Crimes of Persuasion

Schemes, scams, frauds.

Integration Techniques of Money Laundering

Once the funds have been moved through the international financial system enough to make their origins extremely difficult, if not impossible, to trace, it is time to move them home again, to be enjoyed as consumption or employed as capital.

Use of Haven Bank Credit Cards as an Integration Tool

Funds can be repatriated through a debit or credit card issued by an offshore bank without leaving a financial trail. The banks assure their clients that the card account information is protected by the same rules that protect the other account information.

Bills incurred at home can also be settled by an offshore bank through their deposit account or even more discretely by an offshore company.

Scammers and tax evaders using this method may soon hear a tax man knocking on their door, as a result of a federal judge’s order for American Express and MasterCard to hand over all records on cards issued or paid out of banks in Antigua, Barbuda, the Caymans and the Bahamas in 1998/99.

The IRS estimates that as many as 2 million people may be depositing funds in tax havens based on MasterCard's reported 230,000 accounts in just four Caribbean countries.

Receiving Consulting or Directors Fees as an Integration Tool

For truly regular income flows, the criminal might arrange to collect the money in the form of income by having one or more of their offshore companies hire them as a consultant or director so that they can then pay themselves generous consulting fees, as well as possibly a company car or a condominium in a prime location, out of the offshore nest-egg.

Arranging Corporate Loans as an Integration Tool

Probably the craftiest solution of all is to bring the money home in the form of a business "loan". The criminal arranges for money held in an offshore account to be "lent" to their local business. Not only is the money returning home in completely nontaxable form, but it can be used in such a way as to reduce taxes due on strictly legal domestic income. Once the "loan" has been incurred, the borrower has the right to repay it, with interest, effectively to themselves.

In effect, they can legally ship even more money out of the country to a foreign safe haven while deducting the "interest" component as a business expense against domestic taxable income.

Proceeds of Gambling as an Integration Tool

Money can be brought back from trips disguised as casino winnings. Money is first wired from their offshore bank account to a casino in some tourist centre abroad. The casino pays the money in chips; the chips are then cashed in; and the money is repatriated via bank check, money-order or wire transfer to their domestic bank account where it can be explained as the result of good luck during a gambling junket. Organized crime groups have been known to purchase winning race track and lottery tickets for a premium to help account for their cash.

Real Estate Transactions as an Integration Tool

Another option is for the criminal to use international real estate flips. Here they arrange to "sell" a piece of property to a foreign investor who is, in reality, themselves working through one or several offshore companies. The "sale" price is suitably inflated above acquisition cost, and the money is repatriated in the form of a capital gain on a real estate "deal".

Similar local property deals occur where they will purchase a piece of property, paying below the real market value on the paperwork. The rest of the purchase price is paid in cash, under-the-table. The property is then resold for the full market value and the money recouped, with the illegal component now appearing to be capital gains.

An increasingly common method involves placing a deposit on a house purchase and then pulling out of the deal after a few days. Although it usually involves the solicitor (lawyer) deducting a 5% commission on a failed deal, the criminals then get a legitimate check from the solicitor's office.

Using Stock Purchases as an Integration Tool

With the aid of dishonest stock or commodity brokers the person seeking to launder money buys spot and sells forward, or the reverse. One transaction records a capital gain, the other a capital loss.

The broker then destroys the record of the losing transaction and the launderer exits with the money now appearing as capital gains. The cost is the double commission plus any hush money demanded by the broker.

Use of Businesses as an Integration Tool

To handle ongoing flows of criminal money, cash-rich launderers like to use cash-based retail service businesses such as Laundromats, car washes, vending-machine routes, video-game arcades, video rentals or bars and restaurants, then mix the illegal and legal cash and report the total as the earnings of the cover business.

In so doing, the money is distanced from the crime, hidden in the accounts of a legitimate business and can then resurface as the earnings of a firm with a plausible reason for generating that much cash. The technique chosen will depend on the amounts and whether the criminal operation is a one time event or something to be conducted on an ongoing basis.

International Importing and Exporting as an Integration Tool

The criminal might also choose to repatriate the money as business income. It is merely a matter of setting up a domestic corporation and having it bill an offshore company for goods sold or services provided.

If commodities are the chosen vehicle, it is safer that they actually exist and are overvalued (if on the way out) or undervalued ( on the way in), rather than completely fake. The same can happen with services as well, without the need to be bothered with physical inventory.

They may take over a company that engages regularly in international trade in goods and/or services then divide the payments between "suppliers" in several countries, alternate between wire and written forms of remittance and ensure that the nominal recipients appear to have sound business reputations. Service companies are the best for there are no clear rules against which to check the prices being charged to the domestic company.

Money launderers also receive the assistance of accountants, notaries, lawyers, real estate agents, and agents for the purchase and sale of luxury items, precious metals, and even consumer durables, textiles, and other products involved in the import-export trade.

Use of Free Trade Zones as an Integration Tool

Free trade zones are convenient places to arrange to have dirty money pay for goods that will generate bank deposits in other countries. In this type of money-laundering, they pay for the goods with money in the country where the goods are manufactured.

The goods are then shipped to a company in a free trade zone to conceal the source of the payment.

They are then shipped to the final destination where the goods are sold for the local currency and a local currency account is created whereby a legitimate trade transaction has covered the criminal laundering.