Money-Laundering In Jersey? Fuhgeddaboudit!

FBI agents take arrested suspects from their headquarters as part of a corruption investigation. i i

FBI agents take arrested suspects from the Newark, N.J., headquarters on July 23 as part of a corruption investigation. Louis Lanzano/AP hide caption

itoggle caption Louis Lanzano/AP
FBI agents take arrested suspects from their headquarters as part of a corruption investigation.

FBI agents take arrested suspects from the Newark, N.J., headquarters on July 23 as part of a corruption investigation.

Louis Lanzano/AP

Federal investigators are still trying to unravel an alleged money-laundering scheme involving rabbis in New Jersey. They were picked up last week in a sweeping federal crackdown that netted 44 people, including New Jersey mayors and assemblymen.

Officials say the cash was passed across the counters of grocery stores and bakeries in Brooklyn, N.Y. Wads of bills were stuffed into cereal boxes: Apple Jacks and Cinnabon Crunch. One money-launderer in New Jersey was said to be operating in an office above an actual laundromat. All the dirty money was allegedly brokered by rabbis and funneled through Jewish charities.

Former CIA and Treasury agent John Cassara will help NPR's Robert Smith learn about laundering money. In the New Jersey case, the illegal money supposedly came from counterfeit handbags.

Smith has ill-gotten goods to unload: "I got bootleg CDs here. Bootleg NPR CDs here. I got Morning Edition. All Things Considered. $5. Three for $10. Come on man. Bootleg CDs."

Hard to believe, but the NPR CDs were not hot sellers, although Cassara pretends that Smith raked in $1 million in cash.

Now what?

"If I want to just hold on to that cash and spend it slowly, I don't need to launder money," Smith says.

"If you are comfortable sleeping on a lumpy mattress filled with dirty money there's nothing wrong with that," Cassara answers.

"But if I try to use my cash to buy something major like a car or a house," Smith says, "I will be reported to the federal government, which will want to know where all those wadded-up $5 bills came from. I need to sneak this cash into the banking system."

Cassara says there are three stages of money-laundering: placement, layering and integration.

Placement is getting the money into some electronic form.

"I can't just deposit it," Smith says. "The banks have to report anything over $10,000. In the old days, I could have gotten around that by making large numbers of slightly smaller transactions."

Criminals used to hire busloads of workers to put small sums of money into multiple banks. Those workers were called Smurfs, after the old cartoon featuring the little blue guys.

New banking software is getting better at exposing the smurfing trick. So criminals have to get a shell business to help launder their cash.

"The pizza parlor, the fast-food restaurants," Cassara says.

"Bars, strip clubs, car washes," Smith chimes in.

"Laundromats," adds Cassara. "Anything that is a cash-intensive business."

Someone would just have to slip a little of that dirty cash in with the clean.

In the New Jersey scheme, prosecutors claim that it was Jewish charities that were used to get illegal money into the system. Smith decides to launder his pretend influx of cash through his new pizza parlor, Famous Original Bob's.

Now it's time for Step 2: layering, which means moving the money around.

"You may transfer it to the Caymans," Cassara says. "You may transfer it to Switzerland and come back again."

In the New Jersey case, one of the rabbis brags in court documents that he sends money "to every country imaginable — Australia to Uganda."

Smith's bootleg CD money has been smurfed, covered in pizza sauce and sent on an around-the-world trip.

"Congratulations," Cassara says. "That sounds like quite a money-laundering scheme."

"I have a problem now," Smith says. "My money is everywhere around the world. How do I get the money back?"

"Its not that hard once you have the money into a financial institution," Cassara replies. Some overseas banks will basically give you a debit card, or they can call it a loan to cover your tracks.

Which brings Smith to the final stage: integration. Spending his newly clean money. That is, if he gets away with it.

In the New Jersey case, the rabbis and their connections could face another possible stage of money-laundering: incarceration.

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