Cash and Carry Melvin Soudijn Senior researcher Dutch

Cash and Carry Melvin Soudijn Senior researcher Dutch National Police Peter Reuter University of Maryland Lisbon, 25 -10 -2017

The Cocaine Smuggler’s Problem: Too Much Cash u Bulk drug sales are all in cash u u Traffickers sell in large lots u u u Many small or medium bills 200 kilo shipment typical Generated ca. € 5 million For Colombian smuggler money is in the wrong place in the wrong form

Solution u Hire someone to smuggle your cash back home

Colombia Money broker The Netherlands Wholesale cocaine trader Money broker Coordinator Couriers Employees Cocaine buyers Suppliers (500 notes)

Our study u Research question: u u Financial records of 6 Dutch police investigations u u Defendants involved in transporting cash from NL to Colombia, Venezuela etc. All used similar methods u u What is cost of moving the currency? Convert to € 500 notes Create concealed compartments in luggage Recruit (South-American) emigres for courier work We estimate 914 courier shipments moving 277 million euros

Case example 1 u u FIU Netherlands report Bank employee converts euro bills Financial notes on money smuggling Three week period: u u € 7, 8 million received € 4 million smuggled € 2, 6 million confiscated 51 transports identified (€ 425, 000 on average)

Case example 2 u u Colombian woman changes € 500 notes Financial records of 7. 5 months u u u € 19. 5 million received € 15 million smuggled No confiscation 64 couriers identified (€ 300, 000 on average) Estimate of amount of money changed u € 95 million in € 200 and € 500 notes over 4. 5 years

Exchange at small tobacco shop

Case example 3 u u Failed robbery 20 months financial records u u € 234 million received € 208 million smuggled € 7 million confiscated Dozens of couriers identified (€ 200, 000 on average)

Costs in % Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Exchanging 3% 3 - 3, 5% 3% 2, 5 – 3, 5% 3 – 3, 5% Couriers fee 3, 4% 0, 9% 2% 2% 4, 75% 2% Tickets 0, 53% 0, 44% 0, 81% 0, 52% 0, 6% 0, 5% 0, 03% 0, 19% 0, 14% 0, 25% 1% 0, 03% 0, 05% 6% 8, 15% Transport Pickup airport General costs 1% 0, 23% 0, 37% Luggage Total known costs 7, 12% 4, 37% 6, 37% Fee coordinator 1 -3% Fee broker 2 -5% Insurance 5 -7% ? ? ? 6, 5%

Conclusion u u Smuggling cash generally costs over 10% Highest price is 17% u Confirmation: depends on factor time and relations

The Puzzle: why such an inefficient method? u u Our earliest case was from 2003 Still in use today u u Alternative methods? u u u Latest incident april 2017 Regular banking (0. 1%) Hawala (3 -7%) Bitcoins (5 -9%) Trade based money laundering (%? ) Hurdles u u Depositing (or buying goods with) millions in cash will trigger SARs Hawala network not strong in South-American region Bitcoin’s public ledger draws attention to changing millions Trade from Europe to S-A too thin

Other puzzles u Money not laundered in Europe but moved to other destinations u u u Why euros outside Europe? Where do all the € 500 bills go? Impact of non-production of € 500 note? Is the size of the South-American economy underestimated? Are cocaine smugglers not very competent? u Or at least incapable of reaching beyond their own networks?