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THE ELECTRONIC BLACK MARKET

 Banknotes, Diamonds, Gold, Oil, Cigarettes - That Will Do Nicely, Sir!

 

By David Guyatt

 E-commerce has grown to become a multi billion dollar market place that straddles the planet, and yet is still in its infancy.  Recent estimates place annual internet turnover well above the $100 billion mark - a figure that is set to sky-rocket over the next decade.

 The global reach, easy access, speed and relative anonymity that is available via the internet has, however, benefited one sector of international business more than most. This is the electronic elite of the international black market.  Discrete websites and hard to locate trade boards have become home to a global community of shadowy wheeler-dealers anxious to join the ranks of the very wealthy without a moments delay.

 For it is in the murky world of the electronic black bazaar that humungeous quantities of used banknotes change hands.  One recent "Cash to Cash Exchange" - as it is known amongst these insiders - was based on a "trial tranche of 30 million French Francs" ($6 million) being exchange for Sterling, Italian Lire or Spanish Peseta banknotes.  The offering party stipulated that the exchange was to take place at the "Brinks Security House" located at St. Laurent Du Var, France.  The French Francs were offered at a 20% gross discount with 6% of this earmarked for disbursement as "commission" to intermediaries on both the buyers and sellers side.

 Nor does this black currency market deal in trifling amounts.  One seller located outside London, recently posted an offer to sell 2.2 billion Libyan Dinars (2.8 billion) together with 5 billion Hong Kong Dollars (409 million).  A subsequent phone enquiry revealed that these currencies were no longer available, following representations made by an intermediary acting on behalf of Middle Eastern oil companies.  However, the broker now wished to acquire as much as $2 billion worth of Kuwaiti Dinars in order to smooth his deal with the oil companies.  In addition to this he was a strong buyer of Japanese Yen and Italian Lire, but was in any case, always interested to do business in any G7 currency.  The latter, due to their strength, continue to form the backbone of these shady transactions.

Admittedly, scams in this shadow realm are common-place.  The principal one in the black currency market is to obtain payment of one currency before handing over the other.  This is immediately followed by the prolonged disappearance of the suitably enriched con-man, naturally.  Besides this there are numerous other swindles and get-rich-quick schemes primed and ready to catch the unwary and unwise.

 But where there is smoke there is always fire.  One senior executive in the insurance industry recollected - in strict confidence - an occasion where a sum of several hundred million dollars was to be physically, and discretely, shipped from one country to another.  This was occasioned by an impending change of government when certain highly placed officials, seeking to protect their "interests," wanted an insurance policy to cover against possible loss during the transfer. 

 Not least, the vast amounts of ready cash that daily spills out from the global drug trade - now reckoned to top one trillion dollars annually - has to be laundered and banked.  Currency exchange is obviously one method of laundering mountains of dirty cash.

 Other players in this cyber-market place avoid trading banknotes and instead focus their efforts on dealing in large quantities of cigarettes.  The bulk standard black market "fag" peddled throughout the known smoking universe is Marlboro Red.  One Internet site specialises in offering anything from delivery of a few Master Cases through to multiple container loads.  The price fluctuates, of course, but generally remains within the $280-300 band.  This is for a "Master Case" that holds 500 packets of cigarettes, and works out at 60 cents or about 38 pence a packet.  Delivery is negotiable, but typically is ex-warehouse - for example in Amsterdam, or a similar port elsewhere in the world.  There is nothing new about tobacco smuggling and in the past fortunes have been made on the back of it.  What is new, however, is the role the internet now plays in bringing partners in crime together.

 But putting banknotes and cigarettes to the side, it is gold that continues to mesmerise and bedazzle all those who barter in the back streets of the electronic arcade.  Hundreds of offers and bids -often expressed as "AU" in reference to its Latin name - are posted each year on an array of internet trade boards. 

 An offer posted in March this year on the international trade board hosted by Thaipost.com (http://www.thaipost.com) was hocking "1.8 million ounces of unprocessed gold in 12 kilo bars."  This originated from a seller in Ecuador who offered the gold at a 7% discount to the "Second London Gold Fix" due to the impurity of the bars and because they bore no refiners mark or "chop."  Clearly, this gold was straight out of a mine and destined for a buyer who cared little if local tax or other laws were breached in the process.

 This deal is an exception, however.  It is far more common for gold to be offered or bid on the basis of Good London Delivery.  This specifies the bar size, minimum required purity and an acceptable hallmark.  While London Delivery remains the bar of choice for many, the preferred destination is Switzerland, and in particular, the free trade zone located at Kloten airport.  Hidden beneath the airport runway well-guarded vaults house large stocks of bullion for a diverse range of customers.

 One of the most notorious black market gold dealers in the world, the late President Marcos of the Philippines, rented space at Kloten to store some of his plundered gold.  By depositing the metal at the airport's free zone, he avoided registering it with Swiss customs, thus also keeping it hidden from prying eyes closer to home.

 Marcos, however, preferred to avoid keeping all his golden eggs in one basket and therefore stashed bullion in banks vaults all over the world.  Documents given to this writer in confidence purport to identify 57 banks in 33 countries where Marcos gold was deposited.  Verifying the accuracy of such gold deposits is often fraught with danger. .  A copy fax message dated 1994, noted that a Swiss lawyer who had undertaken to "probe" a sensitive gold deposit once belonging to Marcos, was now "missing, presumed dead."

 Yet, for those who are not attracted to trading in banknotes, cigarettes or plain old-fashioned gold, there are plenty of other high value commodities to chose from.  A range of websites hawk silver, platinum, diamonds, topaz and other gemstones.  Oil also continues to sit high on the list. Then there is a bewildering array of financial instruments up for grabs.  This is in addition to rare earth and scientific metals.  In fact, anything that will make a quick buck ultimately finds its way to the info highway's numerous trade boards.

 Another striking feature of this market is that it possesses its own unique procedures and documentation.  Following initial contact between the buying and selling party, fax and mobile phone numbers are exchanged to enable negotiations to continue in private.  If these preliminary contact shows promise - meaning that access to the offered commodity on the one hand, and the money to pay for it on the other, can be demonstrated to everyone's satisfaction - then negotiations move to a third phase.  This invariably involves face to face meetings, usually referred to as "table top meetings."  And, while meetings at Brinks Security House in France are not always the norm, London hotels are.

 Last summer I sat sipping Champagne in the plush lounge of the Thistle hotel in Victoria.  My host was an eastern European gentleman flanked by his youthful and perpetually silent "assistant." The individual bore signed and sealed papers identifying him as an authorised intermediary for certain high level individuals and government departments in Moscow and elsewhere in the former Soviet Union.

 He was in London seeking support for a large project finance package aimed at cleaning up chemical weapons waste from the floor of the Baltic Sea - where it had been dumped by previous Soviet administrations.  Apart from that, however, he had on offer a dazzling array of commodities ranging from billions of dollars worth of Russian Rouble banknotes - available at a 20% discount - through to massive quantities of Russian Government Treasury securities.  A huge block of gold bullion, located in a dozen western European centres was also on offer.  In addition, I was shown deposit receipts for $50 million worth of cut gemstones held in a Moscow bank on behalf of a corporation located in New York. 

During my two meetings with the individual who I soon dubbed "the Man from Moscow," I learned that other eastern delights were also available.  These included oil, timber, scientific metals and, of course, ampoules of Red Mercury - just in case I knew someone who wished to build their own suitcase sized nuclear bomb. 

 Intriguingly, within a few months of these London hotel meetings, the Soviet economy collapsed spectacularly forcing the government to suspend dealing in Treasury notes.  Was it possible that the "Man in Moscow" was so well informed and so closely connected to the corridors of power that he knew in advance, what was soon going to happen?  Russian rats fleeing the sinking ship of communism had earlier plundered a vast assortment of state owned assets following the ousting of Mikhail Gorbachev, in 1991.  The entire process seemed destined to be repeated in 1998.

 Meanwhile, the dizzying growth of the internet as a global marketplace is set to boost even more dubious transactions across the border-less regions of deepest cyberspace.  This raises the question of which government department or agency is tasked with regulating this rapidly developing arena.  The answer, it seems, is that there is no answer. 

 Business Age contacted the Home Office; the Department of Trade & Industry; the Metropolitan Police Computer Crime Unit and the National Criminal Intelligence Service (NCIS).  The latter includes Interpol.  Our enquiries were generally met with a blank response.  One problem for this is the multi-jurisdictional nature of the internet which makes it difficult for any one government department or agency to get to grips with the matter.  NCIS are the only law enforcement agency that is aware a real problem exists.  This followed their recently completed "Project Trawler," that looked at internet crime.  Despite this, no plans are in the pipeline to monitor or combat the growth of the electronic black market.

 It seems that for once, anyway, Big Brother isn't watching.

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