AP Investigation: How con man used China to launder millions
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AP Investigation: How con man used China to launder millions
ERIKA KINETZ & TIA GOLDENBERG & DANIEL ESTRIN & RAPHAEL SATTER
Mar. 28, 2016
ASHDOD, Israel (AP) — Gilbert Chikli was rolling in money, stolen from some of the world's biggest corporations. His targets: Accenture. Disney. American Express. In less than two years, he made off with at least 6.1 million euros from France alone.
But he had a problem. He couldn't spend the money. A tangle of banking rules designed to stop con men like him stood between Chikli and his cash. He needed to find a weak link in the global financial system, a place to make his stolen money appear legitimate.
He found it in China.
"China has become a universal, international gateway for all manner of scams," he said in an interview with The Associated Press. "Because China today is a world power, because it doesn't care about neighboring countries, and because, overall, China is flipping off other countries in a big way."
A visionary con man, Chikli realized early on — around 2000, the year before China joined the World Trade Organization — the potential that lay in the shadows of China's rise, its entrenched corruption and informal banking channels that date back over 1,000 years. The French-Israeli man told the AP he laundered 90 percent of his money through China and Hong Kong, slipping it into the region's great tides of legitimate trade and finance.
Today, he is in good company.
Criminals around the world have discovered that a good way to liberate their dirty money is to send it to China, which is emerging as an international hub for money laundering, an AP investigation has found. Gangs from Israel and Spain, North African cannabis dealers and cartels from Mexico and Colombia are among those using China as a haven where they can safely hide money, clean it, and pump it back into the global financial system, according to police officials, European and U.S. court records and intelligence documents reviewed by the AP.
China's central bank and police refused repeated requests for comment.
In a regular briefing with reporters Monday, Chinese Foreign Ministry spokesman Hong Lei said the government "places great emphasis" on fighting crimes such as money laundering and is working to expand international cooperation. "China is not, has not been, nor will be in the future a center of global money laundering," he said.
Chikli is widely credited in France with inventing a con that has inspired a generation of copycats. Chikli's scam, called the fake president or fake CEO scam, has cost companies around the world $1.8 billion in just over two years, according to the FBI. And the damages are rising fast.
Security cameras poke over the high wooden fence that encircles Chikli's property, a sleek, three-story home in Ashdod, a port city on the Mediterranean. Beyond that, a swing set, pink-and-purple tricycle and orange ball jumble his lawn. And then there is Chikli himself, tan and smiling at his massive front door. He was sentenced in absentia to seven years in prison by a French court last year and remains a wanted man, but here in Israel, he lives openly and talked about his criminal exploits with pride during four hours of interviews with the AP.
"It's the power of persuasion," he said. "It's not easy to turn the head of a bank president."
Dirty money has long washed through China, but has been viewed primarily as a domestic problem. Now, mounting evidence shows that non-Chinese criminals are learning to tap entrenched, sophisticated Chinese systems to move money illegally— largely beyond the reach of Western law enforcement.
China's underground financial systems are of rising concern to top policymakers there, who are struggling to stem massive capital flight as the economy slows. Despite strict currency controls, a record net $711 billion gushed out of China last year, not counting foreign direct investment, according to estimates by Fitch Ratings.
A lot of that money leaks out illegally. Corporations undervalue exports or overvalue imports to move capital abroad, for example. Money changers and underground banks routinely help mainland Chinese slip cash out of the country in excess of the official $50,000-a-year limit. Global Financial Integrity, a Washington-D.C. non-profit, ranks China as the world's largest exporter of illicit money.
"Wherever I go in the world, there is a growing Chinese presence," said John Cassara, a former financial intelligence agent at the U.S. Treasury Department. "It's only natural that the Chinese are going to bring their financial systems with them — their above-board financial systems and their underground systems."
"It's completely off the radar screen," Cassara said. "No one knows about it."
But Chikli knew.
"Gilbert Chikli knows that China is a springboard to be able to bounce money off of," said the con man, who often spoke of himself in the third person. "It's not a secret. The whole world knows that China is a hub for sending and receiving money."
THE 'FAKE CEO SCAM'
The first con, the one that made Chikli realize he had "the gift," began in Paris on the afternoon of July 25, 2005, with a phone call.
When Madame G., who ran a branch of La Banque Postale, picked up the phone, a man with a sure, powerful voice said he was the bank's CEO and needed her help on a top-secret terrorism investigation, French court documents show. He dropped details about past meetings that left Madame G., whose name cannot be published due to French privacy laws, convinced of his identity. The man told her a secret agent named Paul would be in touch.
Following instructions, Madame G. bought a burner phone to communicate with Paul. Over the next three days, he hammered her with 43 calls.
Some of the bank's clients, Paul explained, were suspected of running money for terrorists. Less than three weeks earlier, four suicide bombers linked to al-Qaida blew themselves up in central London, killing 52 people and injuring 700 more. Photographs of bloody, burned commuters staggering from the London Underground were everywhere.
Paul told Madame G. he needed the names of the bank's biggest clients. He wanted her to bring him cash. He would scan the bills to see if they were stolen, then they'd meet at a bistro on Rue de la Paix and he'd return the money. She was a key player in a major anti-terrorism operation.
He was counting on her.
On July 28, Madame G. stuffed 358,000 euros ($398,000) in a bag and took a taxi to a cafe in eastern Paris. She walked into a stall in the restroom. She heard a woman say the secret password. Madame G. passed the cash-filled bag under the stall. Mission accomplished.
Then she went to the bistro on Rue de la Paix and waited on the terrace. But where was Paul?
After she went to the police, investigators eventually traced the calls to Chikli. Paul was, in Chikli's telling, just one of his many stage names. The woman who took the cash in the bathroom was Chikli's mistress. Chikli's brother, Simon, drove the getaway car, according to French court documents.
Back then, it was a game to Chikli. But if he wanted to get more money than would fit in a sack, he had to take his criminal ambitions global.
Banks are supposed to know their customers — not just their identities, but also where their money comes from. To scale up his fraud, Chikli needed a way around international anti-money laundering norms.
He had a number of options for cleaning his cash. Chikli called HSBC and tricked an employee into sending money to one of his Hong Kong front companies, which bounced it to a guy in Fujian province, who told investigators that he often used his bank account to launder money for Israelis, in exchange for a 5 percent commission. Police traced tens of thousands in transfers from Chikli front companies to Bank of China accounts.
The Bank of China refused to comment.
But Chikli's preferred method, which he described for the first time in detail to the AP, was to use import-export schemes.
Such trade-based money laundering is a growing concern for U.S. authorities. Mexican and Colombian drug cartels laundered more than $5 billion in drug proceeds in part by exporting counterfeit goods from China, according to a U.S. Justice Department indictment against three Colombians based in Guangzhou.
Chikli ordered companies to send money to bank accounts around the world — often, he said, in Eastern Europe. Then, he'd bounce the funds to Hong Kong and China and arrange for them to be withdrawn in cash. The money was used to purchase merchandise — shoes, gold, steel, textiles — in China. For a commission, the Chinese vendor then issued highly inflated receipts to Chikli's shell companies, creating a "legal" paper trail. Typically, Chikli said, he'd actually buy some goods, while forwarding most of his cash to another account he controlled. He might purchase, say, 20 tons of steel, but bribe the vendor to give him a receipt for 100 tons.
Chikli sold the goods and then sent the money to Israel, where false invoices made the entire sum look like legitimate trading profits, he said.
"Everything is clean," he said. "Give me the documents and everything is fine."
THE WASHING MACHINE
Chikli used to run a clothing company in Sentier, a late 18th-century Paris neighborhood built atop a medieval slum. Sentier was once a neighborhood for strivers — first Jews from Eastern Europe and North Africa, then Chinese who moved into the wholesale textile trade. Chikli forged the idea for his scam on these streets.
The tools of his trade are simple: telephones. Chikli called the company that runs Disneyland Paris, pretending to be the CEO. He called French technology conglomerate Thomson SA and persuaded an employee to transfer millions to accounts in Russia, Switzerland and England. He called Barclays, Galeries Lafayette, American Express.
Eventually, French authorities caught up with him and put him on trial for dozens of attempted frauds, many thwarted only at the last moment. In 2009, Chikli posted 30,000 euros ($33,500) bail. His passport was confiscated and he was ordered to remain in France to stand trial. Instead, he chartered a private plane, he claims, and fled to Israel.
A French court found him guilty last May of defrauding La Banque Postale, LCL bank and HSBC, along with Thomson and Accenture, out of 6.1 million euros, and attempting to extract over 70 million euros from at least 33 others. But by then, he was living by the sea in Ashdod.
It was, perhaps, his most masterful con of all.
Israeli authorities would not say whether France had made a formal request for Chikli's extradition. French judicial officials have not responded to repeated requests for clarification on the status of any extradition request related to Chikli. Israel and France share no bilateral extradition treaty, but Israel has surrendered French citizens in some cases.
Israeli authorities also declined to explain why Chikli is able to live freely in Israel. A spokesman for the state attorney's office, Noam Sharvit, would only say that Israeli law enforcement is "doing all they can to fight and contain these criminal phenomena."
Law enforcement has not globalized as fast as crime, and the legal firewall that surrounds China has added to its appeal as a money-laundering hub.
Chinese authorities generally have done little to help Western companies defrauded in Chikli-style scams recover their money, according to European intelligence documents reviewed by the AP.
The U.S. State Department, in a report this month, reproached China for lackluster performance on money-laundering investigations.
"China has not cooperated sufficiently on financial investigations and does not provide adequate responses to requests for financial investigation information," the State Department wrote.
Jay Bienkowski, an FBI supervisory special agent in Washington who has retired since speaking to the AP, said extradition is crucial for apprehending criminals across borders. But China and the U.S. do not have an extradition treaty.
Europol, the European Union law enforcement agency, has no cooperation agreement with China.
"For us it's a blind spot," said Igor Angelini, Europol's head of financial intelligence.
'MAYBE IT WAS GOD'
Chikli insists he no longer runs fake CEO scams. But a new generation of fraudsters is copying his technique. Using information gleaned from social media and hacking, they impersonate top executives and convince employees to route money to accounts they control, ostensibly to do business deals or pay suppliers.
The FBI said it received 13,500 complaints from fake CEO scam victims around the world — a rise of 270 percent last year.
"It's a significant scam. Big dollars, and relatively recent," said Bienkowski. "It's scary."
The frauds hinge on delicate detail: A faked email ending in .co instead of .com. A name off by a single letter. The pressure is always relentless. A critical deal must be executed immediately, in total secrecy. A new supplier urgently needs payment.
The FBI traced fake CEO scam transfers to more than 70 different countries. "At the very top of that list is Hong Kong and China," Bienkowski said.
Some of the networks now running fake CEO scams are collaborating with Chinese migrants in Europe to launder their money, according to European intelligence documents reviewed by the AP.
"Non-Chinese criminal groups committing CEO frauds are sending money to China because Chinese criminal groups in Europe are giving them cash," Angelini told the AP. "The scale of this phenomenon is quite substantial."
Police believe Chinese migrants and Israeli con men first learned to work together in Chikli's old neighborhood, Sentier, forging a system for laundering money so elegant that today some migrants consider it "the fastest and most secure and most reliable method for Chinese merchants to transfer their funds to China," according to European intelligence documents.
The methods they've devised are a variation of the ancient Chinese system of fei qian (FAY ch'ien), or "flying money."
Chinese immigrants first give their cash to a trusted member of the local Chinese community in France, Italy, Spain, Belgium or Germany and indicate where their money should be remitted. That Chinese intermediary — the bagman — provides the Israeli contacts with the relevant bank account information. The Israelis then direct their stolen money to those accounts in China. Once the Chinese confirm the money has landed in the correct account, the bagman hands over their cash, in euros, to the Israelis.
The Israelis get euros in Europe, the Chinese get yuan in China. "It works like an offsetting operation between (the) Chinese community and crooks in Israel," according to the intelligence documents, which note that the Israelis usually charge a 2.5 percent fee.
France's financial crimes squad in June busted a similar money transfer network in a Chinese wholesale district in Aubervilliers, in the suburbs of Paris, where Chinese merchants are accused of laundering money for North African drug dealers.
While Chikli's copycats may have tapped into flying money networks, Chikli said he never used them himself. He claimed that many of the people running scams today are French Jews who have fled anti-Semitism in France and use the con to rebuild their lives in Israel.
"If it can help these families who have lost everything in France," he said, "then all the better. "Maybe it was God that gave me this idea."
'THANK YOU FOR CALLING'
At 50, Chikli's even, chiseled face is beginning to show signs of age. He insists his intention was never to harm people, but to take revenge on a financial system that lets the rich steal with impunity. He saw who wielded real power in the world: Corporations and the people that run them. And if the son of a poor Tunisian car mechanic could not be a CEO, he could at least pretend to be one.
"I understood that the bankers were never convicted," he said. "If the bankers were never convicted, then I needed to indirectly become an official banker."
As a scrappy 8-year-old, Chikli stole notebooks from school and resold them to his classmates. He later got into credit card fraud. "We would go shopping," he said. "It was pretty nice because we felt like we were the owners of something, which we were not."
He studied acting. Worked in advertising and real estate. But his true vocation was persuasion.
"The brain is the world's most dangerous weapon," Chikli said. "I learned not to control but to try to make someone believe that I was right. And from that moment, all the doors opened."
Chikli calls this "the gift." With it, extracting millions from some of the world's best educated and most privileged can be a matter of a single phone call. "It can last two hours. It can last four hours. It can last five minutes," he said. "It's cinema."
Chikli maintains that his real accomplices were the employees who took his calls and complied with his demands. He threatened them. He bullied them. He seduced them.
He said he made amends to about 30 people who executed his orders — some of whom lost their jobs — by sending credit cards linked to offshore bank accounts with about 50,000 euros ($55,800) each.
"Everyone took — everyone. There was not one who refused," he claimed. He said he gave one bank manager 18 roses. "She was pulverized," he said. "If I remember correctly, we sent her 180,000 euros. That's how we wanted to apologize."
Chikli would provide no evidence to support his claims.
Today, Chikli has himself amassed many trappings of a banker's life: White baby grand piano. Glass elevator. Fendi bedboard. A glam wife 19 years his junior tattooed with "Gilbert" in curling letters next to a heart on her slim wrist.
"I have six children," he said. "I take my kids to school. I am home at 8 p.m. every night. Sincerely, I am the most simple man in the world."
This fugitive from French justice is the hero of a new film starring Julie Gayet, the companion of French President Francois Hollande. Producer Isaac Sharry met Chikli while he was awaiting trial in a French jail and paid him for the rights to his story.
The heist-thriller based on Chikli's life, "Je Compte sur Vous," is also being marketed in English.
The title: "Thank You for Calling."
Associated Press writers Eric Tucker in Washington, Josef Federman in Jerusalem, Gerry Shih in Beijing, Angela Charlton, Nicolas Vaux-Montagny, and Philippe Sotto in Paris, and AP researcher Fu Ting in Shanghai contributed to this story.
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