Drug Empire Works
The basis of this investigation
In the following pages we will take the reader from the
opium-growing mountains of the Far East's Golden Triangle, to the
offices of opium wholesalers in the expatriate Chinese districts of
Bangkok, Rangoon, and Singapore; we will take him through the bonded
warehouses, shipping lines and air freight companies of old-line
British trading companies who control the Chinese expatriate
wholesalers; we will lead him through the maze of financial
channels that fund the Far East's opium trade, to the august portals
of Hong Kong and Shanghai Banking Corporation and other top British
banks who control the financing topdown; we will take him across the
Pacific to the ports of entry for heroin into the United States, to
the skyscraper offices of the Canadian banks and corporations who
finance, ship, and protect the heroin en route to the United States;
and, finally, we will guide the reader down the family trees of the
Canada-based Zionist financiers, to their contact-points in the
world of organized crime and heroin distribution. When this is done,
we will have reconstructed the Annual Report of Dope, Incorporated,
including balance sheet,
board of directors, senior operating officers, table of organization, and subsidiaries.
At the conclusion, the reader will know and understand more
about the personnel and operations of illegal drugs — the world's
biggest business since the days of opium-pusher Adam Smith —
than the law enforcement authorities of the United States and
other countries knew until recently. In the files of these agencies,
in the minds of solitary investigators, and, to a surprising extent,
in the public record itself, the pieces of the puzzle have existed
Fitting them together into a single picture is the task of
this investigation. But the puzzle is not a jigsaw game, in which
the picture is assembled by fitting the pieces together side-by-side. As a first approximation, it would be better for the reader to
imagine a set of clear plastic overlays, each of which contains
part of the picture; laid one on top of the other, they complete the
The different overlays of this puzzle are these:
The detailed record assembled by American and other
investigators of the mechanics of the opium trade from the Golden Triangle down to opium's ports of departure to the rest of the
Pinpointed identification of opium wholesalers, largely in
the Chinese expatriate community, including the names of
A comprehensive profile of British finance in the Far East,
revolving around the Hong Kong financial center and its leading
bank, the Hong Kong and Shanghai, including the web of British
ties to the Chinese expatriate banking community throughout the
An exhaustive grid of the British control over means of laundering dirty money in the hundreds of billions of dollars, including "offshore" banking, gold, and diamonds;
A grid of the huge quantity of
public record material showing the integration of British Far East and dirty money financial]
operations worldwide with the top level of British foreign policymaking, centered in the Royal Institute of International Affairs;
The similar public record of
evidence of strategic agreement between Great Britain and the Maoist People's Republic of
China, going back to negotiations between British opium-runners and
Mao Tse-tung, under the auspices of the Royal Institute of
Twenty years of official
documentation — from American, Japanese, Taiwanese, and
Soviet sources — that the People's Re-public of China grows
and exports opium not only to earn foreign exchange, but to
fund secret intelligence operations, through Chinese expatriates;
A comprehensive grid of the intimate links between all these
elements — British old-line opium-runners, British dirty money
operations, Chinese expatriate overseas operations, British-Chinese
policy agreement — with the "Canadian" connection to American
The international web of the British-centered "Zionist lobby,"
and its special function in gold and diamond-related dirty money
operations, laundering of dirty money, financing of international
terrorism, and financial control of the Canada-U.S. drug channels;
Lastly, a gridding that
demonstrates that the leading controllers of the opium war against the United States are not only
connected by interlocking directorates and other business ties but
by ties of "blood" that constitute this web under one family.
The resulting picture is comprehensive: the entire mass of detailed, documented evidence fits together into a single picture,
stretching from the present day back through the British origins of
the opium trade in the time of Adam Smith.
The Hong Kong and Shanghai Bank and related companies finance the
opium trade. In this, they are acting as designated agents of the
British monarchy, through the Royal Institute of International
Affairs. Not only do they control the expatriate Chinese legmen of
the opium trade, but they do so as part of an agreement negotiated
between Mao Tse-tung and the Royal Institute of International
Affairs, by the Hong Kong and Shanghai's leading representatives!
The gold and diamonds side of the dirty money laundering operations,
under the immediate control of Britain's Zionist Hofjuden (Court
Jews), is part of the same machine. Through the highest circles of
British policy, all the important branches of the
drug machine — the Chinese connection, the old-line British opium
traders, the dirty "offshore" banking sector, and the Zionist
Hofjuden — run Canada from the top.
From there the trail leads directly into the American crime
syndicate, through the Hofjuden Bronfman family.
The world illegal drug traffic is not only the world's biggest
swindle and subversive agency: it is controlled by a single group
of evil men whose names and organizational affiliations are all
printed below, and whose intimate ties of ownership, family, and
political collaboration go back 200 years. We know their names
and addresses, and know how to mop them up.
Back to Contents
Banking and the World's Biggest Business
Assembled as one picture, the hard evidence available from the Drug
Enforcement Administration and other law enforcement bodies leaves
only one possible conclusion: The drug "industry" is run as a single
integrated world operation, from the opium poppy to the nickel bag
of heroin sold on an inner-city street corner. Not only is illegal
drug traffic under the control of a single world network, but
opiates traffic in particular is without doubt the best-controlled
production and distribution system of any commodity in international
trade, illegal or legal. De Beers' Central Selling Organization's 85
percent control of world diamond wholesaling — an example not
irrelevant to the drug trade — pales by comparison to the orderly
marketing arrangements for heroin demonstrated by the hardest
Investigators are daunted by the fact that the solution to the
problem is so damned obvious. Imagine Edgar Allan Poe's fictional
purloined letter, photographically enlarged to 8 by 20 feet, and
used as wallpaper; then, imagine the French police attempting to
find it with magnifying glasses.
When we speak of the drug-related illegal economy — for drugs
are the pivot on which most other illegal activity turns — we are
talking of a $200 billion per year business, the biggest business in
the world. That is net, not gross, annual sales of drugs, plus
related illicit payments.
How can such activity avoid sticking out wildly, especially in
areas of concentration such as the Far East? Because the British
monarchy organized most of the Far East to conform to the drug
traffic! How can $200 billion in illegal payments get through the
international banking system past the eyes of law enforcement
authorities? The answer is: the Anglo-Dutch "offshore" banking
system. This and related precious metals and gems trade were
designed around illegal money in the first place!
Mere consideration of the obvious — or what will quickly become obvious when the evidence of the public record is assembled below — gives the financial specialist the equivalent of an
inner-ear disorder. The financial world, remember, is one in which the stock market will do flips over a measly few hundred
million dollars' difference in the weekly reported figures for the
American money supply. Although most of the necessary evidence has long been available, both investigators and the public
prefer to see world drug traffic and related illegal activity as a
montage of movie villains: Far Eastern warlords, free-lance
smugglers, jowly gangsters, and corrupt politicians. Such individuals figure into the world drug traffic, but as the arms and
legs of a top-down operation, under the immediate control of the
British and allied monarchies.
The most striking single fact for this conclusion is that the price
series for heroin at retail level in major American cities show virtually total uniformity. Law enforcement records show that,
within the acceptable range of 3 to 6 percent purity at the street
level, the price of heroin has been constant between widely disparate distribution points during the past ten years.
local distribution chains, internecine warfare among drug-traffickers, interdiction of smuggling routes, the virtual elimination of the Turkish opium supply after 1972, the scouring of Asian
and European transit points, and local changes in political and
growing conditions in the Golden Triangle growing area, all have
failed to have any effect on the single world heroin price! The few
exceptions prove the rule, and consist mainly of sharp temporary
drops in some local retail prices, attributed to occasional
free-lance supply through returning Vietnam War veterans and the
Where does it go?
Closely related to the striking uniformity of inner-city heroin
prices at retail level in the United States is the gigantic discrepancy between known levels of opium production for illegal purposes
and consumption by the world's addict population. Fairly reliable
statistical data are available for both. Within great margins of
fluctuation depending on weather, enforcement, and other conditions,
available supply exceeds demand by roughly a factor often.
Approximately 700 tons annually are produced and transported out of
the world's largest opium-growing area, the Golden Triangle. (2)
Seven hundred tons of raw opium, in the form of balls of opium gum,
are the equivalent of about 70 tons of refined heroin. In practice
less than half this amount is refined into heroin; the remainder is
sold in the form of either opium or morphine base, largely for
smoking purposes, and largely to an addict population in the
orient itself. However, by all estimates of the American addict
population, approximately three tons per year of refined heroin are
more than sufficient to meet annual consumption "requirements."
About that much again is required to maintain all other heroin
addicts in the noncommunist advanced sector.
DEA and other official sources affirm the cited production figures
through direct monitoring of opium shipments and other sophisticated
intelligence methods. Consumption and sales are obviously limited by
the possible size and financial resources of the addict population
in the advanced sector. To use a rough example: If the full 30,000
kilograms of annual Golden Triangle heroin production obtained the
full street price for heroin, the total retail value would be about
$150 billion. But most estimates of annual illegal purchases of
retail heroin are under $15 billion.
In short, most of it is never sold, because production capacity is
enormous relative to the market's absorption capacity.
What happens to the rest of the heroin? Only a small portion of
the total comes into the hands of law enforcement agencies,
whose capture of a few pounds of heroin is a matter for celebration. We still must account for tens of tons. The law enforcement records indicate that the drug is warehoused in huge stockpiles against contingencies and to prevent oversupply on the market.
For example, during the height of the crackdown on
Southeast Asia heroin traffic in 1972 (immediately after U.S.
troops withdrew), a single refinery captured by Thai police had on hand a stockpile of 3,000 kilograms, roughly one-tenth of
Southeast Asian production. At the time, 21 refineries were
known to be operational in the area. (3).
The law enforcement record shows that Dope, Incorporated
does its best to avoid mishaps through careful research — on the
streets of American cities — which is transmitted back to the
poppy fields. Meo tribesmen in the Burmese or Yunnan Province
mountains foothills do not plant what they feel like, but what they
are told to plant. This facet of the production cycle is well known
to law enforcement investigators. If for some reason the market
research is off, chaos will ensue, as it did in 1972, when the
Triangle yielded a bumper harvest, after wholesalers told poppy-growing peasants to increase their acreage by 50 to 100 percent.
The wholesalers counted on the continuing exponential expansion
of heroin consumption among American soldiers in Vietnam.
Nixon pulled the rug out from under them by pulling the troops
out, leaving the world heroin market in an unprecedented state of
Reckless price-cutting and competition for sales outlets in this
case might have provoked serious consequences for Dope,
Incorporated were it not for "government regulatory intervention." The Thai government stepped in and sold 22 tons of opium
to the United States. The opium was burned in a public ceremony
attended by giggling Thai officials, thus restoring "equilibrium"
to the market. (In any case, the Thais were only repeating the
action of the Imperial Chinese in 1839, who purchased and burned
more than 3,000 tons of opium to the great relief of oversupplied
British traders, who sent special fleets to India to bring
additional opium back to get the Imperial Government's attractive
Once world illegal opiates traffic comes under scrutiny as an
integrated, centralized "monopoly," the discrepancy between the huge
oversupply and relatively restricted demand presents no further
difficulties. We are looking at an "industry" based on the same
principles as the world diamond cartel controlled by De Beers, or
the so-called "club" among leading pharmaceuticals manufacturers.
Diamond production capacity is so large relative to the absorption
capacity of the world market that De Beers' Central Selling
Organization, running 85 percent of world diamond wholesale trade,
limits availability in order to obtain essentially the price it
wants. Pharmaceuticals are, ironically, an even better example.
Since the knowledge to manufacture most of the commonly used
prescription drugs is widespread among the pharmaceuticals
companies, and since the costs of production are insignificant
compared to the retail prices of most drugs, elaborate legal
arrangements are necessary to prevent a price collapse.
the profits of the pharmaceuticals industry owe not to chemists but
to patent lawyers.
How big an industry?
Heroin trade is the ideal commodity cartel; its price is more reliably controlled than that of crude oil, and its world volume of
sales, at roughly $25 billion for heroin alone and considerably more
for smoking-opium and other derivatives, is substantially higher
than that of most of the commodities UNCTAD is presently considering
for cartelization. A couple of comparisons are in order. At the
recent world gold price of $225 per troy ounce, annual
world gold mining production (outside the Soviet Union) yields less
than $7 billion. During 1977, after an unprecedented price run-up,
world diamond output was under $5 billion.
Allowing for the relative ease with which a large dollar value of
heroin may be transported — the drug is worth at street level 366
times its weight in gold (4) — the worth of the drug trade is still
boggling. It is even more boggling when the retail value in the
United States and other OECD countries of non-opiate illegal drugs
comes into the picture. For example, the Colombia marijuana crop
officially estimated for this year alone carries a retail value of
$40 billion. (5) Since marijuana smoking is so widespread in the
OECD countries, there probably exists a much larger market in
dollar terms than the relatively restricted market among heroin
Beyond such examples, no accurate data exist. The best that can be
stated is that the total world cash flow of illegal drug traffic
certainly exceeds $100 billion, and almost certainly does not exceed
The $100 to $200 billion figure includes heroin, opium, morphine,
marijuana, cocaine, so-called hallucinogens, and abuse of
otherwise-legal prescription drugs. It does not include the proceeds of other drug-related illegal activities, including gambling,
theft, prostitution, smuggling, arms traffic, and so forth. It is
almost meaningless to assign a total figure to the size of the
world's illegal economy. It can only be stated confidently that the
illegal economy, whose cornerstone is illegal drug traffic, exceeds
the gross national product of most of the OECD countries! That is an
extremely conservative projection of the hard data available.
To put the matter another way: all international traffic in
controlled substances, including drugs, and also including means of
barter for drugs — gold, diamonds, armaments, and so forth — the
$200 billion international narcotics trade is bigger than the world
oil trade. "DOPEC" is bigger than OPEC. World trade volume is a mere
Where does the money go?
The question that emerges now is,
"How is it possible that $200
billion and up in dirty money, crisscrossing international borders, can remain outside the control of the law?"
Again, only one
possible answer can be admitted: a huge chunk of international
banking and related financial operations have been created solely
to manage dirty money. More than that, this chunk of international
banking enjoys the sovereign protection of more than a few
These conclusions are obvious. If the entire resources of the largest private bank in the world, roughly $70 billion, had no other
use but the financing of illegal world drug traffic and related
illegal activity, those resources would be insufficient. If the
members of the New York Clearinghouse, the richest group of
commercial banks in the world, applied their entire $150 billion
lending volume to the illegal economy, the volume might just be
In the following sections of this report, the Anglo-Dutch banking
operations that control illegal drug and related trade are
documented in detail. Below, we will demonstrate through several
chains of evidence that this is the only possible banking network
that could handle the requisite volume of illegal traffic.
Anglo-Dutch oligarchy's banking operations have the following
They have run the drug trade for a century and a half.
dominate those banking centers closed off to law enforcement
Almost all such "offshore," unregulated banking centers are under
the direct political control of the British and Dutch monarchies
and their allies.
They dominate all banking at the heart of the narcotics traffic; the
Hong Kong and Shanghai Bank, created in 1864 to finance the
drug trade, is exemplary.
They control world trade in gold and diamonds, a necessary aspect
of "hard commodity" exchange for drugs.
They subsume — as documented below — the full array of
connections to organized crime, the prodrug legislative lobby in the
USA, and all other required elements of distribution, protection,
and legal support.
THE OFFSHORE COVERUP
Financial specialists, who have lived too long with the smell of the
West Indies backwaters to mind it any longer, will choke on
the above assertion. The general reader, by contrast, only needs to
know a few facts in order to realize that something is wrong. All
the offshore international banking operations — including the clean
side — are such a speculative whirlpool that virtually the entire
deposit base changes hands every week. Hundreds of billions of
dollars, including at least a hundred billion in the offshore
centers and further hundreds of billions elsewhere, circle the world
through teletyped bank transfers.
No banking reserves are kept on any of this, as insurance against
sudden withdrawals; in the United States, by contrast, commercial
banks must hold 15 percent of their checking account balances and 4
percent of their savings balances on reserve. The "offshore" banks
just assume that if they are short of cash, they can borrow what
they need on the enormous "interbank" market. This mind-boggling
financial procedure involves banks lending funds to each other in
order to obtain fractional advantages in interest rates. Perhaps 40
percent of the total market is interbank money. Deposit maturities
are so short, and money transfers are so rapid, that $50 billion
changes hands every business day through the New York banks'
Clearinghouse system alone.
The "offshore" banking markets are precisely what the name
implies: either Britain's old island colonies refurbished for international banking, or inland feudal relics like Andorra and
Liechtenstein. Federal bank regulators will only stare at their
shoes when asked what goes on in these places.
In the Cayman Islands, one of the largest offshore centers, the
only government is the official "Tax Haven Commission." Law
enforcement officers have absolutely no way of getting hold of
bank records in such places. Repeatedly, they have identified the
offshore centers as the place to look for dirty money. They have not
been able to, because virtually all the centers are under British political protection (see below).
American banks do a land-office business in the offshore centers, precisely because no reserves are needed, and every dollar
of deposits can be lent out for interest. Currently American banks
have over $35 billion in loans booked through Caribbean offshore
islands, more than through their offices in London.
Even clean banking operations have moved offshore because present
federal banking regulations virtually force them to. The
big movement offshore began under the Kennedy Administration, when
Anglophile Treasury officials C. Douglas Dillon and Robert V. Roosa
railroaded legislation through Congress that taxed loans made to
foreigners by American banks. The tax did not apply to loans made
offshore, so that is where the bankers went. By the time the
Dillon-Roosa legislation was lifted in 1974, the banks were "hooked"
through the difference in reserve requirements. In a recent
interview in Euromoney magazine, Citibank's chairman Walter Wriston
denounced the Dillon-Roosa taxes as a "pure gift to London." (6)
According to the estimates of the
Bank of International Settlements, the total assets of so-called Group of Ten offshore banking
centers, the unregulated islands and enclaves where "bank inspector"
is a dirty word, amount to $94.349 billion, or close to $100
billion, as of February 1977.
The figures break down as follows:
The above figures do not show the actual size of the offshore
banking centers, because they include only the assets of branches
domiciled in the largest ten industrial countries. They do not
include such entities as the three large banks in Thailand's
capital, Bangkok, which figure prominently in financing Golden
Triangle opium production. Nor do they include thousands of smaller,
"offshore" finance companies based only in the offshore centers
Expatriate Chinese banks in the Far East, which have
long been known to be a key point of contact with illegal drugs and
other contraband traffic in the Far East, also do not show up on
these tables; there is no available data on these institutions at
all. Furthermore, the above table does include a great deal of
legitimate banking business which American and other industrial-country banks bring to the "offshore" market for tax and
other reasons. However, the round figure of $100 billion is a useful
Another set of figures is provided in the Bank of England's
quarterly report, although it contains the same unwanted additions and deletions, and is thus relevant; it shows the large volume of interchange between London, which in major respects functions
as the world's biggest "offshore" center, with the previously
mentioned outposts for illegal money.
Unfortunately the available
figures mix in both British banks' dealings and those of American
and other banks which have offices in London.
OWNED AND OPERATED BY LONDON
More important than these numbers — which give a meager
understanding of the volume of business in the offshore centers and
mix in the legitimate business of American and other institutions —
is the political control of the unregulated banking centers, With
very few exceptions, offshore banking as a whole is under the thumb
of the Anglo-Dutch oligarchy.
The British pre-eminence makes the world picture of offshore banking
and dirty money more comprehensible. If the world offshore banking
sector appears to run as a single operation under British monarchy
control, that is because the same group of people who run it also
run the opium traffic whose proceeds this banking sector was created
One index of British muscle is the following breakdown of the
offshore banking centers, comparing the number of banks in each
center directly attached to the Royal Institute of International
Affairs governing bodies with the number of other banks in each
London and Switzerland are not normally considered offshore banking
centers, although in practice both centers function that way.
Although Switzerland has signed a treaty with the United States
permitting law enforcement officers to investigate and seize funds
relating to illegal narcotics traffic (resulting in one recent $250
million seizure), Swiss banks are still notorious depots for dirty
However, the Swiss side of the operation, typified by Lombard Odier and Edmond de Rothschild's Banque Privee in Geneva, and the
Zionist-controlled Baseler Handelsbank is more specialized. Their
most important activity is conduiting funds for international
terrorism. Most recently, European authorities traced the funding
of the 1978 Aldo Moro assassination through Swiss channels back to
London is the largest center for Eurodollar banking under the
encouragement of the Bank of England, which permits the foreign
branches of U.S. and other banks to hold external accounts in London
without reserve requirements, and with minimal inspection. At last
count, international banks had $90 billion in assets in London. The
Bank of England can do as much or as little as it wants in the way
of regulation, under British law.
For self-evident reasons, even the best-protected institutions of
the British oligarchy prefer to launder their dirty money through
Caribbean, Hong Kong, and similar branch operations, rather than in
Because the British suppliers of narcotics have ironclad control
over offshore bank operations, American organized crime marketers of
those narcotics have had a field day in the Cayman Islands and the
Bahamas. American drug enforcement authorities know that most of
the dirty money arising from the U.S. drug trade and related illegal
activities ends up in the Bahamas. There has been, unfortunately,
little public heat against the British officials who control the
This level of control reaches the flagrant. For example, the chief
of all banking regulation and licensing in the Cayman Islands, a close third behind Hong Kong and Macao in the big
league of dirty money, is one Mr. Benbow. Mr. Benbow is a retired official of Britain's National Westminster Bank, which
shares two directors, J.A.F. Binny and R.J. Dent, with the
Hong Kong and Shanghai Bank.
Benbow got his present job at the
recommendation of the British-influenced International Monetary
Fund, according to a source at the IMF's Exchange and Stabilization
division. Direct British "hands-on" management of the Caribbean
offshore operation dates back to the 1940s, when
E.D. Sassoon, Ltd. of Hong Kong — which had made its fortune from
the opium trade over the preceding century — picked up, moved, and
became E.D. Sassoon, Ltd. of the Bahamas.
Virtually the only one of the offshore centers not under official
British control is Panama; not coincidentally, Panama is the only
offshore center where American banks strongly outnumber British
banks. That is not to say that Panama is clean; on the contrary,
most of the funds derived from the Colombian trade in marijuana and
cocaine are laundered through Panama, through the three large
Colombian banks resident there. However, American banks have a
measure of maneuvering room that they do not have in the Cayman
Islands or the Bahamas, under the snooping eyes of the British
West German banking sources believe that the British banks behind
Drugs, Incorporated want to move in on Panama and close the gap. The
West German sources identify a special feature of the drug-ridden
Hong Kong and Shanghai Bank's proposed takeover of a controlling
share in New York's $20 billion Marine Midland Bank: Marine Midland
is the transactions agent for the central bank of Panama. All of the
national accounts clear through Marine Midland. Should the Hong Kong
and Shanghai succeed in acquiring the American bank, it would
exercise a decisive margin of control over the Panama offshore
market, and bring British control over the offshore centers full
Longstanding ties between Marine Midland and Panama were reflected
in the fact that a former board member of Marine Midland Bank,
Coudert Brothers lawyer Sol Linowitz, negotiated
the Carter Administration's recent treaty concerning the
FAR EAST CHOKEPOINT
The next sections will concentrate on the Far East offshore banking
connection to the drug traffic as a model for the world operation,
and follow the trail back to the controlling centers in London.
British control over the world dirty money operation is no secret,
and the British-Canadian-Caribbean connection to organized
crime in the United States is so thoroughly documented that no doubt
However, it is the Far East that acts as a chokepoint for dirty
money, in such volume that it dwarfs legitimate economic activity in
the region, and in the British Crown Colony of Hong Kong in
London has seduced and jostled American banking operations into the
Caribbean to such an extent that there is a vast amount of
legitimate money mixed in with the proceeds of the drug traffic.
However, Hong Kong was set up by the British, literally from bare
rock, as a center for the drug trade, and remains to this day purely
British, and purely a center for the drug trade. In the Far Eastern
example we can "prove" that Britain (and its Peking allies) run
every phase of international drug traffic.
The laundering cycle
The Drug Enforcement Administration and other law enforcement
organizations know how the cycle of dirty money in the United States
works. The $50 billion retail proceeds of the total drug traffic in
the United States are partly recycled into the drug operation in the
United States itself, with large "off-take" by each level of the
crime machine. The net profits, in cash, are laundered through
hotels, restaurants, gambling casinos, and sports events — the
"corporate profile" of the Max Jacobs family and other foot-soldiers
of the British drug machine.
After the cash is laundered through these nominally legitimate
channels, it is transferred to offshore banking operations or their
equivalent. Then, according to Drug Enforcement Administration
officials, the funds take several trips around the world over the
telex machines of offshore banks, passing through at least a half
dozen, and usually more, different bank accounts and corporate
fronts, from the Caymans to Liechtenstein, from Liechtenstein to
the Bahamas, from the Bahamas to a "nonresident corporation" in
Canada, from Canada to Panama, and so forth.
At various points in the process, the funds will purchase diamonds, gold, paintings, or similar portable valuables. At a further
point, the valuables will be translated back into cash, eliminating
even the trace of a bank transfer. For this reason, the use of
undercover agents, in place even at fairly high levels in known
branches of narcotics trafficking, has a poor record of detecting
either the source or ultimate destination of narcotics-related
Once laundered, the proceeds of the drug traffic and related illegal activities divide into three channels.
First, between 10 and
20 percent of the total is recycled back to the opium wholesalers in
the Far East and the marijuana wholesalers in the Caribbean and
Latin America, constituting the net profits of the wholesale drug
A second part is invested in expansion of offshore
operations, particularly gambling casinos, resorts, and other
profitable operations that are also useful for further laundering of
The remainder is reinvested in the United States in
"legitimate" racing, gambling, hotels, restaurants, and other
business appropriate for cash-laundering and further expansion of
the domestic drug traffic.
As noted, Hong Kong and related Far East operations are the
chokepoint in the entire traffic, where dirty money is a way of
life. We will focus on the Far East, the point of origin of world
heroin traffic, and work backwards through the maze of Dope,
Incorporated fronts and subsidiaries, to arrive at the British-controlled syndicates in the United States.
Back to Contents
From Opium to Dirty Money
The starting point for the drug cash flow is the cash size of the
opium and heroin traffic in the Far East itself, before the drugs
obtain the stupendous price markups available in Western markets.
The price pyramid is known to be the following:
Raw opium, the gum of syrup extracted from opium poppies, is
produced in the Golden Triangle, the conjunction of the southern
border of the People's Republic of China (Yunnan province), and the
northern borders of Thailand, Burma, and Laos. The mountainous
terrain, largely above 4,000 feet in elevation, provides ideal
growing conditions. Mountain peoples, rather than ethnic Chinese
(including those in Yunnan province), grow the opium and collect the
gum. The merchant purchasing the gum pays roughly $100 a pound, (1)
at collection points such as Lashio or Misai in Burma.
By the time the merchant, typically a Yunnanese, has brought the gum
by mule train to the triborder area, e.g. Tachilek or Chiengrai in
Thailand, the price has doubled, to $200
a pound. (2) At this point the opium is either refined into heroin
at refineries located in the triborder area itself, or earmarked for
the large Far Eastern market for smoking opium and related
Existing data permit the estimate that a division of an average
700-ton crop into 300 tons for heroin refining and 400 tons for
opium shipment for Far Eastern smoking purposes is usual. (3)
The $200 pound price at the triborder area is the price paid to the
local agent by a wholesaler based either in Bangkok, Rangoon, or
Hong Kong. Any distinction among these cities is meaningless. The
business structure of the area is under the control of two principal
groups that straddle the Far East. The first is the old British
banks and trading companies, including the HongShang, Jardine
Matheson, Charterhouse Japhet, Swire's, and the Peninsular & Orient
Lines. The second, their satellites, is the overseas Chinese
networks, under the joint control of London and Peking.
The wholesale value of the 700 tons of annual opium product in the
Golden Triangle, prepaid in the triborder area, is roughly $280
million. The $280 million figure, compared with the Gross National
Product of Thailand, is considerable; it is like $35 billion in
terms of the American GNP.
But this wholesale figure is only a small portion of the cash
flow of the Far East drug traffic. The next wholesaler, the Bangkok
merchant who buys from the first wholesaler, pays about $1 billion
for the equivalent of 700 tons of opium in the form of either raw
opium or refined heroin. This is roughly four times what the opium
was worth at the first wholesale round. The majority of production
is retailed locally at large markups (although the markups are much
smaller than in the case of heroin retailed in Western countries).
While no hard estimates are possible, the cash flow in the Far East
related to this first phase of opium production alone could not be
less than $1 billion. That by itself is 15 percent of the estimated
assets of foreign banks in Hong Kong, or 10 percent of estimated
bank assets of foreign banks in Singapore, or precisely Thailand's
1977 balance of trade deficit!
Measured against the size of economic activity in the regions, there
is no possible way to chalk these numbers up in the "Errors and
Omissions" column. The cash must go through nominally legitimate
channels, in such volume that the nominally legitimate channels —
like the HongShang — cannot possibly be unwitting as to the origin.
Even these numbers do not sufficiently reflect the scale of the cash
flow derived from crude opium sales alone. It must be added that
most of this cash flow is seasonal; virtually all wholesaling must
be completed during the two months following the March poppy
harvest. Correspondingly, the visible flow of drug-related funds is
several times as large during those two months.
Finally, the wholesale and local retail cash figures presented
above exclude what is possibly the largest component of Far Eastern
narcotics money: the reflow of funds back to the Far East from sales
made in the West. The narcotics wholesaler in Bangkok or Rangoon or
Hong Kong with direct contacts with the growers and control of
refineries has paid about $2,000 a pound for the refined heroin.
Between him and the street corner, the same pound of heroin will
undergo three markups of 1,000 percent. Its ultimate retail value
(for pure heroin) will be close to $5,000,000 per kilogram,
according to official DEA figures, or $2.27 million a pound, with a
total of $25 billion for Western sales.
What portion of this markup, and, in what quantity, accrues to the
Far East wholesaler?
There is no possible way to estimate this.
According to the record of arrests of heroin smuggling, a
substantial portion of such smuggling is conducted directly through
expatriate Chinese channels, like the Hong Kong-to-Vancouver route,
(4) and the notorious activities of the China Sailors' Union of Hong
However, it is this markup that pays the wholesaler's
out-of-pocket costs, including the original purchase from the
highlands merchant, the refining, the huge quantity (perhaps 300
tons annually) of acetic anhydride used in heroin refining,
security, bribes, transportation, warehousing, and so forth.
If the annual profit of the Golden Triangle operators is in the
range of $5 billion — or a mere one fifth of the annual retail sales
of heroin in the West — then the total cash flow in the Far East
related to drugs is not $1 billion, as above, but $6 billion. The
actual reflow is probably several times that sum. Some of the $5
billion may be banked elsewhere than in the Far East.
comparisons to the size of the region's economic activity become all
the more grotesque: Thailand's 1976 total exports were only $2
billion. Even the $6 billion figure does not include the huge Far
Eastern market for opium and heroin consumption. Added in, the
retail volume brings the total close to $10 billion — twice Hong
Kong's money supply.
There is another way to arrive at the same $10 billion figure: the
official estimate for bribes paid annually to Hong Kong police is an
astonishing $1 billion, more than the annual police budget. From a
hard business standpoint, that $1 billion in payoffs is a major part
of the overhead cost of both wholesale and retail drug operations in
Hong Kong, the area's drug capital. Since the known profit margin in
the drug trade is 500 to 1,000 percent, it is fair to state that the
$1 billion bribe figure is no more than 10 percent of local drug
revenues. If $1 billion is 10 percent of the total, the total is $10
Back to Contents
How the Drug Trade is Financed
The chain of financial control of world opium traffic begins in Hong
Kong, with billions of dollars in Hong Kong dollar loans to
expatriate Chinese operators in the drug-growing regions. These
expatriates include two of Bangkok's best-known bankers,
according to American law enforcement files.
Hong Kong also provides essential logistical support,
1) Smuggler-sized gold bars, obtainable through
Hong Kong and Shanghai Bank subsidiaries
available through Hong Kong's Anglo-Israeli controlled
3) Warehousing facilities, dominated by a subsidiary of the
Hong Kong and Shanghai Bank
The Hong Shang
Hong Kong and Shanghai Bank is the semi-official central bank for the
Crown Colony, regulating general market conditions,
holding excess deposits of the myriad smaller banks, providing
rediscount facilities, and so forth. Clearly, the Hong Kong and
Shanghai Bank is also the financial hydra unifying the production,
transportation, and distribution of Asia's opium.
Not only does it dominate financial activity in Hong Kong, with 50
percent of total banking business on the island, but "bank and
government often work closely together," (1) the London Financial
Times comments. The Colonial government in Hong Kong makes virtually
no statistics on banking activity available.
Commenting on the $8.3
billion figure for Group of Ten bank operations in Hong Kong, the
Financial Times notes that,
"The official figures are also just the
tip of an almost certainly greater volume of business, which is
conducted by international banks with finance company subsidiaries
in Hong Kong, or organized from Hong Kong but routed through
entirely offshore accounts in such places as Vila (New Hebrides)."
To be precise, there are 213 deposit-taking finance companies in
the Colony, as well as 34 local banks and 104 bank representative
offices. Over these squats the Hong Shang.
The Chinese middleman
The essence of the bank's drug control is its intimate relationship
to scores of expatriate Chinese banking families scattered
throughout the Far East. The British and Dutch connection to these
families dates back to the first East India Company penetration of
the region. The central banking role of the HongShang expresses an
agreement that grew out of a century of official opium trade and
continues through the present.
First, consider the financial and logistical requirements of the
trade. Planning for the March opium harvest begins in September. The Bangkok or Hong Kong drug wholesaler must estimate
the size of his market during the next summer, and, after market
research is completed, inform his agents in the triborder area.
(That market research must come from the United States and other
They, in turn, will communicate to the
Yunnanese and other merchants who operate in the poppy-growing high-lands to the north what the market will bear for the next harvest.
The merchants then inform the Meo peasants what acreage they may
At this point, the wholesaler must consider the following. First,
the physical means of payment must be obtained, including American
or Soviet armaments, gold in appropriate small-bar or jewelry form,
or whatever, and this to the tune of $140 million worth. Golden
Triangle peasants can't use American dollars. Thousands of mules and
muleteers must be made ready for the treks into the highlands.
Bribes must be paid, routes monitored, border conditions observed,
smuggling routes secured, contacts opened in the West, and other
loose ends secured. The required seed money is in the range of the
wholesaler's $2,000 a pound price for refined heroin. (3)
What portion of the investment is made through "internal resources" of the drug wholesalers, and what portion borrowed, is a
matter of guesswork. It is known that a very large amount is
borrowed seasonally to finance drug wholesaling, largely from
expatriate Ch'ao Chou Chinese banking networks. Since the Ch'ao Chou
category includes Thailand's most prestigious bankers, who are known
to engage in financing drug traffic, very considerable financial
resources are at the traffic's disposal. It is a matter of a 200
percent annual rate of interest — agreed and no questions asked.
Known "angels" of the narcotics trade include Chen Pi Chen,
a.k.a. Chin Sophonpanich, Chairman of the Board of the Bangkok Bank,
with $5 billion in assets; and Udane Tejapaibul, former Chairman of
the Board of the Bangkok Metropolitan Bank, with $2.4 billion in
assets. Significantly, Sophonpanich, whose name is a Thai pseudonym,
is a Ch'ao Chou Chinese expatriate. (4)
Such scandalous relationships are not much of a surprise in the
region. At the time of the 1973 Thai coup, the premier's son and
chief of the narcotics bureau, Narong Kittikachorn, was found to be
a prominent investor in drug wholesaling.
The annual credit line that must be extended to drug wholesalers,
assuming they finance half their operations through credit, probably
comes to about $150 million. Through pure chance, that is the
average annual growth of the Bangkok Bank's "Loans and
Advances" during each of the last ten years. Of course, Chin
Sophonpanich competes with many of his Ch'ao Chou colleagues for
this lucrative business.
THE CH'AO CHOU
Wherever the Ch'ao Chou expatriate banking community has surfaced in
leading positions of influence, Peking, British, and opium trade
connections are evident. In 1958, the Thai authorities issued a
fraud warrant against Bangkok Bank's Sophonpanich. He fled to Peking
and remained there until 1965, after which he returned, a deal with
the Thai military in hand. According to area sources, Sophonpanich
still maintains close contact with the Peking regime.
As one among several Bangkok financiers who finance the drug
wholesalers in the volume of $100-200 million per year, Sophonpanich's contacts include several names that have frequently
appeared on the "Opium Watch List" of American law enforcement agencies: Ying Tsu-li, General Lo, and the brothers
Hutien-Hsiang and Hutien-Fa, leading refiners of heroin in the
In addition, area sources report that Sophonpanich has direct
links to the so-called Triads, the expatriate Chinese secret societies that do most of the legwork in the opium traffic (see Part I).
Yet, Sophonpanich is actually nothing more than a subcontractor of the
Hong Kong and Shanghai Bank, as we now demonstrate.
The HongShang-Chinese deal
Bangkok Bank illustrates the way the chain of financing leads back
to the HongShang. Its current asset volume is $5 billion, much
larger than the savings capacity of the area could justify. Banking
sources report that most of its credit-generating capacity comes
from rediscounting of the trade paper of the Singapore and Hong
Kong financial markets, and mostly with the HongShang itself. Since
the HongShang controls 50 percent of Hong Kong deposits and acts as
the ultimate rediscount agency
for the entire colony and much of the rest of Southeast Asia, the
dependency of the Bangkok Bank and other Thai banks on the HongShang
is virtually total. Most of the Bangkok Bank's lending volume is
subcontracted business, controlled by the HongShang.
The British-Chinese expatriate link goes back as long as the British
have been in the Far East. The British organized the systematic
colonization of tens of thousands of Chinese expatriates
throughout the area, and started them out in the lower levels of the
business otherwise conducted by the East India companies and their
Even where Britain displaced early overseas Chinese financial
interests from positions they had enjoyed in the precolonial period, they left them in local control or in a junior status in such
ureas as opium trading, and often virtually restricted them to those
areas. As W.J. Cator notes in his book The Economic Position of the
Chinese in the Netherlands Indies (6) and Purcell notes in
Chinese in Malaya, (7) Chinese monopolies of opium and alcohol local
distribution continued in many Southeast Asian colonies, under the
aegis of the colonial authorities, into the first decades of the
Colonial powers divested Chinese merchants of control of many
trading monopolies granted by the precolonial local authorities, hut
left them in control of gambling and local drug and alcohol
distribution because Chinese secret societies were uniquely equipped
to handle them. The secret societies, representing branches of
societies operating in southern China, theoretically pursued the aim
of their founding — the overthrow of the Manchu Ch'ing Dynasty in
But as time wore on and the regime remained in power, the
societies abroad became less interested in the politics of their
homeland and more the instruments of overseas economic interests. As
anthropologist William Skinner notes in his book Chinese Society in
Thailand, An Analytical History, (8) the immigrant societies
were usually headed by influential monopoly owners — opium traders,
keepers of gambling and prostitution houses — who generally used the
societies to further the interests of their monopolies.
In other economic sectors besides opium, it is common knowledge that
overseas Chinese business interests were often
employed as compradors, middlemen in the service of colonial banking
and trading operations, indispensable due to their knowledge of the
local market and their language abilities. The close economic
relationships that certain segments of the Chinese business
community enjoy with particular British banking interests date from
that experience. At every point in the postwar political history of
the region, the Chinese expatriate financiers have acted as
consistent allies of the British and Dutch.
According to standard estimates,
Chinese expatriate financiers currently control 60 to
80 percent of the economies of Indonesia, Thailand, and Malaysia.
What the size of expatriate dependency on the Hong Kong market is
can only be guessed. However, the existing financial data show that
the Hong Kong financial market is enormously oriented to foreign
lending, in roughly the same proportion as the American banking
system. One-third of all Hong Kong-dollar denominated loans —
excluding the so-called Asia-dollar market
— are to foreign borrowers. Foreign lending stood at HK $18.47
billion in March 1978, against $39 billion in local loans. (There
are about 4.6 Hong Kong dollars to one U.S. dollar.) (9)
Since the borrowers' market for Hong Kong, rather than American,
dollars is limited to the areas of the Far East still under British
financial sway, the HK $18.47 billion figure of overseas loans
reflects the immense financial dependency of Burma, Thailand, and
Malaysia on Hong Kong. The business is largely conducted through
Chinese expatriate family ties. Most of Hong Kong's 250 locally
registered finance companies, in fact, are owned by Chinese
The scale of expatriate Chinese operations, centered in Hong Kong
and dependent on the Hong Kong and Shanghai Bank, is gigantic; the
overseas Chinese community controls 42 percent of the foreign trade
of the Southeast Asian countries, compared to 32 percent of Western
business, 18 percent of non-Chinese local firms, and only 8 percent
of state-controlled trading companies. (10)
As of the most recent
figures available, Chinese expatriate investments in the area
totaled only slightly less than
combined American, Western European, and Japanese investments
(although recent Japanese expansion in the area may have shifted the
The Hong Kong and Shanghai Bank, self-described as "a monument to
British finance in Asia," is in full control of the Hong Kong money
market (1), on which such Chinese expatriate institutions (2) as the
Bank of Bangkok absolutely depend for rediscounting loans, etc.
Opium smugglers and wholesalers (3) in turn depend on the expatriate
banks to finance their barter-purchase, refining and transport of
opium and heroin from the "Golden Triangle" peasants of Southeast
Asia and China's Yunnan Province (4).
From seed-money to
dirty-money, the proceeds of the drug trade start and finish with
the HongShang (a.k.a. Hong Kong & Shangai Bank).
The above figures only give a partial picture of overseas
Chinese financier dominance of Southeast Asian economies,
because the expatriate Chinese bourgeoisie is overwhelmingly in such
strategic sectors as banking, insurance, shipping, warehousing, and other intermediary activities, rather than manufacturing or agriculture.
According to one of Stanford University's classic China studies,
Thompson and Adloff's Minority Problems in Southeast Asia,
"Foreign-exchange and other controls (imposed by national
governments in the area — ed.) have transformed many of the
Chinese into smugglers and black marketeers, and such operations have increased both their wealth and their unpopularity.
Attempts to control the Chinese have almost everywhere run into
the bewildering maze of overlapping Chinese organizations
which exists in every country of the area, and they have been
frustrated by Chinese evasion, ability, and indispensability." (11)
The activities of the corrupted section of the expatriate Chinese
community in Southeast Asia have provoked a long series of
clashes with national authorities — who have not generally been
successful in limiting illegal traffic. The one exception is the
British possession of Hong Kong, the center of illegal operations in the
area, where the smugglers are members of Hong Kong's high society,
e.g., Macao gambling overlord Stanley Ho, who made his career
smuggling strategic materials from Hong Kong to China via Macao
during the Korean War.
Back to Contents
Britain's Gold and Dirty Diamond Operations
One feature of the financing chain of the Far Eastern drug
traffic—the Asian gold market—is a tipoff of the British (and especially
Hong Kong and Shanghai Bank) control over the entire process.
It might seem strange to the general reader, but the gold connection
was one of a handful of critical clues that led investigators up the
whole chain of evidence that will eventually put the management of
the HongShang and a few other long-established institutions behind
Vast quantities of gold are absorbed into the Asian drug trade—an
inestimable percentage of the 400 to 600 tons of the metal that pass
through the orient in a year, mainly through Hong Kong, and mainly
through subsidiaries of the HongShang. The trade could not run
without it and other precious, portable, untraceable substances—like
First of all, peasants of the Golden Triangle poppy fields do not
appreciate secret accounts in the Bahamas. Furthermore, since the
end of the Vietnam War, and the end of the widespread traffic in
contraband and American arms and American dollars, the
U.S. dollar in the form of currency is no longer an acceptable
medium of exchange. They must be paid in food—which they do not
produce themselves—goods, and gold or the equivalent.
Secondly, the People's Republic of China's share of Golden Triangle production is paid almost entirely in gold, shipped in bulk
across the Burmese border. (1) PRC gold income on opium production
probably absorbs around one-seventh of all gold traded in the orient
(judging from data analyzed more closely in Section 6, The Peking
Connection). There could be some double counting here, since Peking
also sells gold on the Hong Kong market.
Third, and possibly most important, gold cannot be traced, although
any bank transfer ultimately can. One bar of gold looks like any
other; changing a bank balance into gold or diamonds, and then
changing it back into a bank balance, is like crossing a river to
Gold is so important to the entire business that the metal's price
is pegged to the price of raw opium in the Golden Triangle
highlands. The dollar's fall in terms of the gold price from $35 an
ounce before 1971 to about $225 recently has also dramatically
escalated opium wholesale prices. The escalation of the gold price
over the past year has been so steady that all the numbers regarding
the size of the opium trade may already be gross underestimates.
indication of the closeness of the gold-opium relationship is the
well-known story that the CIA fieldmen in northern Laos carried both
gold and opium, to use as means of payment to the local Me'o
population in case of need.
How illegal gold travels
The American public will be shocked at how openly the Hong Kong and
Shanghai Bank uses its monopoly in the Far Eastern gold trade to
feed smuggling operations. Prior to the official opening of the Hong
Kong gold market in 1974, HongShang openly financed the gold markets
of Macao, the flagrantly crime-ridden island that plays "offshore"
to Hong Kong's own "offshore" operations. Today the Hong Kong market
is run topdown by Sharps Pixley Wardley, a 51-percent owned
subsidiary of the HongShang. The Hong Kong market's current daily
volume is in the hundreds of millions of dollars, on a par with
London and Zurich.
Apart from Hong Kong, the other route for smuggled gold to the
Far East is through the Persian Gulf sheikdom of Dubai. The dominant
commercial and gold market force in Dubai is the British Bank of the Middle East, a 100 percent subsidiary of the
Hong Kong and Shanghai Bank.
A 1972 description from one of Britain's best-known experts,
Timothy Green of Consolidated Gold Fields, Ltd., (2) is instructive on how the illegal flow of gold travels:
"It may indeed sound romantic, but it is a fact that both in 1970
and 1971 at least 500 tons of gold—that is to say half of all South
Africa's production, or 40 percent of total gold production in the
non-communist world—passed through unofficial channels on the
way to its ultimate destination."
"Unofficial" channels, as the author proceeds to make clear,
means illegal channels. Most of the world's existing gold is held
by central banks; prior to 1971, gold was the basis of central bank
reserves. With the advent of the new European Monetary System, gold is again becoming an official monetary reserve. Gold
dealings among banks, industrial users such as jewelers, and so
forth, are also counted as "official" channels.
Apart from the drug traffic and related money-laundering
uses, gold smuggling has played a major role in aggravating the
payments deficits of Third World countries such as India, where
large numbers of private citizens hold gold. However, the Indian
government in 1977 opened up direct sales to the Indian population. This largely eliminated India as a haven for gold smuggling
by making gold available through official channels. Despite this,
judging from the activity of the Hong Kong market, the proportion of gold running into illegal channels has, if anything,
increased, and the drug-related proportion of the illegal gold
increased as well.
"UNOFFICIAL" MEANS ILLEGAL Green continues:
"... these unofficial
channels usually start in gold markets such as Beirut (since defunct
— ed.), Dubai, Vientiane, Hong Kong and Singapore which I am
today. Their chief role — their raison d'etre — is as distribution
centers for the smuggling; they are entrepots convenient to nations,
which for a variety of reasons, forbid the official import of gold
for commercial or hoarding uses ....
"Dubai has become the largest gold market in the world, except for
London and Zurich — no mean achievement for a shiekhdom with a
population of around 60,000. Both in 1970 and 1971 Dubai had well
over 200 tons of gold — indeed in 1970 the equivalent of a quarter
of all South African production found its way along this golden
pipeline to India and Pakistan (and further East. Since the
beginning of official gold sales by the Indian government, and the
reopening of the Hong Kong gold market, Dubai's importance has
attenuated somewhat — ed.) . . .
"By contrast to Dubai, a
gold market that developed very quickly to meet a special short
term need was Vientiane in Laos. The market there really grew
with the escalation of the war in South Vietnam. And it grew
because it was the nearest and cheapest source of
gold. . . . This gold which was bought as a hedge against the
constant devaluations of the Vietnamese currency and to hide the
vast black market profits made from pilfered American arms and
equipment, was paid for almost entirely in cash. (Throughout the
1960s and 1970s, pilfered American arms and equipment formed a major
part of the barter goods exchanged for opium in the Golden Triangle
highlands — ed.).
"Vientiane's short success made some impact on the oldest gold
market in the Far East — Hong Kong, or more correctly Hong
Kong-Macao, for the two are held together as it were by a golden
chain. Hong Kong, as a British Crown Colony, forbids the private
holding of gold bullion; only commercial gold of less than 945
purity may be traded. To get around this regulation, gold bullion
has for more than twenty-five years made a curious sideways shuffle
from Hong Kong to Macao and back again. The gold bullion — in 995
good delivery bars — that comes into Hong Kong by air from Europe
and Australia ... is transferred in Macao, where it is melted down
into Chinese 1.5 and 10 tael bars. It then returns, stealthily, to
Hong Kong. This traffic has been presided over for may years by the
Wong Hong Hon Company which negotiated a series of two-year
contracts with the Portuguese authorities in Macao for exclusive rights for the gold traffic. The traffic
was financed by the Hong Kong and Shanghai Bank," (emphasis added)
That is, in the testimony of Britain's leading gold expert, the
HongShang financed illegal gold trade in Hong Kong itself, prior to
the reopening of the Hong Kong gold market, after which the
HongShang subsidiary Sharps Pixley Wardley took over the legal
Digging into the back archives, it is clear that Consolidated
Gold Fields' 40 percent figure for smuggled gold in 1972 represents, if anything, a moderation of past trends. Earlier figures
are much higher. For example, British author Paul Ferris in The
City (3) claimed that in 1951 only 17 percent of all world gold production went through official channels; Ferris's report was
based on interviews with the London gold pool. "What happens
to the gold when it disappears into the economic undergrowth of
the East is of no concern to the London bullion dealers," Ferris
claimed, but as we will demonstrate, the London bullion dealers
know precisely what happens to the gold in the Far East. The
London bullion market is merely a subsidiary of Dope,
In the July 22, 1952 issue of The Reporter, an article under the
byline of H.R. Reinhart, the then Far East correspondent of the
Neue Zuercher Zeitung, estimated Asian gold smuggling at $150
million in that year. At today's gold prices, the figure would be $1
billion for the same quantity of gold. The account bears impressive credentials, since 1) the Reporter editor at the time was Harlan Cleveland, now a senior official of the Aspen Institute, and
part of the present drug machine in the U.S.; and 2) the Neue
Zuercher Zeitung, Switzerland's top daily paper, is linked
through European aristocratic ties directly to the British
Reinhart identified a "Golden Loop, the circuitous path that
leads from North Africa to the coast of Red China and back again
as far west as India." The center of gold smuggling was the
Portuguese-controlled island of Macao, where gold smuggling is
legal, and "anyone who dares call a smuggler a smuggler can be sued
for libel." Then the gold is smuggled into Hong Kong, and thence to
the rest of Asia.
A mere 3 percent of the smuggled gold is seized by Hong Kong
authorities, Reinhart noted, even though customs officials receive a
20 percent commission on all seizures; presumably, bribes to customs
officials are more substantial.
Standard Western and Soviet sources estimate the smugglers'
commission at 30-50 percent in such transactions. Soviet economist
M.A. Andreyev reports:
"According to a Chinese businessman in
Singapore, smuggling yields a profit of up to 100 percent on
invested capital, which is several times higher than the profit
received in the basic branches of the island's economy. In Hong Kong
the commission paid to smugglers amounts to from 30 to 50 percent of
the cost of the smuggled commodities." (5)
However, if the bribes paid to Hong Kong customs officials are
substantial enough to overshadow the 20 percent kickback on seized
contraband gold, the bribes must also be in the order of 30 to 50
percent. The point is that the gold trade itself would not be
profitable, unless it were only a bridge transaction in a much more
profitable operation — e.g., narcotics traffic! That is the case.
But as Reinhart reported,
"British justice, as dispensed by the
magistrates' court in Hong Kong, extends even the benefit of the
doubt to a suspected smuggler caught with the goods."
not be a surprise at this point; as noted before, it was a matter of
public record for a quarter century that Britain's Hong Kong and
Shanghai Bank itself financed the gold smuggling!
One further crucial point — whose full importance will only emerge
in the following sections — is that the People's Republic of China
has been in on the illegal gold market since the 1949 Maoist
Gold flown into Macao, as noted above, was (before Hong Kong opened
up its gold markets in 1949) resmelted into bars of less than 95
percent purity, whose trading the Hong Kong authorities
hypocritically endorsed. The resmelting, Reinhart reported, was
the business of the Kan Kuam Tsing Company in Macao. "On the Hong
Kong exchange," the Swiss journalist added, "the buyer is not
unlikely from the People's Republic of China." Since the PRC buyer
wants metal of monetary-reserve purity, above 95 percent, he takes
the gold back to the Kan Kuam Tsing Company, and reconverts the gold
back to a higher purity level. Reinhart identified the firm Pao
San and Co. as a regular vehicle for Peking gold purchases during
the early 1950s. (6)
According to Reinhart, the PRC entered the Hong Kong gold market in
1950. Last July's announcement that 13 Communist-owned banks in Hong
Kong would be permitted to trade directly in the Hong Kong gold
market thus only extends an agreement that has been in force since
the founding of the PRC.
One big gold pool
Apart from a relatively insignificant flow of gold into Hong Kong
from mines in Australia and the Philippines — insignificant
compared to the 300 tons of gold traded in Hong Kong during 1977 and
the 600 tons traded during 1978 (projected) — Hong Kong depends
entirely on the London gold pool for its supplies.
Above map is based on one appearing in the 1977 annual report of
Consolidated Gold Fields, Ltd.
The world total of gold in metric
tons was only approximately 1,500.
Of this, 390 metric tons was
distributed from Europe through Dubai and 287mt through China,
primarily by British-controlled agencies, most of it ending up in
Another 18mt is directly exported to Hong Kong, for a
total of 695mt.
The vast proportion of this flow is "unofficial,"
and is put to use in drug-related dirty-money laundering. (Cf.
Why do London's gold pool operators tolerate this situation? Because
the London gold pool is the same operation as the Hong Kong and
Shanghai Bank, controlled by the same London families whose
drug-running activities go back 150 years.
There are two major South African gold producers, Anglo-American and
Consolidated Gold Fields (whose gold specialist was quoted above);
there is one major South African diamond producer, De Beers, largely
owned by Anglo-American; and five major London gold pool firms, who
meet every day in the trading room of N.M. Rothschilds at New Court,
St. Swithin Street, London, to set the world gold "fixing."
Examining these firms individually, we discover such a manifold of
connections that it is meaningless to speak of the London and Hong
Kong gold markets as anything but branch offices of the same
Hong Kong and Shanghai's own gold-trading outlet is Sharps
Pixley Wardley, of which they own 51 percent. One of the five
London gold pool firms, Sharps Pixley, owns the remaining 49
percent. But Sharps Pixley itself is a fully owned subsidiary of
the London merchant bank Kleinwort Benson whose deputy
chairman is Sir Mark Turner, the chairman of Rio Tinto Zinc.
Rio Tinto Zinc itself was founded a century ago with the opium-trading profits of Jardine Matheson, by a member of the Matheson family;
the Mathesons are still large shareholders in the
HongShang. The Matheson family's heirs, the Keswick family,
still have their traditional seat on the HongShang board. Sir Mark
Turner spent World War II at Britain's Ministry of Economic
Warfare, which also employed Sir John Henry Keswick, and
another HongShang board member, John Kidston Swire.
Hong Kong's second largest bank, the Standard and Chartered
Bank, owns a majority share of another member of the London
gold pool, Mocatta Metals. Standard and Chartered's predecessor, the
Standard Bank, was founded a century ago by Cecil
Rhodes, of whom we will have much to say later in Section 7.
Standard and Chartered is not only a close collaborator of the HongShang in such matters as the transfer of Red Chinese opium
money (see Section 6 below) — but is heavily interlocked since the
days of the official British opium trade.
British Gold and Diamond Syndicate
One of Standard and Chartered's directors is the current Lord
Inchcape, of Inchcape and Co. and the Peninsular and Orient
Steam Navigation, the latter dominating ocean freight in the Far
East. Both companies are heavily represented on the HongShang
board of directors. Inchcape's father wrote the notorious 1923
Inchcape Report recommending continued British sponsorship of
the opium traffic — despite the outrage of the rest of the League
of Nations — in order to "protect the revenues" of then-British
colonies in the Far East.
This example also indicates why the London gold pool's dirty
money operations are a worldwide, not merely a Far Eastern,
problem. Mocatta Metals, a subsidiary of Standard and Chartered's Mocatta and Goldsmid, operates one of New York's biggest dirty money laundering operations.
Mocatta Metal's current chairman, Dr. Henry Jarecki, has been under
investigation for years for illegal activities, although no
indictment has yet been handed down. According to European
intelligence sources, Jarecki's dirty money operation helps fund the
activities of the Mossad, Israel's foreign secret intelligence
service, in New York City, including assassination teams.
Jarecki is no small fry: he is a frequent gold columnist for
British financial publications such as Euromoney, and rated a
lengthy profile in the September 1978 issue of Fortune magazine.
Nonetheless, he is eminently suited for the role of bag-man for
Israeli intelligence hit squads. Jarecki began running
drugs as a small-time pusher on the University of Michigan
campus in 1950-51. In 1952, he spent six months in jail for suspected espionage in East Berlin. According to published sources,
approximately half of Jarecki's present staff of 28 gold traders
started out in the same Harvard Psychology Department that
featured LSD-pushers Dr. Timothy Leary and "Baba Ram Dass"
in the early 1960s. (7)
Midland Bank stands behind both Standard and Chartered and
Mocatta and Goldsmid, with a 20 percent ownership of Standard
and Chartered; it also wholly owns another London gold pool
bank, Samuel Montagu. Sir Mark Turner is a director of both
Midland Bank and Samuel Montagu. The Montagu family, heavily
intermarried with the Rothschilds, Montefiores, and Samuels, is the
cream of Britain's Court Jews. One of their protégés is HongShang
board member Philip de Zulueta.
N.M. Rothschild and Sons, which opened up operations in Hong Kong in
1975 to take advantage of the newly liberalized gold trading laws,
and Johnson Matthey, the remaining members of the London gold pool,
are also interlocked several times over with both the HongShang and
the major South African gold producers, Consolidated Gold Fields and
Anglo-American who control between them 90 percent of South Africa's
(For further details see Section 7 and 8.)
The diamond black market
Second in importance in the money-laundering process is the world
diamonds market, worth $5 billion annually at wholesale value, whose
single presiding manager is Sir Harry Oppenheimer of De Beers
Corporation. Oppenheimer is also the chairman of the larger South
African gold producers, Anglo-American. The Anglo-American and De
Beers complex runs the Hong Kong side of the money-laundering
diamonds operation on two levels — wholesale and retail. De Beers
runs 85 percent of the wholesale diamonds market; through his
intimate Israeli connections, Oppenheimer also runs the Hong Kong
There are two points of special relevance for diamonds to the
international heroin traffic. The first is that, in value relative
to size and weight, diamonds are the closest approximation to heroin
as a store of value for furtive use. Secondly, the De
Beers-controlled international diamond cartel operates according to
a pyramidal structure identical to that of the world heroin trade.
The use of expatriate ethnic networks for the dirtier side of the
operations is also homologous, except that in the case of diamonds, Jews take the place of Ch'ao Chou Chinese. Not coincidentally, there is almost as little publicly available information
on international diamonds trade as on the heroin traffic.
South Africa's largest producer, De Beers, was the 1888 creation
of Rothschild legman Cecil Rhodes; in 1929, the company underwent
reorganization by Sir Ernest Oppenheimer, of the Anglo-American
family. De Beers controls the Central Selling Organization (CSO),
which handles 85 percent of international diamond trade.
At ten "sights" each year, 300 clients purchase stones from the
CSO. The list of these select clients is secret. Following their
purchase by the secret list of clients, the diamonds are sent to
centers for further preparation. The two dominant cutting centers are Antwerp and Ashqelon, in Israel. Antwerp's
diamond cutting and related trade is financed by the Banque Bruxelles-Lambert, controlled by the Lambert family, the Belgian cousins
of the Rothschilds. Israel's (and also New York's) diamond business is financed by
Bank Leumi. (8)
Within the individual centers, dealers trade among themselves
on such exchanges as the New York Diamond Dealers Club, the
Ramat Gan in Tel Aviv, and the Antwerp Diamond Bourse. No
written records are kept of any transactions on these exchanges;
the agreements are sealed with a handshake. No aspects of this
trade are available for scrutiny by law enforcement agencies,
even under American law, before the diamonds reach the jewelry
Hong Kong's own substantial wholesale diamond market is the
virtual monopoly of the Union Bank of Israel; this bank is wholly
owned by Israel's largest finance house, Bank Leumi. Bank
Leumi, in turn, is under the control of Barclays Bank, on whose
board sits Harry Oppenheimer and the Oppenheimer family
itself. Bank Leumi's own chairman is Ernst Israel Japhet, of the
Charterhouse Japhet family whose fortune derived from the
official British opium trade during the nineteenth century!
Ten times a year, representatives from the Ramat Gan, Tel
Aviv's diamond exchange, go with Union Bank financing to the
De Beers Central Selling Organization "sights" in London, and
purchase one-third of the world diamond output.
Like the Peking-British-controlled Ch'ao Chou Chinese networks in
the Far East, Britain's Zionist financiers are a cult unto
themselves, with their own family networks, cults, and language. New
York's diamond market consists, at the lower levels, mainly of
members of the extremist Hasidic sects resident in the area. This
exotic feature of the diamond traffic achieved public notoriety
after several unexplained thefts and murders occurred in the diamond
trade during 1977.
Although there is an apparent division of labor between the Hofjuden
precious metals and precious stones channels of the world dirty
money operation, the various firms involved are so closely
intermarried, interlocked, and interowned with the major dirty money
banks, that the working of the dirty money apparatus is totally
A case in point is Canada, the dumping ground for all aspects of
Dope, Incorporated that feed into the United States. The Bank of
Nova Scotia, for example, is both the major gold dealer (and banker
for the second largest gold dealer, Noranda Mines), and the major
dirty money operator in the Caribbean.
The Nova Scotia is notorious for bribing its way into new branch
offices in the Caribbean, violating local currency laws, running
flight capital against currency restrictions, "investing" in local
businesses known to be intelligence fronts, and so forth. Nova
Scotia's branch network in the Caribbean is the largest of any bank
in the world, save Barclays which has a similar pedigree. Gold is a
specially useful medium for the special case of the Caribbean, where
official restrictions make some bank transfers difficult.
Conveniently, Nova Scotia leads the Toronto gold market.
The other leading gold market operator in Toronto is Noranda Mines:
its chairman Powis is a member of the board of directors of the Bank
of Nova Scotia. Powis is also a member of the board of Sun Life
Assurance, the Rothschilds' insurance company.
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