COVER STORY
Money launderers wash billions through international trade
BY JOSEPH A. MANN
MA9JOSE@AOL.COM
Imported plain cotton pillow cases from France that cost more than $900 apiece and new bulldozers exported to Venezuela that cost $387 each. Such prices seem highly suspect -- and could be examples of someone using international trade to launder money.
Despite strict enforcement of federal anti-money-laundering laws, criminals are constantly finding ways to transform dirty money -- the proceeds of illegal activities -- into clean cash, and one of their most important routes is laundering money via international trade.
Money launderers are moving enormous sums through ports in Florida and other parts of the country by overvaluing or undervaluing exports and imports, said John Zdanowicz, a professor of finance at Florida International University.
Using a statistical program he developed to track money laundering, Zdanowicz analyzes U.S. government trade figures, calculates average prices for commodities and merchandise and searches the data for abnormally priced products.
The pillow cases and bulldozers are among the products he has turned up that seem to indicate trade may have been used to disguise the movement of money. But since the names of importers and exporters don't appear with government trade figures, Zdanowicz doesn't know who is moving the merchandise -- or the money.
''The front door of money laundering is the banking system,'' Zdanowicz said. ``The government has done a pretty good job of closing the front door, but the back door -- international trade -- is wide open.''
In its 2009 report, the U.S. State Department's Bureau of International Narcotics and Law Enforcement Affairs said annual estimates of trade-based money laundering reached into the hundreds of billions of dollars.
Lester Joseph, principal deputy chief at the Department of Justice criminal division, told participants at a recent anti-money-laundering conference in Miami that one of the government's priorities this year is to focus more attention on trade-related laundering.
As a center for world commerce, South Florida offers abundant opportunities for trade-related money laundering. Last year international trade in the Miami Customs District, which includes airports and seaports along the coast from Fort Pierce to Key West, reached an all-time high of $90.2 billion with exports of $54.9 billion and imports of $35.3 billion.
One way money launderers move large sums is by undervaluing exports to a foreign destination or by overvaluing imports. Alternatively, those overseas can use trade to move money into the U.S. by undervaluing goods shipped here or overvaluing merchandise exported from here to other countries.
CHEATING ON INVOICES
Zdanowicz explained how it would be easy to launder $1 million in cash quickly and move it out of the country: ``I'd buy 200 Rolex watches in Miami [at about $5,000 each] and export them to my partner in Colombia, charging $5 each on the invoice. My partner there pays me $1,000 for the shipment, sells the watches at the market rate in Colombia and we've laundered $1 million.
''I've heard about Corvettes being bought in Miami for $40,000 in cash and sending them to Latin America, invoicing them for $500,'' said Zdanowicz, who also is president of International Trade Alert, a firm that offers consulting services on international trade issues. The cars are then sold for $50,000 or more, thus making a profit while laundering money.
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