Oh My Fraud

Warning: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!

Greg Kyte: It was weird how many times Al Capone came up in my research, one source said. The period of prohibition famously saw figures like Al Capone take advantage of money laundering, contributing to the modern understanding of the terms. No, Al Capone went to jail because he didn't pay taxes on his dirty money. One of the primary things you have to do to make dirty money look clean is you pay taxes on it. So really, when you [00:00:30] think about it, the main way Al Capone contributed to the modern understanding of laundering money was by not laundering his money.

Earmark CPE: If you'd like to earn CPE credit for listening to this episode, visit earmark Cpcomm. Download the app, take a short quiz, and get your CPE certificate. Continuing education has never been so easy. And now on to the episode.

Greg Kyte: Hello [00:01:00] and welcome to Oh My Fraud, a true crime podcast where our criminals launder their money but can't clean their conscience. I'm Greg Kite and I'm the real life inspiration for Marty Byrde. I really wish I knew who that was. Did you not watch Ozark? No. Oh, okay. Well, some people.

Caleb Newquist: Listening to the show will get that reference.

Greg Kyte: Okay.

Caleb Newquist: And it's appropriate. And it's appropriate for this episode.

Greg Kyte: Yeah, but your real name is Caleb Newquist.

Caleb Newquist: I'm Caleb Newquist. Yes. Yeah. So, Caleb. [00:01:30] Yes, sir.

Greg Kyte: Before we get into it, uh, I like we do, uh, I would like to read a listener review real quick. Okay. We have been want to do as of late. Sure. Uh, this come this one comes from bookkeeper Jenna, who says, love these guys. Binge season one like a true nerd. Just for fun. Pumped for more. Keep it coming. See, it is true. People listen to the podcast just because it's a fun podcast, [00:02:00] and not necessarily because they're up against the deadline and have to get 14 more CPE credits in in the next 36 hours.

Caleb Newquist: And if you like, oh my fraud, please take a minute to write us a review. It might help more true nerds stumble upon the show. We also want everybody to know that we are more than just disembodied voices. Inside your podcast app. We also take this show on the road, so if your firm has an in-house training or an event, needs a keynote presentation that's ridiculously fun and ridiculously informative and ridiculously [00:02:30] clean, we can be ridiculous pros. We can. We can keep it clean, let us know, and we can do that for you.

Greg Kyte: Yep. If you're interested in hiring us for your event, send us an email at oh My fraud at earmark Cpcomm for pricing and availability now. Caleb. Yes, changing subjects. I am very interested in this because for some reason this is always fascinating. Me have you ever noticed a specific business in your city? Everybody [00:03:00] has one. Everybody. Everybody drives by these all day long, but a specific of a specific business in your city that's been there like forever. And that looks like it should have gone out of business like 20 years ago. Yeah, 30 years ago, something like that. But but the thing just stays open. And this could be a business where you live now or where you grew up or something like that. But just one of those things where all the time you just go, how? How? Yeah, how was that? It's not why is that a business and [00:03:30] how did they pay their rent I gotcha yeah. So you got, you got one I got one.

Caleb Newquist: Yeah I know and I'm going to be careful because I don't want to dox I don't want to dox the business. Uh, you know, you know, legal peril and whatnot. Uh, but there is a, uh, there is a costume shop that is near where I live, and it definitely kind of fits this criteria. It's it's it's been around so long. It's been around. It's it's been around way longer than I've lived in [00:04:00] the area. And it's on this huge lot. It has this huge parking lot, and it's just hard to believe that some asshole hasn't come along and just razed the whole thing to build, like fucking luxury condos or something.

Greg Kyte: Oh, right. Yeah.

Caleb Newquist: Yeah. And but but it's also, it's a costume shop. Like 99% of their business is concentrated in one month. There's a reason they have pop up Halloween stores.

Greg Kyte: Yeah.

Caleb Newquist: You just don't need costume shops [00:04:30] 12 months out of the year, right? Right. And so anyway, it's as far as I can tell. And like there's never there's never cars in the parking lot.

Greg Kyte: That's always a giveaway for these businesses.

Caleb Newquist: And so I just don't know, maybe, maybe. And again, if I was maybe, you know, if I needed to know, maybe I'd just walk in there and be like, so how do you how do you how do you make this work, fellas? You know, or whatever I've never done.

Greg Kyte: Tell me your business plan here. It right here at, [00:05:00] uh, 12 month costume shop Supply Incorporated.

Caleb Newquist: Right? Right. But I'm a chicken shit.

Greg Kyte: Did I dox him? Was that the name?

Caleb Newquist: No, that's not the name. Oh, but it was close. But I am a chicken shit, so I'm not gonna go in there and ask them, like how they make it work, but I'm sure I'm sure there's a reasonable explanation. Uh, you know, that's or.

Greg Kyte: Or maybe not. Or maybe.

Caleb Newquist: Not. Uh, I don't know, I what about you, Greg? I'm sure you have one in mind.

Greg Kyte: Oh, my gosh, I, I was it was one of those things [00:05:30] where like, have you ever, have you ever been asked a question and you can't answer because there's too many answers running around like, you know, there's there's. Too many things that are going to fit this bill. So you like my daughter.

Caleb Newquist: Asking me, daddy, have you ever been embarrassed?

Greg Kyte: Yes, exactly, exactly. So so I so for real, there was just one day I happened to be driving around my town and I was like, going, oh, I gotta look for one of those. And immediate. [00:06:00] And I immediately drove past the right one. And I'm absolutely gonna dox this business. It's called A1 Vacuum and Sewing. It's been in the same place for longer than I've lived in Utah, so over its over three decades this place has been there. And and like you said, with the costume shop, I have never seen a single car in its parking lot. Yeah. And and now, granted, uh, Provo, Utah, which is where this business is just. I'm the next [00:06:30] city over, but Provo, uh, is a very crafty and a very, uh, uh, housekeeping e, uh, city. So I could see a demand for sewing machines and vacuum cleaners possibly being slightly higher than, uh, elsewhere in the country. Sure. But I cannot believe that there is enough specific sewing machine and vacuum business to keep that place alive. [00:07:00] Especially because, like, if, if you had the if you had to buy a vacuum cleaner right now, where would you go?

Caleb Newquist: Well, bed Bath and Beyond went bankrupt, so. Right. Uh. Fuck. Uh, maybe the Dyson website.

Greg Kyte: Okay, okay, I I'm me. I go to Target or Amazon, depending on if I want to, depending on how quickly I needed the vacuum cleaner. Right. It's one I would I would not go I'm going to go to a one [00:07:30] vacuum and sewing for for anything ever. So but what if you.

Caleb Newquist: Had a vacuum that you wanted it fixed? Isn't a one vacuum and sewing the place you would take it to get it fixed?

Greg Kyte: It is. But haven't you tried to fix enough stuff where you're like, oh, I could have bought a brand new one for an extra 15 bucks over what? I just got this old one fixed.

Caleb Newquist: Yes. Of course.

Greg Kyte: Yeah, yeah. So that's why I know I would not do that. Okay. And again, I'm going to say that over the past 30 years, our collective culture has become [00:08:00] more of a disposable culture than it was even back in 1992 when I first rolled into Provo, Utah. Yes. So, um, so, so because of that, I've got to assume that A1 vacuum and sewing has to be a front for the Mormon mafia. And that's just that's my conclusion that I've made.

Caleb Newquist: And now that we've settled that, um, our attorneys will be requesting copies of this podcast and, uh. [00:08:30]

Greg Kyte: I don't I don't see how there's anything legally wrong. What we did by questioning how a business stays in business. We didn't we didn't I? Well, okay, I guess I did say that I'm convinced it's a front for the Mormon mafia that could. There could be some sort of, uh. What is it? Libel. Is it? No, it's not slander, I think. I think it's slander because I said it with my mouth and didn't write it with my pen. Um, so. Yeah, but, uh, but but but still [00:09:00] the. Come on.

Caleb Newquist: Yeah, I hear you. I understand, I understand your skepticism. I also, I also it makes me think of like when I lived in New York City, there were always places where you'd be walking around and, you know, like you, when you live in New York City, you kind of. Stick to your own neighborhood for the most part. And, um, and yeah, there are there are businesses where you're just like, what's that all about? You know, it's like, yes, that's what's going on there. And. Yeah, and, and you know, you [00:09:30] know, the rent, if it was a regular business, you know, they'd be paying through the nose and rent and you're just like, they're not making they can't they're whatever they're doing in there isn't covering that. Right. So right.

Greg Kyte: Right. I, I spent a couple of summers in Los Angeles and uh, and, and when you're in Los Angeles, you're always wherever you're going. You're driving through a CD. At some point, you're driving through a CD part, there's a. Oh, yeah, there's no right. There's no way to get from one part of LA proper [00:10:00] to another part of LA proper without going through someplace where you're going. I would never walk along this street, but then there's like a fucking pet store, and it's like, who's who's gonna stop here to buy a puppy? Yeah, not a goddamn person is going to do that. Nobody is going to do that. So if it's not obvious, uh, because we haven't made it obvious yet. Uh, today's episode is about money laundering.

Caleb Newquist: Yeah, we've been interested in this [00:10:30] topic for a while. Uh, really, since we've been doing the podcast, because it seems like almost every case we talk about, uh, it involves money laundering.

Greg Kyte: So buckle up, because today you get to learn everything you've ever wanted to know about money laundering. First off, I feel like we gotta just get a good working definition of money laundering. And the one that I found that I like the best [00:11:00] comes from Grant Thornton Insights. Uh, which I'm sure you're familiar with from back in your days at Going Concern. I'm sure.

Caleb Newquist: Had to share all the time. Yeah, I'm sure I stumbled across it.

Greg Kyte: Right. But. But this was specifically Grant Thornton Malta that had this specific Grant Thornton insights. And so here's here's Grant Thornton Malta's definition of money laundering. It is a process whereby offenders attempt to obfuscate the true [00:11:30] nature of the obtained assets from illegitimate activities, and to ultimately make such assets appear legitimate. That's a great definition.

Caleb Newquist: Is it a great definition?

Greg Kyte: It's got so many big words. It's got lots.

Caleb Newquist: Of big words like, I feel like it could be. It could be, uh, a little more accessible.

Greg Kyte: It could be, it could we could we could make it more, uh, on on the Greg Kite level. Sure. Or even you got money. You got money from doing something illegal and you trying to make it look like [00:12:00] you got it from not doing something illegal. There you go. Okay. Bingo. That is better. Yep. Uh, so. But but what's crazy is that just finding that definition. Yeah. Uh, took me down. This this weird money laundering rabbit hole. That was very. It was very fun. Very fun. Okay. Because, uh, because I was like, Malta, that's ringing a bell. Probably from some movie or TV show that I saw. Yeah. But I was like, doesn't Malta have a big organized crime situation? And it turns [00:12:30] out it absolutely does, because according to a Malta today article from October 2023, quote, Malta is home to various criminal networks, including loose domestic organizations engaged in fuel smuggling, illegal fishing, human trafficking, money laundering, drug trafficking, illegal gambling and assassinations, acting both on their own and in collaboration with foreign groups. Which is amazing, that is, that they're [00:13:00] pushing illegal fishing and assassination in the same list. So based on on that little clip from Malta today, yeah, I guess the Grant Thornton Associates in Malta probably have a need for specific education and guidance regarding money laundering. Makes sense to me. But Caleb, that's where it even got crazier, because that same Malta Today article also referred to this thing called the Global Organized Crime Index report that [00:13:30] ranks. It ranks all 193 United Nations member states according to their organized crime situation. So if you're ranked number one, that means that you're you have a lot of organized crime.

Caleb Newquist: Corrupt, hella hella organized, organized crime. Okay. Gotcha.

Greg Kyte: So it's like the it's just incredibly organized and so criminal. And then if you're 193, you're, you're like, That's Eden. It was like the Garden of Eden was 193 [00:14:00] I gotcha. The Garden of Eden is still seeking United Nations membership, but once it attained, you know, I mean, so, so.

Caleb Newquist: But so if I may if I may, what was the number one country for organized crime?

Greg Kyte: Uh, number number one country for organized crime was Myanmar. Okay, formerly known as Burma. Yeah. One of the, I believe the very first episode of Anthony Bourdain's Parts unknown. Uh, on Myanmar. [00:14:30] He he yeah, he got and it was it's an amazing I don't know how much of an Anthony Bourdain fan you are. I'm of freak. Okay. When it comes. I've watched, I've never watched.

Caleb Newquist: I've never watched any of his shows.

Greg Kyte: It's it's amazing because they just they just opened, uh, at that point, they had just opened Myanmar up to foreign journalists. Okay. And so he was one of the first people on the ground there, and he did the full Anthony Bourdain treatment. And it was it was uncomfortable him talking to journalists [00:15:00] in the country because it was like, I think these people are going to die as soon as the episode as soon as the episode airs there. Because like it was, it was such a I mean, just in terms of the governmental oppression on the people, it was pretty crazy. So the fact that it's number one on the Global Organized Crime Index report does not surprise me a bit. You know.

Caleb Newquist: What? I still wouldn't have I still wouldn't have guessed it.

Greg Kyte: That you wouldn't have. No, no. [00:15:30] Okay.

Caleb Newquist: No, I would have I don't know what I would have guessed, but it wouldn't have been Myanmar.

Greg Kyte: Yeah, definitely not surprising to me that it was those Myanmar, Myanmar, Myanmar, Myanmar.

Caleb Newquist: Myanmar.

Greg Kyte: Myanmar. Okay, Burma.

Caleb Newquist: Somebody's got to correct us.

Greg Kyte: Yeah. Please. Please do.

Caleb Newquist: It's so much easier to say something like the Burmese jungle, you know what I mean?

Greg Kyte: That is. That is. I would like you please just write a one star review. We'll read it, uh, at the top of an episode sometime.

Caleb Newquist: And, I mean, this also tracks with our, uh, you know, our our our [00:16:00] substandard geography.

Greg Kyte: That's true. It absolutely does. So, uh, here's now here's your next question. Please just humor me. Guess I will. Where Malta ranked from 1 to 190 301 being the most the most organized crime, 193 being the least organized crime. Where do you think Malta. Gosh, ranked.

Caleb Newquist: From everything you've said so far, it's got to be top ten, Greg.

Greg Kyte: No, it's 109. What? It's it's even though they have people doing illegal fishing and, [00:16:30] uh, fuel smuggling. Yes. It's I mean that's that's some crazy shit, but it's still 109 out of 193. Now, here's what makes that crazy. The United States is number 67 is what it is. Ah, that means that we are 52 countries more organized crime than Malta, which is super organized crime. So, uh, that should put things into decent perspective, uh, in [00:17:00] terms of what our need is to be more informed about money laundering, what it is, how it occurs, what we need to do in response to it, that sort of thing. Um, but, uh, in my defense, in Malta's defense, sure. Uh, the report does specifically call out Malta as, quote, an attractive environment for money to be laundered through the formal financial sector. So clearly, the report even felt it was important [00:17:30] for when they were talking about the southern Europe sector to to, uh, point out that Malta I it almost felt like it's like, hey, just if you're reading this report because you need like a, a Yelp review, uh, for laundering your money. Malta. Not a bad choice.

Caleb Newquist: Not a bad choice.

Greg Kyte: But this episode isn't completely about organized crime. It's not about organized crime, per se. It's about money laundering.

Caleb Newquist: The [00:18:00] sources we found in our research say that money laundering has been around for about as long as money has been around. And, um. I didn't look up the origin story on money, but it's been around for a while. Yeah, uh, the first records we have of money laundering date back to 2000 years ago, around the time Jesus was born in Bethlehem. Chinese merchants were laundering their money in order to avoid taxes and to hide the fact that they were ignoring regional trading bans.

Greg Kyte: Listen, the [00:18:30] the the Magi came from the East, so we don't know where. Maybe they came from. China, right? Maybe it was Chinese merchants who were trying to. How did we say it, uh, obfuscate the true nature of the obtained of the obtained assets from illegitimate activities. Oh, and maybe they're like, if we give these to a baby, right? Then who's going to say who's? Who's going to say who's going to think we stole them?

Caleb Newquist: Right.

Greg Kyte: Uh, if we give them to the Savior of the world, of course we must have [00:19:00] gotten them. Yeah, from our jobs.

Caleb Newquist: That really changes my whole perspective on gold, frankincense and myrrh. Um, it's.

Greg Kyte: I'll tell you, that's the, uh, that's the that's the Mafia's go to, uh, mur mur. I got it, I got all this money. What do I need here? Move it. Move it through some more. Take it to our. We got a murga Murgi. Take it to the Murgi. He'll make it right.

Caleb Newquist: All right. [00:19:30] Fast forward a couple of millennia. The modern era of money laundering was defined during prohibition in the United States. Before prohibition, organized crime focused on gambling, prostitution, loansharking, extortion, and protection rackets. But then, in January of 1920, the production, distribution and sale of alcohol suddenly became illegal and the mob suddenly hit its heyday. Fun fact In the United States, the consumption of alcohol was never illegal under federal law. And you'll have to remind me, Greg, which [00:20:00] amendment to the Constitution.

Greg Kyte: 14th.

Caleb Newquist: -14.

Greg Kyte: Oh, what was it? What was it? Guy who wrote his senior paper on prohibition. Uh, 20th, 23rd.

Caleb Newquist: It was the 20th.

Greg Kyte: Quick Google search. 18th, the 18th and the.

Caleb Newquist: 21st and the 21st. Rescinded it. Rescinded it because there's a famous brewery in San Francisco. Uh, San Francisco called the 21st 21st Amendment Brewery.

Greg Kyte: Oh, nice.

Caleb Newquist: So that's how I can keep that one straight.

Greg Kyte: But, [00:20:30] well, well played brewery in San.

Caleb Newquist: Francisco. Yes, yes, yes.

Greg Kyte: Okay, so.

Caleb Newquist: So here's a great quote from the Mob Museum's website. Quote. By the early 1920s, profits from the illegal production and trafficking of liquor were so enormous that gangsters learned to be more, quote, organized than ever, employing, among other things, lawyers and accountants. Now, enormous illegal profits created enormous demand for money laundering. One method that became popular that became popular [00:21:00] among mobsters was cash only laundromats. Now, just to be clear, our sources specifically said, quote, cash only laundromats. But we're talking about the 1920s, so I'm really not sure what kind of other forms of payment could have been made.

Greg Kyte: Can you barter? I don't think you can barter. No, I.

Caleb Newquist: Think bartering was out of favor by that time. But also, Jennifer Garner and Samuel L Jackson weren't hawking Capital One cards either. So like. Right.

Greg Kyte: And I think [00:21:30] back in 1920, uh, Bitcoin was actually just a little piece of a coin.

Caleb Newquist: Yeah, correct. Many people believe the widespread use of laundromats is where the firm money laundering came from, but they're wrong. It didn't originate in the Jazz Age. It came from another time, also known for its music, but also from a scandal so big every other scandal would be compared to it. The music was disco. The decade [00:22:00] was the 1970s and the scandal was Watergate.

Greg Kyte: Turns out I have never given a shit about the Watergate scandal. And as a result, to prepare for this episode, not only did I have to learn about money laundering, I also had to learn about Watergate. And after reading more about it, I even care less about [00:22:30] it now. Uh, Watergate was a scandal that's so big that people often refer to it as the deflate gate of the 1970s. A bunch of dumb shits broke into the national, uh, Democratic National Committee headquarters, which was located inside the Watergate office building in Washington, D.C., which was also a hotel. Somehow that's always been weird to me. Like, why that? Yeah. Yeah. Why is it.

Caleb Newquist: Also a hotel?

Greg Kyte: I mean, I guess it's [00:23:00] a building, and they could be both, but that's. I don't get it. Like, is it a comp?

Caleb Newquist: Is it like a complex or. There are multiple buildings. Like what?

Greg Kyte: The only thing I can think of is offices on the ground floor and hotel. But even I don't know, I don't know. Yeah.

Caleb Newquist: I mean, I guess that makes sense because, like, I worked in a building that was all that was hotel on one side. And then there's commercial space on the other. So I guess that works, but I just yeah, I don't know.

Greg Kyte: Yeah. It's a yeah, it was a different time.

Caleb Newquist: Different is a different time.

Greg Kyte: A different time. All right. [00:23:30] Uh, anyway, tell me, Greg.

Caleb Newquist: Tell me more about these dipshits.

Greg Kyte: Well, I'd love to. The aforementioned dipshits were caught going through files and attempting to plant listening devices, uh, in the Democratic National Committee headquarters. And all of this happened on June 17th, 1972, when I was exactly 26 days old. And five days later, when I was exactly one month old. President Richard [00:24:00] Nixon said he had nothing to do with it and knew nothing about it. Oh my God, I remember it like it was 51 years and eight months ago. Here's a quote. Great quote by a great article published by FTI consulting. In addition to confiscating burglary tools and wiretapping gear, the arresting officers at the Watergate seized $6,500 in new $100 bills, most of which had [00:24:30] sequentially ordered serial numbers. The FBI traced the bills to the Republic National Bank of Miami, where one of the burglars, a former CIA agent named Bernard Barker, maintained an account, so investigators obtained bank records showing that Barker had deposited five checks totaling a little over $100,000. One of the five checks was from an account belonging to the chairman of Richard Nixon's Midwest [00:25:00] Campaign Finance Committee.

Caleb Newquist: Uh oh.

Greg Kyte: So despite Nixon's denials, this incontrovertibly tied the burglars to the Nixon campaign. As a result, money laundering became a big part of the Woodward and Bernstein Watergate articles, and the expression money laundering began its widespread use. Did you know that, smarty pants?

Caleb Newquist: I didn't, and I guess I wonder how they landed on. Money laundering [00:25:30] and scare quotes. You know it, isn't it?

Greg Kyte: It's so because you're taking dirty money and.

Caleb Newquist: And you're just washing it and you're just washing I think. Yeah.

Greg Kyte: Yeah, I think that's it is I mean, I think the idea of money being dirty money has probably been a. I think that's predated the the concept of money laundering.

Caleb Newquist: Sure. Yeah. Dirty money.

Greg Kyte: You're making it clean money. I think that's where it is.

Caleb Newquist: You're right, you're right.

Greg Kyte: Laundromats be damned.

Caleb Newquist: Right. That thing about the sequential bills is just so [00:26:00] ridiculous. Like, wait, what.

Greg Kyte: Do you mean? Well, just because.

Caleb Newquist: That they're sequential, like the numbers on them, they're just like they came off the printer and they just took them. Right, right, right. Um, this isn't weird. Right.

Greg Kyte: Well, and it makes sense, though, why in so many movies, they're like, I need the ransom to be a nonsequential nonsequential bills. Because it's because of Watergate. So many this this scandal changed the landscape forever. Caleb, I don't know if you [00:26:30] understand. I mean, I know you also don't give a single shit about the Watergate scandal, but this was a big fucking deal, man. I don't even know how I can convince you of that at this point. Oh, I'm.

Caleb Newquist: Convinced I actually think I. I'm actually pretty fascinated with Watergate.

Greg Kyte: Right? And like I said before, I still don't care about it at all. Fantastic. But what? But listen, what makes this especially interesting, even ironic, is that just two years earlier, [00:27:00] President Richard Nixon had signed into law the Bank Secrecy Act that was designed to prevent this exact kind of thing from happening.

Caleb Newquist: The Bank Secrecy Act is also known as the Currency and Foreign Transactions Reporting Act, but it probably should be known as anything but the Bank Secrecy Act because it forces banks in the United States to not be so secret. It's more like the Bank [00:27:30] Snitching Act, actually. There are three main requirements of the Bank Secrecy Act. Banks need to file what's called a currency transaction report on anyone who engages in a cash transaction exceeding $10,000.

Greg Kyte: Uh, fun fact I got one of those filed on me. Oh, yep. I think I'm sure you know this. I own a 1973 Ford Bronco.

Caleb Newquist: Do you know that?

Greg Kyte: Yes. One of my prized possessions. I bought it for $13,200, [00:28:00] and, uh, I had to pay for it in cash, so I had to go to my bank, and I had to. And I had to say hi. I would like $13,200 in cash, please. And they're like, yeah, that seems weird. Here, fill out this form. So I yeah. So, uh, there was extra paperwork. Uh, I got put on a government watch list, I'm sure. And I also got depressed at how small a stack of bills was. Uh, [00:28:30] for $13,200. I was, like, expecting a briefcase. And it was like a it was like a one fat envelope is all.

Caleb Newquist: It's just 130. It's just 132 hundreds, right?

Greg Kyte: It was so depressing that that was. That's the most cash I've ever seen in my whole life.

Caleb Newquist: Did you did you think you were gonna walk out of there with, like, a with a with a briefcase, like, handcuffed to your wrist?

Greg Kyte: Like a duff? I was thinking duffel bag, a.

Caleb Newquist: Duffel Ocean's.

Greg Kyte: Eight style.

Caleb Newquist: Sure. Yeah.

Greg Kyte: So.

Caleb Newquist: And you just got a fat envelope?

Greg Kyte: Yeah, [00:29:00] I did, yeah. It was. Yeah. Nothing makes you feel poorer than the most cash you've ever seen in your life. In one. In one. Just an envelope.

Caleb Newquist: Yeah, yeah, yeah. Uh, judging by the research, you probably didn't end up on a watch list. Uh, here's what Wikipedia says about it. And we all know that Wikipedia is the ultimate authority on federal legal regulations. So just hang in there, okay? A single currency transaction report, or CTR for short filed [00:29:30] for a client's account is usually of no concern to the authorities. While multiple ctrs from varying institutions or suspicious activity reports we're going to talk about those in a minute suggests that activity may be suspicious.

Greg Kyte: Gotcha. Got it. So one. So one time I withdraw that that money. No, I get a pass.

Caleb Newquist: Right.

Greg Kyte: You get Pat. Go. You're fine. Kite. Right. Don't worry about it. Right.

Caleb Newquist: Unless you have like 15 Ford Broncos. Oh [00:30:00] they're going to be like why. And your and your pay for paying for all of them in cash. Right? Then they'd be like. Wait. You bought you bought 15 Ford Broncos and you'd be like, yeah, and you paid for them all in cash, right? You'd be like, yeah.

Greg Kyte: Then they'd be like, come with me to jail, right?

Caleb Newquist: Okay.

Greg Kyte: Weird, right? Which is crazy because we've got some more questions. Right? Which is weird because I don't know if you know this story, but did you know Penn Jillette of Penn and Teller fame? Yes, he he started as a street magician. [00:30:30] Okay. And a street performer. Yeah. And he he made an ungodly like a ridiculous like, I think he made over $100,000 in a year as a as a street performer. And he took his he went to a CPA and was like, hey, I need to pay taxes on my money. That on my six figures I made as a street performer. And the accountant said, get the fuck out of my office. Seriously. He was like, if I if [00:31:00] I even try to to file a tax return for you for $100,000 cash you made as a street performer, then I will be in trouble and you will be in jail. So get the fuck out. And so he didn't pay taxes on his on his clean on his clean money. Funny.

Caleb Newquist: Yeah, it's a good story.

Greg Kyte: It is.

Caleb Newquist: So that thing called a suspicious activity report. Yeah. That requires banks to report. Surprise. [00:31:30] Suspicious activity. What? Yes. So basically, if it's a if a customer's activities suggest that they might be laundering money, the bank needs to file a suspicious activity report. Got it. Yeah. There's also the FBR. They call it FBR or Fibaa.

Greg Kyte: I think it's I think it's the FBR. Okay.

Caleb Newquist: Yeah. So that is the that is a foreign bank account report. Anyone [00:32:00] with foreign bank accounts that collectively have a balance of more than $10,000 are required to file. An f bar or fubar. Fubar. It's to.

Greg Kyte: Us. It's fubar.

Caleb Newquist: Fubar. Yeah, but this might also sound familiar to our tax preparers out there, because you also have to report these accounts on schedule B of your 1040. Yep.

Greg Kyte: Very familiar to me.

Caleb Newquist: Shout out for the tax folks. But the reason why we're doing [00:32:30] an entire episode about money laundering is because so many of the perpetrators, in the cases we look at, are charged with money laundering. The Bank Secrecy Act is considered anti-money laundering legislation, but it doesn't criminalize money laundering. Money laundering doesn't become illegal until 1986 with the passage of the Money Laundering Control Act.

Greg Kyte: The Money Laundering Control Act is what made money laundering [00:33:00] a federal crime. It was passed in 1986. Back to the future has been around longer than money laundering has been a federal crime. This law prohibits people from engaging in certain financial transactions, with proceeds that were generated from certain specific crimes, which are known as specified unlawful activities. And Caleb. There are over 250 specified unlawful activity [00:33:30] crimes. So let's play a little game. Okay. Uh, real quick, think of a crime. Sure. Yep, yep, that's a specified unlawful activity.

Caleb Newquist: Great.

Greg Kyte: The law also requires that the person engaged in those financial transactions has the intent to conceal the source, ownership and or control of the money. It also gives a very broad definition of financial transaction. So if I give you a wad of cash that's considered a [00:34:00] financial transaction under the Money Laundering Control Act, it's not I bought stock, it's not I opened a certificate of deposit. Right. It's, uh, it's I, it's you handed.

Caleb Newquist: It's you handed me a fat envelope of of $100 bills.

Greg Kyte: Of 132, $100 bills. That's enough to be a financial transaction. Yeah, which makes sense, though, to to me it does. But but for this crime, that's like I [00:34:30] said, it's very broadly defined, which I think as we'll get to is part of the reason why this is such a go to crime for, uh, prosecutors to throw at, uh, fraudsters. Um, but also this makes money laundering attack on penalty. Okay. Because if it's a crime to engage in financial transactions with proceeds that came from a crime, that means someone [00:35:00] has to be convicted of a crime before anyone can be convicted of the crime of money laundering. Oh, so a pile on offense? Okay, I would like to call it.

Caleb Newquist: Okay.

Greg Kyte: Then in 1992, they passed the Annunzio wily Anti-Money Laundering Act, which we only barely care about because all it did was it beefed up the regulation on the bank side. So [00:35:30] basically, the Bank Secrecy Act that you talked about, uh, that started in 1970 and the Annunzio wily anti-money laundering act that started in 1992. Those make it illegal for banks in the United States to be friendly to money launderers. Oh, yeah. So we can't. That's why Switzerland has Swiss bank accounts, but no one deposits their money. Uh, in any spy movies, in just an American bank.

Caleb Newquist: Account at a at [00:36:00] a at a Bank of America in Saint Louis.

Greg Kyte: Right, Citibank. You're not. No spies, no spy activity at Citibank. Right. Uh, and the AI program that we use to help us with the research for this episode brought up a few more laws that were established at, at least in part, to combat money laundering, including the Patriot Act that was passed right after nine over 11, and the establishment of the Financial Crimes Enforcement Network, which happened in 2004. Uh, but those are [00:36:30] all super boring, which proves that humans are still better than computers.

Caleb Newquist: So how exactly do you go about getting convicted of money laundering? It just takes three easy steps.

Greg Kyte: Or maybe five easy steps, possibly 6 or 7. It all kind of depends how you count.

Caleb Newquist: First off, if you want to get convicted of money laundering, you need to know that the money in question is the proceeds of an illegal activity.

Greg Kyte: That's step one. [00:37:00] But step one has two parts. The money has to have actually come from an illegal activity, and you have to know that the money came from an illegal activity.

Caleb Newquist: So if someone gives you money to launder that they earn through their completely legitimate paper route, you can launder it all you want, but you can't be convicted of money laundering. You can't clean what ain't dirty.

Greg Kyte: Also, if you do a bunch of convoluted financial transactions with a bunch of money that [00:37:30] you, for real don't know came from an illegal activity, you can't be convicted of money laundering, right?

Caleb Newquist: Unless you're a bank. Then you should have known that the only reason to engage in a bunch of convoluted financial transactions is to launder money.

Greg Kyte: Step two is that you actually have to engage in a financial transaction. This can include a purchase, a donation, a loan, or like we said before, just handing somebody a sack of cash. [00:38:00]

Caleb Newquist: But this step has a sub step because you have to also engage in the financial activity with the intent to conceal or disguise the illegal origins of the money.

Greg Kyte: So let's say you're an assassin and you buy a house all cash, but you disclose at the closing that the cash you're using to purchase the house was earned from murder. Then you're all good. Yes.

Caleb Newquist: Usually loan officers just breeze right past the. This house is not being purchased with blood money disclosure form, but [00:38:30] it's a very important form.

Greg Kyte: So that brings us to step three. Five. In order to be convicted of money laundering, the money has to be shown to have gone through the three steps of money laundering.

Caleb Newquist: Step one placement. The money has to get into the financial system. If someone gives you money and you give that money to someone else and that person puts it in a financial institution, then you were involved in the placement step of money laundering.

Greg Kyte: If you [00:39:00] take the money to your casino or your Breaking Bad car wash, or your weird A1 vacuum and sewing business, and deposit it as if it were revenue from one of those businesses, then you were involved in the placement step of money laundering.

Caleb Newquist: Step two is called layering. This is where you use multiple complex financial transactions to conceal the illegal origins of the money.

Greg Kyte: So if you take your assassin for hire money and deposit it in a bank in Luxembourg [00:39:30] and use that money as collateral to get a loan from a bank in the Cayman Islands, then you've engaged in the layering stage of money laundering.

Caleb Newquist: Step three is integration. This is where you reintroduce the money into the legitimate financial system. So if you use the proceeds of that loan from the bank in the Cayman Islands to purchase a home, or to purchase a car or to purchase a one vacuum and sewing, then you've been involved in the integration stage of money laundering.

Greg Kyte: And one thing to keep in mind [00:40:00] is that taking the illicit cash directly to your casino, or your Breaking Bad car wash, or your weird A1 vacuum and sewing business that can be considered placement and layering and integration.

Caleb Newquist: Also, keep in mind if you want to be convicted of money laundering, that doesn't mean that you have to have committed the underlying criminal activity. You don't even have to be directly involved with the underlying activity.

Greg Kyte: That's right. You just need to know that there was [00:40:30] an underlying criminal activity.

Caleb Newquist: So there you have it. Those are the three or 5 or 8 steps required to be convicted of the federal crime of money laundering.

Greg Kyte: And if you're taking the quiz for CPE credit, good luck remembering any of that.

Caleb Newquist: Okay. Greg, did we learn anything?

Greg Kyte: Yes. Well, that's it for this episode, remember? Even after you launder your money real good, every [00:41:00] bill still carries around 3000 different types of bacteria on its surface.

Caleb Newquist: And also, remember when someone asks you to deposit a bunch of money into a bank in Luxembourg and then transfer it all to the Cayman Islands? Just do it and don't ask any questions.

Greg Kyte: If you want to drop us a line, send us an email at omy fraud at earmark Cpcomm and Caleb, where can people find you out there in the internet?

Caleb Newquist: You can get me on LinkedIn at my full name. Forward slash backslash. [00:41:30] It's just a slash. Caleb Newquist Greg, where are you?

Greg Kyte: So you can find me on LinkedIn. But if you do direct message me on LinkedIn. Please have patience because I'm not getting on there very often, but I promise I eventually do read every single direct message that I get on the LinkedIn.

Caleb Newquist: On My Fraud is written by Greg Kite and me, Caleb Newquist. Our producer is Zach Franc. Rate review and subscribe to the show wherever you listen to podcasts. If you listen on earmark, that's where you get the [00:42:00] CPE. It's a new year. It's never too early. Get some CPE, then you don't have to be a basket case come December. That. Doesn't that sound nice? That sounds nice, does it?

Greg Kyte: Is. It's marvelous.

Caleb Newquist: Yeah, I can.

Greg Kyte: Speak from first hand experience.

Caleb Newquist: Yeah. Are you, are you were you normally a basket case in December. Oh no.

Greg Kyte: No I mean because of earmark I'm so far ahead that, uh, because I, this past year wasn't my reporting period, but I've got almost everything I need for next [00:42:30] December when I do have to report.

Caleb Newquist: There you go. Accountants. Be like, Greg, join us next time for more average swindlers and scams from stories that will make you say, oh my God, oh my fraud.