October 20, 2005

What happens when you don't do due diligence...

A story doing the rounds (1, 2) shows how money laundering is now being used to open up security in banks that don't do DD. The power of the money laundering bureaucrats is now so unquestioned that mere mention of it and a plausible pretence at it allows anyone to do the craziest things to you.

AN INGENIOUS fraudster is believed to be sunning himself on a beach after persuading leading banks to pay him more than 5 million (3.5 million) in the belief that he was a secret service agent engaged in the fight against terrorist money-laundering. The man, described by detectives as the greatest conman they had encountered, convinced one bank manager to leave him 358,000 in the lavatories of a Parisian bar. "This man is going to become a hero if he isn't caught quickly," an officer said. "The case is exceptional, perfectly unbelievable and surreal."

In another case he did it with wires to Estonia, but had to sacrifice his wife and mother-in-law in the process:

A third payment of 5.18 million was made to an account in Estonia. This time Gilbert was quicker. Police identified him by tracing his calls, but by the time they caught up with him he was in Israel. They arrested his wife and mother-in-law at the family home outside Paris. They deny acting as accomplices.

Can you hear the mother-in-law screaming "I told you he was a SCHMUCK!?!" Read the whole thing - it's a salutory lesson in how governance is done not by blindly doing what bureaucrats and experts think is a good idea, but by thinking on your feet and doing your own due diligence. In this case, it is somewhat unbelievable that the banks did not do the due diligence on this chap, but I suppose they were waiting for an invitation!

Posted by iang at October 20, 2005 11:30 AM | TrackBack

If someone proposed that you create a banking system where...

1) It is faith (er identity) based - create one number (SSN) and have all accounts (such as a credit card number or bank account number + routing number) be a proxy for it... Customers can pay merchants by simply revealing the proxy number...

Then create a whole bunch of rules on how banks have to protect the consumer and combat fraud.

2) Create money laundering legislation that in effect says - don't do anything with your money other than pay tax and spend the remainder via the above mechanism (i.e. trackable between well established identities with well establised spending patterns such as with your grocery store)

3) Create a "secret service" that is supposed to test the above setup with undercover agents to "protect it".

... even a 100 years ago you would be laughed out of the room.

It is those bank and government bureaucrats that created this mess that ought to be in jail.

Posted by: Venkat Manakkal at October 22, 2005 08:20 AM
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