Today, thanks largely to the growth of the global drugs trade, all that has changed. The sums being earned by even modestly successful criminals are simply so vast that the old methods will no longer suffice. A mid-ranking dealer, like the one I am pretending to be, would be selling grams of cocaine to street dealers who would pay them out of the profits of their own sales. That means the money would come to them in small-denomination bills – mostly five and ten-pound notes. Although they could easily use this money to purchase flashy jewellery, and perhaps a nice car or some fine antiques, new banking regulations and the fact that we live in a largely cashless society would mean they could do little else.
Few estate agents would be happy about accepting payment for a house in cash; most hotels and all car-hire companies would rather have a credit card than a wad of notes and even rental companies would rather receive their funds by direct debit. Paying the money into a bank account would immediately cause suspicion. All banks and other financial institutions are legally obliged to report all transactions of £10,000 or more if the customer cannot adequately explain the source of the income. All of this and more has made those with expertise in the field of money-laundering among the most powerful figures in the modern criminal underworld. Rarely drawn from the traditional criminal classes, the best launderers are successful businessmen, accountants or lawyers, who enjoy the thrill of beating the system almost as much as they do earning money.
Money-laundering consists of three phases: placement, layering and integration.
In placement, money derived from criminal activities is introduced into the financial system. In many money-laundering schemes, the biggest ‘problem’ here is handling cash.
In the layering stage, the money-launderer manipulates the illicit funds to make them appear as though they were derived from a legitimate source. This always involves transferring money from one account to another, and even though this may be done as carefully as possible, it still creates problems in the traditional banking system. First, there is the possibility that a transaction could be considered suspicious and reported as such. Related to this is the paper trail created by these transactions. If any portion of the laundering network is examined, the related paper trails could lead investigators directly to the source of the criminal proceeds and unravel the money-laundering network.
In the final stage of money-laundering, integration, the original supplier of the money finally gets the chance to get their hands on the loot. The launderer either hands over the ‘cleaned’ cash, invests in other assets or continues to invest in additional illegal activities on behalf of the client.
Wary at first, Laurence soon opens up and tells me about his life. He explains that he has no criminal convictions – his background is that of twenty years as a legitimate businessman, working first in the aerospace industry and later in diamond mining in Africa. ‘Over the years I built up a lot of trust and started dealing with lots and lots of cash because the diamond business is like that. I’d fly from Freetown to Brussels with a suitcase containing two or three hundred thousand pounds and I’d be doing that at least once a week. It was all completely above board and the bank had no problem with it.
‘I got to know a few people in the course of my business who were involved in slightly less legitimate enterprises, and once they found out that I had the ability to funnel large amounts of cash into the system, they asked if I could attach some of their profits into my turnover. That’s how it started and it grew from there.
‘You have to have a contact with a cash economy of some kind otherwise you’re fucked. This business of banks and accounts and lawyers having to report anything over ten thousand pounds only applies if the transaction is suspicious. There is no law saying you cannot go to your bank and pay in a million pounds in cash just so long as it is in the normal course of your business. Otherwise half the businesses in the high street would be getting reported every Friday afternoon when they took their takings down to their local branch of NatWest.
‘So, what you have to do is create a sequence of events that legitimises the transaction or provides enough of an explanation for the bank to feel confident and not have to ask for any more information. In my experience, banks don’t really care what the source of the money is just so long as they can say they had no reason to suspect it was suspicious. We have an account with a high street bank and put a lot of money through them. They look back at our accounts and see that, in the line of our business, we always put through a lot of cash. That means they’re covered under the laundering act so they feel a lot better.
‘How you proceed is down to you. If you give me the three hundred thousand now and say you want it turned round in seven days, I’m going to have to say no. Trying to launder that kind of money and get it into the system in such a short time is going to be a huge risk. I’ll do it, but it will cost you seventy-five per cent commission because that’s the risk I’m taking. What I prefer to do is take the money and come back to you in a month or so.
‘We could tag it on the back of second-hand car sales. We’ve got a few dealers who trade Bugattis, Bentleys and the like and they do a lot of cash work. Cars like that, you can easily be looking at seventy-five thousand. They can claim to be making an extra sale a week and put the money through their books. In a couple of months, your money is all sorted.
‘It all depends on how quickly you want the money and how much work you’re prepared to do. For example, you could go to Scotland, rent a warehouse and a yard and spend three weeks going out to auctions and buying big pieces of plant equipment. Some of those diggers and big earth-movers go for fifty or sixty thousand a time, sometimes even more. No one is going to blink an eye if you pay cash, but you couldn’t spend the whole three hundred thousand at once, you’d have to spread it out.
‘After a month or so you can put the stuff on the market and adjust the price according to how quickly you want to sell it. If something is worth a hundred thousand and you put it on the market for seventy or eighty, it’s going to sell right away. Okay, you’re making a twenty or thirty per cent loss on your original money, but for a lot of people in your situation, that’s acceptable.’
I ask about commission, and Laurence sits back in his chair and lights a cigarette. ‘That completely depends. It goes from zero upwards. I dealt with one company who wanted to clean up three hundred grand. We took the money and bought plant in Europe, then shifted it out to Africa. Over there we actually managed to get a lot more money for the gear. It took three months but at the end of that I gave them back the exact sum they had given me. I didn’t need to charge commission because we’d made about sixty thousand profit on the sales.
‘It’s a gamble in case you lose the money but for me it’s a gamble worth taking. Normally, on cash, the commission varies between two and five per cent. If you have things like Scottish currency – especially the hundred-pound notes they issue – they’re a pain in the arse to get rid of. With that and small denominations, the commission goes up to ten or sometimes fifteen per cent, but that’s still a pretty good rate.
‘I guess I’m used to it now but at first it always surprised me that, especially in this day and age, the diamond business still revolves around cash. I think the reason it’s not well known about is that the Jewish community in Antwerp keeps a very tight rein on it. But once you get out to Africa, they no longer have control. That’s where our contacts are and these are the people who help us get the rough stones. Once you get them back to Europe it’s a whole different ball-game. You’re dealing with a whole new business community and you don’t trust them and they don’t trust you.
‘We have our own polisher. If you try to sell rough stones in the UK, you’re talking about maybe ten buyers in the whole country. And that means they’re going to spend just that bit more time checking the paperwork because they know they’re in the frame. If you have polished stones, then you can sell the things at every jewellery shop in the country. For cash.
‘It�
��s perfect because it’s one of the few areas left in the world where you can trade cash for product. The most difficult thing to do when it comes to money-laundering is to get the cash into the system. It’s still relatively easy to exchange the notes from one denomination or currency to another. If you gave me half a million in ten-pound notes and you want to change it into Swiss francs, no problem, I can do that at the airport. I’ll hire a bunch of guys, give them a few thousand each and they’ll hit every booth in Heathrow and get it changed.
‘If you had the money in Europe, then it’s just a case a driving around to every bureau de change you can find and changing a couple of thousand here, a couple of thousand there. That’s not a problem. You work hard for two weeks, change maybe thirty grand a day, and at the end of it, it’s done. Doing that won’t bring you any problems – you can even do it on your own passport.
‘If you gave me your money right now, and you had a bit of time, what I would do with it is go out and buy diamonds. Simply because with diamonds, more than with any other commodity, no one can disprove where they came from. If Customs turn around and ask where you got them, you say they came from a mine in Sierra Leone and there’s nothing they can do about it.’
Diamonds, as Marilyn Monroe once sang, are a girl’s best friend but they are also, increasingly, the best friend of criminals, international terrorists and money-launderers the world over. Infinitely more manageable than gold or cash, as well as being far less easy to trace, diamonds have become the chosen currency of the global underworld.
Apart from a recent commitment to avoid trade in what are termed ‘conflict diamonds’ (uncut diamonds sold by various guerrilla movements and corrupt governments in Africa, in return for arms) by authenticating and certifying rough diamonds, the industry imposes few restrictions on the identification and movement of cut diamonds. Such distinguishing marks that are put on some diamonds – like the hallmarks put on gold – are easily polished off, making cut diamonds untraceable.
According to Hatton Garden jeweller Joel Grunberger, stolen and illegally smuggled diamonds do end up in the hands of the shops there. ‘Hatton Garden has a number of people whose history is not exactly squeaky clean.’ Grunberger was a consultant on the Guy Ritchie gangster film, Snatch, which begins with the robbery of an Antwerp diamond dealer. ‘Honest dealers work cheek-by-jowl with the villains. I don’t mean that they sell to the villains, but there are unscrupulous people. Everyone knows the Brinks Mat gold haul came to Hatton Garden,’ he says.
Like Rick the cocaine dealer, Laurence finds moving the money from one place to another one of the most difficult aspects of his work. One of the many tricks up his sleeve is to use something called hawala, an ancient system developed in India before the introduction of Western banking practices. A similar system exists in the Chinese community where it is known as ‘chit’ or ‘flying money’.
Hawala works by transferring money without moving it. If a man in London wants to send money to his family back in Bombay he simply approaches a hawala dealer and hands over his cash. The dealer gives the customer a password, then makes a call to an associate in Bombay who, on being given the correct password by the family, hands over the equivalent sum of cash – minus a fee.
‘It’s all done on trust and it works like a charm,’ says Laurence. ‘It was never intended as a system for laundering money, but a lot of people are using it just for that because it’s so good. You don’t have to worry about getting the cash over to Europe or into a high-street bank, you just walk into one of these places. They’re everywhere, in the back of little cafés, travel agents – places like that.
‘It’s quick and efficient, and the real beauty of hawala is that if someone is trying to follow a money trail and you bounce money from one bank account to another to try to lose them, they’re still going to catch up eventually. Taking it out of the banking system and putting it into hawala means it’s lost for good. There’s no way these transactions can ever be traced.’
As the waitress appears to take our lunch things away, Laurence asks if I want to make use of his services. I tell him that I’ll need to think about it, that I’ve worked hard for my money and I don’t feel I know him well enough to hand it all over.
He nods and tells me he understands. ‘A lot of people, especially some of the older ones, long for the days when they could just stuff it in their mattress and spend it as and when. But those days are gone. If you want to be able to spend the cash, you need to get it professionally laundered. At the end of the day, you need to find someone you can trust.’
And that trust goes both ways. Launderers enjoy many of the benefits of criminal activity but have a better chance of staying out of the police spotlight. Those who are caught, however, can often provide rich detail about the dozens of criminal gangs for whom they work.
In 1998 diamond merchant Solly Nahome was shot outside his north London home. A professional hitman pumped four bullets into him before escaping on a waiting motorcycle. As well as having an office in Hatton Garden, Nahome was financial adviser to the notorious A team.
Nahome was known to the police as an international criminal specialising in fraud and money-laundering. He was said to have met with the A team three or four times a week and arranged for £25 million to be hidden in property deals and offshore accounts. It is thought that he was shot after rumours surfaced that he had been seen talking to police officers.
Although they may be some of the wealthiest criminals around, money-launderers always play a dangerous game. Some more dangerous than most.
CHAPTER SEVENTEEN
I’m sitting on a hard wooden bench just behind the witness box of Woolwich Crown Court in south-east London.
Some seventy-five feet below me is a tunnel leading directly to HMP Belmarsh, which occupies the land alongside the court. Belmarsh is, by all accounts, the most secure prison in the country. It features a special unit used to hold high-risk prisoners, and also houses suspected terrorists who are detained without trial under emergency legislation. There has yet to be an escape. Or an attack.
The whole building has been designed with security in mind. There are ranks of metal-detectors and X-ray machines at the main entrance, and once more at the entrance to the court building. Inside, high Perspex screens around the dock eliminate the possibility of any prisoner making a break for it. For reasons like this and many more, Woolwich is fast taking over from the Old Bailey as the best venue for trials that need to take place under the strictest security possible.
Behind me, a number of police officers with flak jackets and Heckler and Koch carbines held against their chests are on patrol. Grey-wigged barristers wait eagerly and the judge sits at his bench, his hand resting on his chin. One other journalist and I are the only reporters there. Everyone in the place turns and looks as the door swings open and the main prosecution witness – the reason for all the extra security – swaggers in. Overweight and ungainly, dressed in a sharp business suit with his lank hair swinging above his shoulders, this is Michael Michael, chief money-launderer of a £150 million international drug-smuggling operation.
Constantine Michael Michael was born in Brighton on 25 November 1957, the eldest son of Greek-Cypriots who had traveiled to England in search of a better life. By the time his brother, Xanthos, came along in 1962, Michael’s shoemaker father, John, and mother Maria had moved to north London to run a small fish-and-chip shop.
Michael attended the hard Highbury Grove School in Islington and quickly dropped his ‘sissy-sounding’ first name in favour of something more conventional. His teachers remember him as an affable, well-mannered boy who, despite an obvious talent for mathematics, showed little interest in studying. None were surprised when he left school without gaining a single qualification.
His parents insisted he make something of himself so Michael enrolled at Southgate Technical College to study fashion – ‘like a good Greek boy’ – but found the subject tedious. He began missing more and more of his classes and
, after falling in love with Georgina, a Greek-Cypriot girl from Leicester, he dropped out altogether. Within six months, Georgina had become Mrs Michael.
The newlyweds moved to the Midlands and set up home with Georgina’s parents, who also ran a fish-and-chip shop, but almost immediately the marriage fell to pieces. Within eight months Michael had returned to London and was living with his own parents again. ‘I had to come back,’ he told them. ‘I couldn’t stand her. We weren’t compatible.’
Michael started work as a driver for a local VW dealer, doing little more than moving vehicles about. Keen to boost his earnings, he did a little buying and selling in his own time but soon came a cropper. He was given a Porsche 928 and sold it for a tidy profit, only to discover it had never belonged to him. Charged and convicted within the space of a few weeks, Michael spent four months at Brixton prison.
It was his first brush with the law and, initially, the experience left him shell-shocked. But at the same time Michael found himself irresistibly and inexplicably drawn to the characters that populated the criminal underworld. He made a number of firm friends and would later brag that he had lost all three elements of his gangland virginity – first arrest, first charge and first time in prison – in one fell swoop.
Soon after his release he met and married another Greek-Cypriot girl, Alexandra, following a second whirlwind romance. Around the same time he joined forces with a friend who was launching an accountancy business and set up a dual partnership, trading under the name Michael & Co and specialising in arranging mortgages and pensions.
The firm was legitimate, but Michael’s private clients were not. Using some of the contacts he had made while in prison he began keeping the books of businesses that operated just on the wrong side of the law. There were pubs and bars that got their alcohol off the back of lorries from the continent, car dealers who sold more ringers than anything else, and brothels masquerading as saunas or massage parlours. He also specialised in giving references and providing fake paperwork for people who didn’t have legitimate jobs but needed to show banks that they had a steady income before being granted a mortgage. From there it was a short leap to arranging mortgages for people who didn’t exist. In 1989 Michael set up a scam in which he helped arrange £3 million worth of bogus loans, earning himself a commission of around thirty thousand pounds.
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