Clearing House by Michael Lee Cannon
Correspondent banking is considered a high risk typology by the Financial Action Task Force (FATF) for money laundering for several reasons, including the fact that astronomical amounts of money can come from many directions and the correspondent bank provides services for indirect clients, i.e., individuals and entities, whose identities have neither been verified nor for whom first-hand knowledge is obtained.
In Clearing House, author Michael Cannon crafts a tale of correspondent banking utilized to launder enormous amounts of money around the world. The main character starts as a low level smurf in a criminal organization, but after a close call with a competing gang, he decides that he needs to change his focus. He obtains a law degree (paid for by the criminal organization), and becomes a well-respected business man in the New York financial world running a very progressive money services business (MSB) that caters to the needs of the immigrant populations in major cities in the U.S.—while at the same time helping the organized crime syndicate launder millions around the world. He establishes his reputation as not only a canny and successful business man, but something of a social paragon for providing banking services to those overlooked by the traditional banks, mostly the lower classes.
Written as a suspense story, Mr. Cannon effectively weaves in very topical subjects and situations into a fictional story—the more suspenseful as it is very credible, especially if the reader happens to be a compliance professional. As you read, it feels extremely plausible and one can readily accept that all of the situations could occur.
The story covers a number of potential AML situations. The protagonist, Jorge, begins by building up an MSB, which he expands to use contacts not only in the gaming industry, but also in other businesses to facilitate the laundering of money. He also has contacts within the New York Federal Reserve, who keep him apprised of regulatory developments. To increase the perception of the MSB's integrity, Jorge hires compliance officers from the most prestigious banks in the New York City area.
The MSB is identified as a potential client for transaction/payment services by a branch of one of the most prestigious banks in New York City. When the transaction banker is asked to step in to provide a proposal to offer correspondent banking services, his initial reluctance turns to a good working relationship with Jorge. After asking his input and advice on growing his business, Jorge begins courting him as a potential employee. He eventually hires the transaction banker and basically gives him carte blanche to increase the transaction business through the bank, which he does with enormous success. As the need to launder larger amounts of money arises, they reach out to establish a correspondent network globally.
One of the first relationships developed is with an acquaintance of the owner of the MSB, who is the principle in a bank in Miami. This bank is used as a correspondent for their Latin American business, which expands after the travels of the transaction banker through the major Latin and South American cities. He continues trying to expand their network with travelling to various cities around the world, speaking with potential correspondent banks.
The house of cards begins to tremble, when an unrelated investigation into payments from a Pakistani hawalader bring U.S. federal investigators to the MSB headquarters, asking for details of payments they have executed. Further questions are raised by the transaction banker, as he begins questioning the enormous and unpredicted business increases to the mobile offices, whose concept he first proposed. As the regulators request additional transaction information to trace the payments made by the hawalader, the compliance staff is instructed to fully cooperate. The results of these converge to threaten Jorge with exposure.
One of the themes woven throughout the book is Jorge's contingency planning. From his days as a smurf, he always had several alternative plans to protect himself. This theme carries through to the climax of the book.
Whilst the book could benefit from a finer editing (which I am certain will happen in the next printing), it is a classic "page turner." I highly recommend the book to everyone involved in the AML field and/or correspondent banking. It will give you lots of food for thought—and scare you silly!