No Happy Endings for Money Launderers

Crime, even "white-collar" crime, has its consequences.

“MONEY LAUNDERING” is a benign-sounding euphemism for “making the piles of cash collected from drugs, sex trafficking, arms dealing, diamond smuggling, extortion, and other malefic activities seem like it was earned by legitimate means, so it can be spent with impunity.” It was invented by the visionary gangster Meyer Lansky in the thirties and forties, and perfected by the Russian mafioso Semion Mogilevich in the eighties and nineties.

Any ambitious goon can work a protection racket, run numbers, deal drugs, traffic in prostitutes, or do professional hits. It requires only muscle, will, an appetite for risk, and a sick disregard for human life. The big-time money launderer, on the contrary, must be smart enough to understand how to work the books, creative enough to seek out new avenues and opportunities, and ruthless enough to apply these skills to something not only criminal, but heinous. The money launderer might not be the one who cuts the heroin with lethal amounts of fentanyl, or rapes the fifteen-year-old Belarussian prostitute, or sells the enriched uranium to Al Qaeda, but by abetting these nasty activities with his financial chicanery, he is indirectly responsible for those crimes. Mogilevich was involved with other sleazy mob activity, too—he got his start ripping off his fellow Soviet Jews, who were leaving the USSR for Israel or the West; the guy’s an unequivocal scumbag—but, as Craig Unger explains in House of Trump, House of Putin,

it was Mogilevich’s expertise at laundering money that made him so invaluable to other mobsters. He had mastered a skill that was deeply coveted by the most formidable gangsters on the planet: He took dirty money and made it clean.

The so-called “Brainy Don” was able to both stockpile and launder the money, making him very powerful indeed. And very, very rich.

---

There are two economies. The legitimate world economy, with its businesses and banks, its corporations and capital, its stock exchanges and monetary funds, its Swift codes and credit cards, is the first; the second is the underworld economy, the dirty money of transnational organized crime, which deals exclusively “off the books,” in cash.

The latter accounts for more than $2 trillion annually, comprising some 3.6% of the world’s Gross Domestic Product. That may not sound like a lot, but if the estimates are accurate, the underworld has a larger share of the overall economy than any single country except the United States, China, Japan, and Germany. Transnational organized crime does more business than Great Britain, France, India, or Canada, and almost twice as much as Russia.

Money flows constantly between the two economies. But it’s a little like a ski slope: moving up is much, much harder than moving down. A high schooler who buys a dime bag of weed, an account manager who spends the night with a prostitute, a dentist who bets big on the Pats and the points: these are all examples of money moving from the legitimate global economy to the criminal. All that’s required is cash—cash that is likely derived from a legitimate source. Easy peasy. Anyone can do it. (So many people do it, in fact, that there is a powerful argument to be made that weed, sex work, and gambling should be legalized at the federal level.)

But the drug dealer who collects the loot from the guys who sell the dimes bags, the pimp who prostitutes the trafficked girls, the bookie who handles the wagers—all of them wind up with large amounts of cash on hand, and no plausible reason why they should have it. The real mobsters, meanwhile, who perpetrate much more elaborate and awful crimes, accumulate vast quantities of cash—so much loot that it has to be weight-counted. How to render underworld cash usable has been a key feature of many of our best and most popular TV shows, including The Wire, Breaking Bad, and Ozark. Who can forget meth-maker Walter White’s incredible, unspendable hoard of dirty dollars?

Unlike the other programs, Ozark is actually about a money launderer. In the pilot episode, Jason Bateman’s character, Marty Byrde, explains the harsh reality of the underworld economy to a family of thieves who have stolen $8 million of his employer’s money, and mistakenly think they have struck gold: “It’s a lifetime supply of gas and groceries. That’s all it is.” To actually use the money to buy, say, a nice house, a new car, college tuition for your kids—or to deposit it in a bank or invest it in shares of Amazon—it has to make its way from the criminal economy back to the legitimate one. It has to be, in a word, laundered. In this upward direction, the journey of money is much more difficult to accomplish.

Where does all that dirty money go? It purchases legitimate businesses—cash businesses, ideally—to create fronts. Think Breaking Bad’s Gus Fring owning the Los Pollo Hermanos restaurant chain. It buys prosecutors, lawyers, accountants, academics, journalists, judges, and politicians. It’s used to set up shell corporations in places like the Channel Islands, Cyprus, the Seychelles, and the Caymans—any country that prizes secrecy will do—and from there exchanged for prime real estate, for works of art, for antiquities—for any luxury item that can be flipped, even at a loss.

Donald John Trump launders money for the Russian mob in a flamboyant manner that is the antithesis of Ozark’s Marty Byrde—or of the Russian mafiya’s Mogilevich, for that matter, who is a behind-the-scenes, attract-no-attention kind of guy. Trump does it through shady real estate deals. In the eighties, Trump Tower was one of just two buildings in all of New York City that allowed units to be purchased by shell companies. This allowed a mobbed-up Russian like David Bogatin to plonk down $6 million from some mysterious shell corporation to buy five condos in Trump Tower. Any subsequent revenue generated from that transaction—maybe there was rental income, maybe the units were sold—was “clean.” This was hardly the only shady transaction.

As Anders Aslund, a Swedish economist, put it to Craig Unger: “Early on, Trump came to the conclusion that it is better to do business with crooks than with honest people. Crooks have two big advantages. First, they’re prepared to pay more money than honest people. And second, they will always lose if you sue them because they are known to be crooks.”

The much-ballyhooed Russian sanctions imposed by Obama—which the inept Donald John Trump has not managed to get lifted—are effective because they prohibit individual oligarchs, including many of Putin’s old judo buddies, from accessing the Western banking system—in effect closing off much of the legitimate economy to them. The sanctions are a master stroke, because they cast the oligarchs and Putin pals as illegitimate. The sanctions are the West saying: Fuck you, you fucking criminals. What’s the use of having all that money if you can’t spend it outside of Russia?

Anyone who watched The Wire, Breaking Bad, or Ozark can tell you that money laundering stories don’t end well. (The last show is still going, and I’ve only just started Season Two, but it looks like the best the Byrde family can hope for is a Gene Takovic-style getaway, or else witness protection.) Despite a long and storied career, and numerous attempts by the feds to nail him, Meyer Lanksy managed to avoid conviction; he eventually fled to Cuba with some $20 million, and, in his words, “went bust” in Havana. When he died in 1983 in Miami Beach of lung cancer, the 80-year-old had been broke for two years. Mogilevich is 73—the same age as Trump—and lives like a prince in Moscow, but he’s more or less confined to Russia. He can’t visit Budapest, long his base of operations, or London, or New York, without risking arrest.

That’s the fate of the two best money launderers who ever lived—the richest, the smartest, the most powerful and respected. When you’re further down the food chain, a cog in the laundering machine, the cards are stacked against you. For these unfortunate souls, there’s no way out. There’s no retirement party for money launderers, no gold watch, no pension plan. There’s only never-ending anxiety, the eternal need to churn the loot, the constant fear that the curtain can come down at any moment. The most prudent course of action is to defer the ultimate fate, to live to launder another day—which is why every move Trump makes involves stalling. The best that the middling money launderer can hope for is to peacefully and naturally expire before the FBI comes calling.

Will the president wind up in a fancy pad in Moscow, like Mogilevich? Will he go out like Lansky, in Florida of natural causes, a once-wealthy New York legend with a measly $57,000 in the bank? Either outcome would be preferable to exposure of his crimes, and the humiliation of defeat, conviction, asset forfeiture, and prison, that likely awaits him in the new year. Unlike in the rub-and-tug joints that are such ideal fronts for their noxious brand of crime, with money launderers, there are no happy endings.