported to have, in connection with some others, penetrated Citicorp's
cash management services in New York, and transferred more than $10 million to
banks in six other countries (including Switzerland and Israel). Although the
hackers were caught, due to excessive greed, a hefty $400,000 was not recovered.
How were they able to bypass Citibank's security procedures? "Is there a mole
in Citibank?" a Wall Street Journal headline recently asked. A more
perceptive headline would have asked, "Is there a hole in Citibank
software?" Some people think the hackers utilized the PROMIS system backdoor
(the "Greek" method).
Some people who are totally devoid of expertise in banking tech- nology have
questioned the ability of a group of (possibly CIA) "Fifth Column" hackers to
clean out accounts in Switzerland using a computer, whether Cray or otherwise.
Well, duuuuuh, let's see, a Russian graduate student with modest equipment
accomplished the same thing from St. Petersburg using the Russian
phone system. Just think of what he might have been able to do if he had had
some advantages . . .
Others wonder why Swiss banks haven't been publicly screaming about a missing
billion or two. Well, their computers thought the transfers were duly
authorized. Do you really expect the banks to worry about making restitution?
(We are not dealing with pissant ATM theft here.) Secondly, Switzerland houses
much of the world's flight capital. Wonder what would happen to a lot of it, if
Swiss banks admitted to a hacker vulnerability?
But not to worry. Anyone can get his money back by identifying the amount,
the account number, and signing a sworn statement that the account in
question belongs to him . . .
Finally, others question the ability of anyone to saunter through the
Mossad's files. Why? You might not even need a computer. If you think much of
the U.S. government is for sale, you should take a good look at Israel's. And,
at any rate, the Mossad is currently a third-rate intelligence organization in
chaos. Hardly a fortress on a hill.
[to be continued]
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