Angela Jimenez was just another New Yorker making her way through Manhattan’s crowds getting her weekly banking done.

Or so it might have seemed.

Instead, Jimenez was a key link in a chain helping to keep drugs on the city’s streets—laundering money for drug traffickers.

But Jimenez wasn’t the classical “mule,” sent to banks with bags filled wi th cash for deposit, in amounts below $10,000.

Jimenez had cash—lots of it—but was making many very small deposits all over Manhattan. At one point, when government enforcement agents stopped her during a surveillance tail, she still had $165,000 in her handbag, and, apparently, a lot of stops still to make.

Some of the cash was destined for purchases of goods, to be shipped for resale in Colombia. And some of it was used to purchase money orders for amounts under the $3,000 trigger point. But a good deal of it was entering the U.S. banking system for the first step of its electronic transformation into Colombian pesos.

Jimenez was opening accounts at financial institutions, typically placing just $1,000 in each. She had counterparts in Colombia who were waiting for her scheduled deposits into the accounts linked to the many ATM cards they carried. Using cash machines in Colombia they withdrew pesos, which they gathered into bigger bunches for delivery to the drug lords.

By herself, federal authorities estimate, Jimenez helped move at least $1 million in drug sales proceeds, all in itty-bitty batches.
Call it the wireless wire transfer, or, call it by the name law enforcers are using: microstructuring.

Citibank flags the trend
This case—and there have been others—was related by Salvatore A. Dalessandro, deputy special agent in charge of the New York Field Office of the Department of Homeland Security’s Immigration and Customs Enforcement (ICE) Office of Investiga- tions. Dalessandro, who spoke last fall at the ABA/American Bar Association Money Laun-dering Enforcement Con-ference, is also director of the El Dorado Task Force, a multi-agency enforcement group.

Dalessandro spoke of the emerging threats that ICE is seeing, including stored-value cards, online payments, and ATMs, notably through microstructuring. He described microstructuring as a form of “smurfing,” where huge amounts of cash were structured into smaller deposits.

Using specialized software and other techniques, many banks are able to track such attempts at evading Currency Transaction Reporting mechanisms. Unlike traditional smurfing, however, microstructuring aims to fly under the radar of traditional systems by dealing in very small amounts. Dalessandro said that transactions of $500 to $1,500 are more the rule. This method of money-laundering, he noted, is much more labor-intensive. Not only do the players have to make many more deposits, but “they often have to go out and open new accounts to support this kind of activity,” Dalessandro said.

Dalessandro credited Citibank for first flagging microstructuring, in a 2004 Suspicious Activity Report. He said the bank was fine-tuning its suspicious activity detection software and began to pick up many small repetitive transactions.

This led Dalessandro and associates to begin looking for such activity. A key method used was to search for multiple accounts opened using the same names, addresses, and other identifying information. While many people have more than one bank account, most don’t have their names on hundreds of accounts.

Knowing where to start looking for such needles in the banking haystack has been a challenge. “Right now,” he said, “the only way we are identifying this activity is through our undercover operations.” Another mule found in the process used 113 bank accounts to launder $6 million in a year, Dalessandro said.

Different software packages handle anti-money-laundering in different ways, with some possibly able to spot patterns others might not flag. Dalessandro presented listeners with some warning signs that microstructuring may be going on:

• Use of counter deposit slips. Account holders generally receive preprinted deposit slips containing their account numbers. While many innocent account holders may use counter deposit slips from time to time, Dalessandro said that agents have noted that mules usually use counter deposit slips that have not been pre-encoded.

• Early traffic. Frequent activity immediately following the opening of an account with only preliminary and incomplete documentation.

• Frequent visits. Cash deposits of nominal amounts that are frequent and otherwise inconsistent with typical business or personal banking activity.

• Cash in, ATM out. If a bank’s software allows such tracking, cash deposits in the U.S. that correlate directly with ATM withdrawals in countries of concern may signal microstructuring.

• Unexplainable deposits. Cash deposits made to company accounts by individuals with no apparent connection to the company.

In addition to the cross referencing referred to earlier, where something suggests a closer look, where the bank’s system doesn’t routinely perform such checks, Dalessandro also suggested some preventative measures that banks can take:

• Narrow the opportunities. Limit the number of signatories and authorized account users.

• Toughen opening procedures. Require multiple forms of identification for account opening and also for subsequent banking activity.

Experts on the trend
Microstructuring has come about because of the increasing efficiency of the consumer and business banking systems, according to Sal LaScala, executive director at Daylight Forensic & Advisory, LLC, a New York-based consultancy specializing in anti-money laundering and related functions. It’s much easier for criminals to break up cash into small batches for deposit and “send” it through the international ATM system. Compared to traditional wire transfer mechanisms, he notes, the straightforward banking system is simple and comparatively cheap.

“Money launderers always follow the path of least resistance,” says LaScala, one of a number of experts consulted after Dalessandro spoke about the trend from the enforcement perspective. LaScala says he’s heard little chatter about the trend from banking clients, with most talk about it coming from investigatory agencies.

“It changes the landscape, in terms of what a bank has to do,” says LaScala. Banks need to improve their ability to aggregate small transactions across their branch systems and across the multitude of accounts that microstructurers use. Just looking at all small transactions won’t do the job, he says, because this will invariably mean sorting through a great deal of noise, “jamming up the system.” Linking small transactions conducted by the same party will be the key.

In many ways, microstructuring, especially with its international element, represents not so much a new money laundering technique, but an evolution of what’s been going on in structuring and ATM usage for a number of years, according to Pat Kaszubowski, a veteran bank AML officer with large institutions who now manages user groups for Fortent, a multi-faceted BSA/AML software vendor and consultancy based in New York City. She recalls how one large institution where she worked several years back was finding cash deposits made in one large city in its system being withdrawn routinely from ATMs in other cities in its network.

Kaszubowski adds another warning sign to those listed earlier: cash deposits made at ATMs, turning this technique into an all-ATM chain.

“Who would give cash to a machine, unless they were trying not to be remembered?” asks her associate, Michael Recce, chief scientist at Fortent.

“Honest people don’t usually deposit cash into ATMs,” says Kaszubowski, though she adds that in some businesses, this is not unknown. She recalls that some of her past employers had customers who owned bars who would sometimes make cash ATM deposits.

One flag that won’t work, according to Recce, is the request for more than one card on an account. It is not unusual for families to request two or even more cards all drawing on the same account.

High-tech solutions such as facial recognition software used with ATM cameras wouldn’t help much either, says Recce. He explains that people become unrecognizable over time, as facial characteristics and general looks change.

One more indicator that pays off
One issue that nearly all honest bank customers ask about can help a bank flag a potential microstructurer: fees. Drug organizations make a great deal of profit. A strong sign that someone is up to something more than they seem to be, Kaszubowski explains, is that they don’t appear to care, or even ask, what fees and charges a new account is going to incur. BJ

 

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