Money Laundering the NGO way

Does the Mafia have NGOs? and if not, why not?

A brief thought inspired by this Xeet from DataRepublican:

1️⃣ Gov-funded NGO gets a USAID grant for something vague like “strengthening education.”
2️⃣ That NGO dumps millions into a DAF (Donor-Advised Fund).
3️⃣ The DAF isn’t required to disclose what the NGO told them to do with the money.
4️⃣ But somehow, every hyperpolitical nonprofit with a sketchy agenda ends up getting funded.

And a post from my fellow substacker Kitsune, where he mentions such wonderful US laws as FATCA

Completely off topic posting from Kitsune.

The US government has spent a lot of time and effort making it hard for people to do legitimate things because bad guys (mafiosi, cartels, eeebil biiillionaires) have done the same things to hide and/or launder money that otherwise the US government would like some tax from and possibly the whole thing.

FATCA assumes, essentially, that any person with a US SSN and a foreign bank account is a tax dodger and therefore forces the foreign banks to send the US government information about the money in them. Worse, they make the required data and form filling so onerous that many foreign banks decide they’d rather not bank people who have a US SSN.

SARs, as we have discussed earlier¹, and the laws surrounding them do the same for US domestic institutions.

CAF (Civil Asset Forfeiture), which allows the feds, or a police force they have deputized, to steal pretty much anything they feel like and then force you to sue them to get it back assumes that anything you own that “doesn’t fit”, which includes more than a small amount of cash, is the result of criminal activity. So people who take $10,000 in cash to buy a used car are assumed to be drug-dealers and so on.

It’s even got to the point where (IIRC, I may have the numbers slightly wrong) many banks will not allow you to make electronic transfers of more than $9999.99 at a time from your banking app, but if you want to buy something that costs, say, $45,000 and so do transfers of $9999 plus one of $5004, that’s seen as “structuring” and is therefore potentially a crime - at the very least something that warrants a SAR. Also, AIUI, getting money in account A and immediately transferring it out to account B can be suspicious because it looks like money laundering through a chain of accounts etc.

In the above, I’m barely scratching the surface of the rules and regulations imposed on consumers and (generally) financial institutions to ensure that Uncle Sam gets his cut of the action (or sometimes more than that), just picking easy to find examples. I have, for example, completely ignored crypto.

Yet, despite that, we learn that Uncle Sam’s minions in USAID, NIH and so on, can make grants of millions of dollars to NGOs for vaguely defined purposes and those NGOs can subcontract the purpose to other NGOs and pay them and these other NGOs in turn subcontract other NGOs and pay them and so on (see chart at top for an example). In another case, although no federal funds were used, it seems that Paul Ryan’s American Idea Foundation is used simply as a way for Ryan to pay (ex-)staffers additional salaries for doing not very much.

When I read about this, it occurred to me that the Mafia are missing a trick or three if they haven’t got some 501(c)(3)s to launder their money through. Let me work an example

Hoe Street Female Services

Hoe Street Female Services is a 501(c)(3) dedicated to improving the general welfare of the poor ladies of Hoe St., Anytown. These women are so deprived they are forced to stand around outside at all hours of the night in skimpy clothing. Guido’s Protection Services is another 501(c)(3) that is contracted by HSFS to provide security on Hoe St. because it seems unpleasant gentleman called Jose and Miguel want to prevent the poor residents of Hoe St. from plying their traditional activities on Hoe St. and instead want them to do similar things on Avenida de las Putas in the bario. Also some of the poor ladies are so confused they don’t feel that HSFS is helping them, and GPS is invaluable in explaining to them how sadly mistaken they are in that view. The bruising is just superficial and easily masked by a touch of eye shadow. In addition another 501(c)(3), Don Corleone’s Property Trust, turns out to offer below market rate housing on Hoe St. and HSFS contracts with DCPT to provide accommodation for the deprived ladies. There’s also another 501(c)(3) Blue Pills that runs an innovative pharmaceutical service on Hoe St. to ensure that medications and the like are readily available to visitors.

Now we have the structure in place let’s see how it works as regards to the money flow from donations. One of the residents of Anytown, call him John, feels terribly sad at the plight of these poor ladies so he makes a donation to HSFS of $100. He can pay by cash or by card. If the latter he can get a nice tax deduction, something that is particularly handy for another resident, Johnny, who prefers to make a monthly donation of $3000. John and Johnny, of course, are interested in seeing how their donation will help the ladies of Hoe St. so they are invited to choose one of the ladies and go with them to conduct a brief, informal wellness check, while incidentally confirming the quality of the accommodations provided to them by DCPT. John only gets a brief one off inspection, but if he pays $200 he can make a longer more in depth inspection. On the other hand there’s just a whistlestop drive-thru option for $50, which is just the sort of thing you need when you’re in a hurry. Johnny on the other hand is allowed to visit as many times as he wants a month and Jon, who pays $6000 a month, is allowed to make in depth inspections as many times as he wants.

Where do their donations go? HSFS has got administrators like Giovani and Paolo. Their salaries and benefits take up a good 25% of the overall annual income from all the generous donations from local residents. GPS (which also coinicidentally employs Giovani and Paolo, as well as Guido) is a further 30%. Then there’s the rent and so on paid to DCPT which is another 30-35%. Sadly that means the poor residents of Hoe St. only get 5-10% and often they have to use Blue Pills (also run by Don Corleone ably assisted by Guido et al) for various pharmaceutical products that help keep them positive despite their unfortunate condition so they don’t get very much in actual spending money. But perhaps HSFS can apply for a grant from HHS on their behalf?

Haiti

And if you think I’m being overly sarcastic look at how the various NGOs and for profit beltway bandits have profited from Haiti.

As USAID became evermore reliant on contractors and grantees, a new crop of companies grew to fill the void. Beginning in the early 2000s, for-profit development companies largely based inside the Beltway — DC, Maryland, and Virginia — rose to prominence and began capturing an ever-larger share of USAID’s budget. One firm, Chemonics International, received some $1.5 billion globally in FY2024. These firms also dominated the post-quake reconstruction era in Haiti. In the 10 years after the earthquake, firms inside the beltway received more than half of all Haiti-related spending. Just two firms combined — Chemonics and Development Alternatives Inc. (DAI) — received more than 20 percent.

As this Xeet puts it:

Over $4 billion to Haiti but Haiti only got 2% of it. The rest went to firms in DC and "other"

Seriously. Compared to this HSFS would be a mere piker, and one that is comparatively generous to the people it is allegedly supposed to assist. The mafia really ought to be on this like white on rice.

There are other advantages. For example international payments made via Berto’s Bodega are frowned upon by the banking system as a whole because the financial system has been told to worry about them as they may be abused by criminals to transfer the proceeds of criminal transactions (i.e. drug sales) overseas. But a 501(c)(3) like the Bario Foundation transferring funds to its associate Sinaloa Regional Development across the border is totally different.

The only disadvantage for organized crime of the 501(c)(3) method is that it could be trickier for some of the more recent latin american gangs to appoint officers to these enterprises who are legal US residents. But for the Mafia, some of the longer established Cartels and the bros in the hood this will not be an issue. In fact it’s a competitive advantage in the struggle against those pesky newcomers.

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