Watches as Tools of Money Laundering and Illicit Finance

Luxury timepieces are one of the most effective mediums to move illicit funds around the globe and a tool to integrate those ill-gotten gains into the financial system.  Transnational criminal networks, terrorists, narcotraffickers and corrupt politicians have used watches to launder money as a part of global illicit finance.

The Weight of a Million Dollars – 22 pounds

A million dollars weighs just over 22 lbs.  I learned this during one of my first tours as a CIA Case Officer.  Like any other morning, I mounted my Gary Fisher mountain bike and rode out the gate of our compound for a quick exercise ride in the hills surrounding the African capital where I was working.  This activity was “in pattern,” should I have surveillance, they would note the departure, but it would not warrant further investigation.  A trained eye might have seen that something was different, however. The dead weight of ten thousand $100 bills in my backpack made the bike top-heavy and awkward to ride. 

The operation was simple and routine. After a long Surveillance Detection Route (SDR) through the hills and side streets of the third world capital, I worked my way to a predetermined ops site.  The watch on my wrist would have (probably) been a Timex Ironman, my go to Digital Tool Watch (DTW) for exercise over the past two decades.  I would have checked the time before moving into the site, confirming that I would hit the operational window.  In espionage, timing is everything.

Right on time. I identified a couple in the alley.  We established bona fides with a verbal parole -- a predetermined phrase and response.  I then handed them the heavy backpack in exchange for a similar one and rode off in the other direction, the entire exchange lasting less than a minute. In tradecraft lingo it was a “BE” (Brief Encounter). 

A standard CIA Case Officers EDC, read more HERE

Except for the backpack stuffed with cash, it was a routine day for a case officer. Certainly not the stuff of Hollywood but instead a crucial operation for the global network of intelligence collection. Due to compartmentalization, I didn’t know who the individuals were that I handed the backpack to or why they needed the large sum of cash, though I have my suspicions.  They had likely just arrived in the country and could not bring the cash in through customs without drawing scrutiny.

Watches as a Currency:

One takeaway from this operation is that money is heavy.  It’s inconvenient, bulky and difficult to transport, not to mention having to explain it away if discovered.  This is why many illicit actors, spies and criminal networks rely on expensive but innocuous luxury items to move funds across borders.  Given the significant increase in value of timepieces, watches are a favored currency when it comes to illicit activity.  I easily could have handed off a single watch to transfer that same value to the couple that morning.

The value-to-weight ratio of a Rolex, Patek Philippe, Audemars Piguet or other premium brands is exceeded only by precious gems, making it easy to physically transport a watch across international borders. The vast, unregulated, and fragmented gray market makes converting timepieces into cash relatively easy. Unlike vehicles, gold, and diamonds, there is no oversight or registration for timepieces and a million dollar Patek can be worn on your wrist, easily breezing through customs.

Lebron James wearing a "Tiffany Blue" Patek Philippe Nautilus Ref. 5711, a watch that has sold for 100 times its original price at $5,350,000 at auction. 

Luxury Watches – Money Laundering:

The international financial system is heavily regulated and monitored by law enforcement and intelligence services to identify illicit activity. Transactions over $10,000 are automatically flagged and international border law restricts the amount of cash one can bring in/out of a given country undeclared. 

By contrast, watches are a perfect medium for exploitation by bad actors.  They are innocuous and liquid, and pawn shops, auction houses and high-end dealers often turn a blind eye to these activities. Every major auction house has been involved in a controversy where profitability triumphed over ethics at some point. This isn’t to say that they’re willfully supporting money laundering, rather that it is simply a frequent occurrence.

Eight days after 9/11, CIA officers pick up $3 million cash in three cardboard boxes. This money would enable the Northern Alliance (NA) commanders to pay their troops and convince other tribes to rally to the NA rather than fight them. (Photo Credit: CIA)

Moving Illicit Funds - A Case Study

Imagine, you need to move $1 million from the United States to Turkey.  The logical choice is a traditional bank transfer, which would require you to deposit it in a financial institution.  This would alert the authorities who would request an explanation for how you came about the funds, for both tax purposes and Anti-Money Laundering (AML) enforcement. Carrying cash would require a 20 pound duffel bag, making hand-carrying it cumbersome and again would cause scrutiny from customs officials, resulting in questions and import tariffs and complications. Additionally, you introduce a major security risk by carrying that much cash around and potentially becoming a target. 

Customs and Border Protection (CBP) Officer processes a passenger into the United States at an airport. (DHS Photo by James Tourtellotte)

So, what do you do?  You could convert it to diamonds and hide them in a tube of toothpaste (or concealed in your body), but again, if caught, this cannot be explained away.  So, you visit the diamond district in New York, purchase a dozen Rolex and AP watches, each of which could be worth up to $500k per watch.  You use couriers to “smurf” the watches on commercial flights, each one wearing a watch on the wrist and a couple in a carry-on bag.  For the cost of a few round-trip tickets, the watches could be relocated to Istanbul relatively risk-free. 

A single (new) Rolex Dayton can have a street value of $30-$50k, vintage significant higher (James Rupley)

Once you arrive in Turkey, you find the local watch dealer and offer to sell for cash, or a bank transfer to integrate them into the financial system, the first step of money laundering (placement, layering, integration).  Given the illicit activity, you may lose some money on the sale, but this is simply the cost of integrating illicit funds.  The dealer is happy to purchase them below market value and not ask questions.

Well over $100k in Rolex Watches (Photo Credit: Jame Rupley)

Hezbollah’s Illicit Finance:

In 2015, an investigation by the Drug Enforcement Administration (DEA) revealed that Hezbollah, a Lebanese Shia terrorist organization, purchased large quantities of watches in Europe, which were then transported by couriers to Lebanon where they were sold for cash.  Hezbollah reportedly purchased €14 million in watches from a single store in Germany, thus evading international monitoring.  (The movement and exchange of expensive goods has long played a role in informal Middle Eastern “Hawala” money transfer networks throughout the globe.)

This practice is so common that Dutch law enforcement has urged watch dealers to refrain from cash transactions.  Several high profile arrests of criminal networks in Spain, Netherlands, Romania and Belgium revealed luxury watches as integral to the movement of illegal funds, and closely associated with the recent increase in watch crime in the region.

Money Laundering:

The 3 Stages of Money Laundering (Image Credit: Alessa)

Money Laundering (ML) is the act of integrating illegally acquired cash to legitimate financial institutions with the goal of concealing the illegal origins of those funds.  While this is traditionally associated with criminal networks, in the intelligence world, cash is king and most intelligence services practice some form of benevolent money laundering.  Watches can play a crucial part in each step of the money laundering process.

• Placement: Step one is introducing illicit gains into the financial system.  In the example above, this can occur with the sale of the watch and the depositing of those funds into a bank account by the purchasing party.  At initial scrutiny, this will appear to be a legitimate transaction.

Breaking Bad- money laundering (AMC)

• Layering:  Step two is the process of moving those same funds through multiple transactions to conceal the origin of the funds.  Once funds are converted, one could use the illicit funds to purchase watches, and then resell them in a manner to distance the original transaction and repeat this process.  The example above of transferring watches overseas could be another example of layering in addition to potential placement. 

• Integration:  The final last step is returning the funds to the criminal organizations for personal use, thus appearing legitimate. 

Embezzlement and Money Laundering- Former Brazilian President Bolsonaro 

According to press reporting, in 2022, Former Brazilian President Bolsonaro found himself in hot water for (reportedly) selling a gifted Saudi Rolex and a Patek Philippe watch, netting him $68k.  Bolsonaro used a third party (smurf) to transport the watches to the United States and quickly found a buyer in a relatively obscure Pennsylvania mall.

If true, Bolsonaro used the same technique as above to transfer the value from Brazil, convert it into dollars and then (supposedly) repatriate that cash to Brazil.  This is an example of Money Laundering by disguising an unreported diplomatic gift and converting that gift into a usable currency.

This is not the first scrutiny of Bolsonaro's gifts from foreign governments, in 2021, a Brazilian government official was reportedly detained at the border with more than $3 million in jewels from Saudi Arabia in a backpack, allegedly gifts for Bolsonaro and his wife.  

The world is not all flowers and rainbows and we expect to continue to see the use of luxury timepieces in the global illicit finance network, particularly as prices for these luxury goods remain high.

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