On Laundering Black Money - And Gold?

Bruce Krasting's picture


Switzerland started off the money laundering year with a bang. Three big cases in just a month:


- The Swiss accounts of Sergei Magnitsky have been frozen as a result of an ongoing corruption case in Moscow. This case is interesting as Magnisky died in 2009 (He died in prison - supposedly of natural causes - but he was only 37...)

The Russian's have made this claim:


Prosecutors accuse Magnitsky and his former client, London-based investor William Browder, of a $230 million tax fraud carried out through subsidiaries of Browder’s company, Hermitage Capital Management.


I have no idea what this case is really about (it looks political) but whatever it is, it stinks to high heaven.



-The accounts of Malaysia's Taib clan were frozen after a criminal complaint was filed in Kuala Lumpur. The filing read:


"Taib abused his public office in a spectacular way.”


Of interest (to me) is that the revelations about the Swiss accounts came as the result of a divorce proceeding - an angry ex-wife blew the whistle. The talk is that this mess may top $20B! (link)



- The most embarrassing revelation for the month was the release of information that Luis Barcenas, a Spanish politician implicated in a corruption scandal, had 22m Euros ($30m) stashed in a private Swiss account.



I'm sure that there were many other examples of busted money launderers in Switzerland for the month. They just didn't make the papers. In 2011, 1,500 separate cases were pursued by Swiss authorities. That "bumper year" was due to the Arab Spring, and all the hot money from N. Africa that got exposed. Things have probably slowed down in 2013 - So now what is it down to? 50 a month??


This business of black accounts, crooked money and crooked bankers fascinates me. How big a problem is this? I don't think anyone really knows the answer to that. The fact is, it's huge, and it's growing. The following data is from 2010. Even if it is only partially correct, the implications are staggering:


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What? $700B in one year! From only 10 countries! China is how big in this dirt pile?


$700B is a very big number, it is larger than the GDP of Saudi Arabia (or Switzerland), it is equal to the GDP of Indonesia (Pop =240,000,000), it is twice the size of the GDP of Michigan. And this is only from a small group of countries. The industrial countries must be adding huge bucks to the dirty-money list.


I got some input on this topic that might be of interest to gold bugs. I'm not certain of this info, so be guided accordingly. The email reads (in part):


There is a trend developing in the last two years where those with flight capital are trying to launder gold. For example gold is being smuggled out of Venezuela sent to Curacao where the exporter will create documents that he bought it from a country like Peru. It then goes on to a refinery in Switzerland or Dubai and those proceeds or sometimes the refined product are then deposited for the client.

Another example is Dominican Republic which has an usually large outbound flow of mined gold. The reason is similar, raw gold from Venezuela as well as from Africa comes to DR gets washed through a legitimate mining operation and then sent on to a refinery.


Again, I can't confirm any of that, but on the broader question of whether gold is now playing an increasing role in money laundering, I'm certain that it is.


Another comparison on the magnitude of global money laundering is that $700B is 3Xs the value of all of the gold in Ft Knox (valued at 1650).


On one hand you might conclude that the effort to snuff out dirty money in banks is going to be a constant source of new demand for gold. And you would be right in that conclusion. But on the other hand, if gold is going to be where hot money goes, how far away can it be where private ownership is restricted?


There is another side to this. Assume that there is already a large ownership of physical gold by the dirty money crowd (There is). Assume further that this ownership trend is increasing as global banks get squeezed by money laundering investigations and fines (think HSBC). Do the "deciders" in the globe want to enrich those that are now parking hot money in gold? "No" is the answer. This set-up is another reason why suppressing the price of gold would be "helpful". It certainly argues against gold backed money. That would make the bad guys rich.


Black Money

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tip e. canoe's picture

been noodling on this anecdote all day, moe.   you've written a modern parable methinks.   thanks for sharing.

wonder if the buttons-from-Heaven droppers realized the Biblical irony of their counterfeit trinket of choice, eye of the needle and all that?

titty sprinkles's picture

I remember reading in Mind of the Market about how capuchin monkeys have a sense of fairness, genetic engineering is some scary sh*t, but oh the possibilities...

Peter Pan's picture

Bruce, your piece is fascinating but if the authorities were interested in black money they should be going after the close to 30 trillion stahed away in tax havens. The black gold is small fry.

q99x2's picture

How does anyone know that there is any gold in Ft Knox. I signed a petition to audit the US gold but haven't heard anything back. I think they stole my email address instead of filing the petition.

I know if I were a bankster and could swap the physical out for worthless paper I'd have a lot of gold sitting at my place.

Bastiat's picture



You seem to assume that TPTB and the dirty money crowd are on different teams.  If TPTB want gold they go for the big stacks- see Saddam and Gaddafi- junior team members who perhaps forgot their place-and they don't confiscate, they steal it.

Besides, gold held by US residents is trivial, nothing like it was when Roosevelt grabbed it.

kaiserhoff's picture

Odd that Columbia and Afghanistan didn't make the list.

titty sprinkles's picture

I'm sure they're more careful when its foreign aid

Bruce Krasting's picture

Right. What do you figure for Afghanistan? $20B a year? Minimum? Stolen - $100 bills.  WTF...

chindit13's picture

Peripherally you hit an interesting point, so I'll take the implied tangent and run with it.  There's always lot of talk about illicit drugs, who controls them, how much money it involves, etc., and all the laundering associated with it.  Indeed, illicit drugs are at the heart of half a dozen "conspiracy theories" the Internet Gurus love to champion.  The reality is that illicit drugs are peanuts.  At the wholesale level the total is about equivalent to Ray Dalio's yearly IRS bill.  Rather than start at the top, most people who become obsessed with the whos and hows of illicit drugs start at the bottom (street value) and then convince themselves that is the cash flow at the wholesale or producer level, and even then they multiply it by a factor of ten.  Numbers quoted by those who see drugs-as-conspiracy are simply absurd, as they approach or exceed worldwide wholesale cashflow from petroleum.  A rational person need only look at the LA Freeway on a Monday morning to see which one is more significant.

Afghanistan is an excellent case in point.  A couple of hundred years of being either #1 or #2 as the world's opiate source got them chump change compared to the cashflow after the US began its nation buying/building program.  Pre-US invasion some Pushto Warlord was "envied" because he owed two Mercedes and a Landcruiser, and he maybe sported a big low quality diamond pinkie ring he bought from some third rate gem dealer.  Post-invasion he has a home on Dubai's Palm Island, a villa in Geneva, and maybe a place in Kensington. (By the way, go to Afghanistan today and you'll still see big fields of flowers, but they're not poppies, they're purple crocuses.  Yep, saffron is where it's at.  They're giving Iran, Kashmir and Spain a run.)  Heck, even the cashflow from Iraqi oil production had a "run for its money" when the US started shipping in pallets of Franklins to curry favor there and test the "broken window" concept of economic growth, after first breaking all the windows.

Forget drugs, the big money laundering customer is a dictator or "public servant", whether from the Middle East or China.


tip e. canoe's picture

agree with you on this one, chindit:  saffron is the most valuable plant-based compound on the planet, bar none.  didn't know the Afghanis got that deep into production.    good on them.   hopefully, those profits are distributed all the way down to the pickers and processors, but somehow i doubt it.

Orly's picture

You're way off base with this one, chindit.

Drugs have absolutely nothing to do with money, though these "Internet Gurus" (NSA shills...) of which you speak would love you to think so.

Drugs are about control; about putting the uppity Negroes in prison; about controlling the inner cities; about turf wars.  A study in "management," as it were.

Does anyone here besides myself find it...oh, ironic...that Raum Emmanuel moves from being Chief of Staff for the president to mayor of Chicago and the murder rate quadruples in sixteen months?  You think it's because he's a liberal?  Please.

Does anyone here believe that this is all an accident?  Couldn't this be another "experiment"?  I believe it is.  And drugs are a huge part of that.  To have the idea that drugs are about money, when the amount of cash-flow coming into CIA and other "black ops" from weapons sales to both sides is astounding, turns a blind eye to the real agenda.

These people are twisted in the head...and they're only getting worse.  It will catch up with them, though, believe.

One day.

chindit13's picture

I'm going to add something else.  The PTB couldn't care less about controlling the inner cities.  They'd prefer, if they could do it, to control Harvard, Silicon Valley, CalTech, MIT and Wall Street.  That's wherefrom come the ideas, the money, and the power.  What happens in inner cities is about not-so-benign neglect, a tacit admission that a whole swathe of society means nothing, except perhaps on Election Day.  It's an intramural battle, and so long as it doesn't spill over into "polite society", it will be given lip service and little more.  Maybe I've out-cynical'd you here?

As for Rahm, he's a little man, both figuratively and literally, running a city suffering from the same bad economy as the rest of the country.  What's the saying?  Better to be King of a City than (look like you're) on your knees in the West Wing?  Little men can be Kings in Chicago, but they are unlikely to be President.  Carter was the last diminutive one, and the country has been running from the likes of him ever since.  Stature sells, except maybe in France.  Napoleon set the standard there (and gave Rahm his pejorative ailment), besides setting the stage for Sarkozy and Hollande, who see eye to eye with Rahm.

chindit13's picture

We all, if we are fortunate, have our own areas of expertise.  I suspect yours is in charting the FX markets.  Though I will never convince you, it is not in the area of money laundering, illicit drugs, or running the kind of weapons that are actually used (rather than just serving as dictator viagra on Parade Day).  I think we will just have to agree to disagree, but as you ponder this, think of where your "knowledge" in this matter comes from.  Let's be frank, isn't your "knowledge" more accurately called an "opinion"?

In the comfort zone most create for themselves, they don’t really want to see the truth.  They’ve created a world, and even though it might be dark and full of bogeymen, it is their steady state and thus an odd source of comfort.   Change, even of opinions, is unsettling once the mind has become accustomed to its surroundings.  It doesn’t matter that the beliefs might be ugly; they are “home”, and humans most often find a way to fight their way back home and stay there.   I’m not trying to sound like Tony Robbins (or as “the other sides’ CogDis”), but this is a peculiar working of the human brain that it champions consistency and familiarity above all else,  even over unpleasantness.  I guarantee that if it could somehow be proved beyond the shadow of a doubt that any of the “conspiracies” were conclusively false, millions of current believers would be incredibly disappointed.  Their “home” would be destroyed in as real a sense as if a tornado just blew through town.  It’s bizarre, but it is human nature.


the grateful unemployed's picture

news quip tonight, jesse jackson wants barack obama to come home and clean up chicago. [i find this super-ironic, one black to another, and neither one of them a malcom x style black self autonomy advocate] of course we're at war with islam, which oddly was behind this thing in in us since the 60's, but like people who believe in labor unions, who suddenly find themselves listed in the same category as the international communist conspiracy. those muslims are now part of the terror network because all they wanted to was to police their own neighborhoods, and take care of their own because the colonial powers wouldn't.. [thanks goodness for the skeet shooter in chief].

dogbreath's picture

I bought a Farmers Almanac back in the 80"s.  There was a page of short quotes and one was:  " Behind every fortune there is a crime"  - Anonymous Swiss Banker

Bear's picture

Update Version ... Behind every Swiss Banker there is a Fortune, a Crime, and Anonymity 

jonjon831983's picture

In this context, then maybe that's why they have been smashing banking secrecy to take back the black funds/gold.

bigkahuna's picture

Another piece of the puzzle (which IS coming together VERY SLOOOOOWLY).

lieto's picture


Golds roll as money is coming to the forefront simply because our central banks and politicians are printing money, adding debt, and generally driving their (our) currencies into ruin.

When, not if, they loss total control of the system gold, metals, and barter will be all that's left.

It's not really a matter of politicians rewarding anyone willingly then is it?

Another issue is our various prohibitions and wars which offer big profit opportunities to various elected and unelected criminals around the world who are smart and devious.

Part of being smart is realizing the currencies of the developed world are or have become the biggest Ponzi in the history of the world.

At some point this will end, but it won't be voluntarily on the part of the debtor countries then will it?

Any politician that dares talk to the American people honestly is laughed at so far.

We won't change until we are forced to.

That is always the worst scenario.

It will be ugly.

You have been documenting some of that lately with your articles on SS cash flow which is another symptom of rot.

You know it, it's hard to admit how far off course we are isn't it?

jomama's picture

part of being smart is knowing how to spell 'role'.

holgerdanske's picture

I have no doubt that they will try and ban the private possession of gold. As the fiat currencies melt into oblivion, it will be one shady place to park. I refuse to give my gold up, and to "invest" in their casino economy. In case nobody has noticed: You used to pass a test and then be "proficient" in driving or a profession. No longer. You now have to "renew" you licenses. Very conveniently they also fingerprint you and check you out at the same time. The same with money. Cash is going out the window, and all you have saved are now just numbers on a screen. What is it worth? Maybe nothing, if they decide to block your account or devalue the lot.

And they want us to save in that??

They must be mad, or I must, one of the two.






Bananamerican's picture

"black accounts, crooked money and crooked bankers fascinates me. How big a problem is this? The fact is, it's huge, and it's growing."

A lotta folks on ZH pee on Religion (I'm agnostic myself) but there's a reason Greed is one of the 7 deadly sins.

The power of "Cheating" is closely linked with the power of Destruction...both vastly assymetrical, compared to the Power of Creation.

What takes 1000's of men to build can be destroyed by only a few....

A Devilish power and Temptation and for What? A few decades of "glory" on earth before transmuting into wormbait?

I despise most "bankers" and their ilk

chindit13's picture

Tongue in cheek, here's a question from the old Swiss Private Banker Entrance Exam:

A uniformed man enters your office carrying a bag of gold-filled teeth and diamond rings still wrapped around the fingers they adorned.  Do you:

A)  Run for your life

B)  Call security

C)  Ask the gentleman to take a seat and offer him an espresso.


To the fair and moral Swiss Private bankers I have known, just kidding.  I still wear my cow tie.

Orly's picture

There is only one Commandment and it is listed at number five.

Thou shalt not Steal.

Don't steal a wife, don't steal a life.  Don't steal My Day, etc.

Selfishness is stealing and all the Deadly Sins are wrapped around that thought.  Selfish thieves are the ruin of the World.


WmMcK's picture

+1 -- I remember there actually being more than 10 (depending on which book of the Bible you care to read).

the grateful unemployed's picture

i think that's covet, which is to say envy. the law interprets theft as the intention to deny someone the use of their property. so if i ask you, whats your wife doing for dinner, and you said nothing, then it would be okay to ask her out on a date. now central bankers do the same thing with gold, (and some islamics do this too) they play around with each others gold

FeralSerf's picture

Unless your wife is your property, how can someone "steal" her?

Orly's picture

If she entered into a marriage agreement, then each spouse "belongs" to the other.

It is what is called a...


FeralSerf's picture

I don't recall anything in my marriage contract that granted ownership to the respective parties.  Ownership implies involuntary servitude, which is illegal in most countries.

the grateful unemployed's picture

where do you suppose john corzine figures in all this?

seataka's picture

Just the cost of doing business? Germany wants its gold and they are told you'll get half of it over 7 years? Venzuela already got his.. Celente was going to take delivery of his gold.. He got screwed at MF Global. I think I heard 18 cents on the dollar.  That John Corzine is still walking around states that there is no law, we are going mogadishu soon. There is no more Law, there is only the privlege of wealth.

Orly's picture

Then you're not married.  You're friends, with benefits.

Obviously not the same thing.

dark pools of soros's picture

I thought marriage was only for reality shows and gay rights?

the grateful unemployed's picture

i always thought the gay marriage right was really about equal treatment under the (tax) law. in reaility they should just repeal any family or marriage deductions, the government has no business subsidizing marriage of any kind ( full disclosure i am diivorced)

Orly's picture

It's another symptom of what ails this sick world.


SAT 800's picture

Homosexuals getting married is going to somehow affect you? How? What ails the sick world is a debased currency "managed" by idiots; and an enormous Federal Government, which grows like a cancer and prevents the people of the country from having a higher st andard of living.  I fail to understand how homesexuals getting married, or not getting married, is of any more significance than whether or not hula hoops are popular.

Widowmaker's picture

Someone plug in the FAG 800?

andrewp111's picture

By itself, gay marriage has no significance. But principle matters to the law, and it does put the camel's nose under the tent for the real action later. If you have a same sex couple who just happen to be bisexual, why shouldn't they be able to add a third person... and a fourth... and a fifth. It won't be long before you end up with full blown polygamy. And you know what that means. 95% of group marriages will be one man and many women, and that means a tiny number of men will take all the women for themselves. This is a recipe for extreme social instability and violence.

Orly's picture

Oh, I couldn't care less about that.

I meant the reality shows.


Clinteastwood's picture

Hey, I'm all for gay divorce.

Orly's picture

That can of worms that I mentioned?

The Swiss have no choice but to play ball.  It is definitely in their national interest to do so.


Orly's picture

And please spare me the "Statist" rights of privelege crap.  If you had $400B in illegal gains (hint: you don't...), then I hope they would throw you under the prison.


SAT 800's picture

Orly, it has nothing to do with statist rights of privelege; your error is much earlier in the logical chain. Illegal gains are only illegal if you get caught; if you don;t get caught, then you're Joe Kennedy, the father of the President. The issue is the fundamental one of private property and the right to privacy. The State has no business in your Bank Account; period. If the enforcement agencies can prove you commited a crime they will, of course, prosecute you for it. If you were smart enough to put the proceeds in a country that finds it morally and financially acceptable to keep their nose out of peoples private bank accounts; then  you get to keep it.  Why are you so eager to punish some-one for "illegal gains" when you don't specify what was illegal about them? As Thoreau said, "Sometimes the only place for an honest man is in jail". If you were a Jew in Nazi Germany and you had a Bank Account in Switzerland; that money was, by the law of time; "illegal gains"; and they could and would force you to sign it over to the agents of the state. I'd like to know where Bill Clinton's pay-off money for selling the power and influence of t he Presidency went; now that would be an interesting case.

onlooker's picture

Mexico #3 ahead of Russia. Would this be drugs, silver/gold mining, or political corrupt. What else would create that much $ from the poor church mouse to our South?

Bananamerican's picture

why do you think they ARE a poor Church mouse?

Too many criminal parasites...

but it's also Latin American Culture.....speaking of Church mice, there's something about the Hierarchical, (inherently corrupt?) structure of "The Church" that's also REALLY messed up latin American cultures going waaay back

ken's picture

My mother lost her father, and I've lost my grandfather to the Catholic church.

shovelhead's picture

No problem...

You get him back on YOUR expiration date.

ken's picture

My mother lost her father, and I've lost my grandfather to the Catholic church.