Crimes of Persuasion

Schemes, scams, frauds.


Whether it is hundreds of thousands or millions of dollars that the criminal has to hide, government regulations which require the reporting of large cash transactions force them to either stockpile the cash generated, then spend it in dribs and drabs, or be creative in legitimizing and accounting for it so they can purchase huge mansions and luxury yachts without concern.


If the criminal only needs to move a few million dollars a year, the simplest way to launder cash without detection is "smurfing "— having people deposit random amounts of less than $10,000 into variously named accounts at many different banks.

They will also buy bank drafts from various financial institutions to circumvent thresholds for transaction reporting. Then a middleman can ship the compact negotiables for deposit elsewhere. Due diligence rarely catches this activity.

Laundering of accounts held by relatives or friends is also popular.

One smalltime drug trafficker had his wholesalers deposit money into his account using the "Interac" bank tellers. He then withdrew the money to purchase money orders in U.S. funds which he sent out of the country both to purchase more drugs and for safekeeping.

This first hurdle is bypassed by customers paying by certified cheque, money order or credit card as opposed to the more prominent use of cash in drug sales.

A currency structuring charge stems from attempts to make bank transactions in such a way as to evade notice by the federal government, which requires banks to report transactions of more than $10,000.

Shipping Money Abroad

Sometimes they have to resort to shipping the money abroad in bulk cash then arrange to get it back.

Someone might smuggle cash to Mexico, deposit it in a United States dollar account, draw out a draft, mail or carry it back into the U.S., deposit or cash it in a bank, with no requirement for the bank to report the transaction.

Sometimes less bulky items are purchased domestically such as diamonds, gold or even precious stamps and other collectibles.

The criterion is that they be of high value in relation to bulk, making them physically easy to smuggle as well as relatively easy to reconvert into cash at the point of destination.

Commonly, the proceeds will be wire transferred to accounts back in the U.S.. Enforcement officials believe that as much as $10 billion in Mexican bank drafts is laundered through such schemes each year in Panama alone.

The currency of choice for illegal transactions is the U.S. dollar, which circulates widely outside of the borders of the United States.

Indeed, of the $400 billion in U.S. currency in circulation, $300 billion is in circulation outside the United States.

Placement Through Banks

Banks and other financial institutions may unwittingly be used as intermediaries for the transfer or deposit of money derived from criminal activity.

One drug smuggler is believed to have laundered approximately $100 million (US) a year over a six year period through deposits into a branch of a Canadian bank located in Nassau, Bahamas.

Several accounts would be used, all of them in the name of Nassau-registered corporations. The money was then wired to the bank's Cayman Islands branch and into the account of a company.

From there the money was wired back to the U.S. into the bank's New York City branch. It would then be dispersed among numerous corporations owned by the individual in the U.S.

Suspicious activity may include:

blue bullet point use of Letters of Credit and other methods to move money between countries where such trade is inconsistent with the customer's usual business;
blue bullet point customers who make regular payments or receive wire transactions from countries which are tax havens;
blue bullet point frequent requests or use of travelers cheques, foreign currency drafts or other negotiable instruments;
blue bullet point reluctance to provide normal information or providing minimal or fictitious information that is difficult or expensive for the financial institution to verify when applying to open an account;
blue bullet point using accounts with several financial institutions then consolidating them prior to onward transmission of the funds;
blue bullet point greater or unusual use of safe deposit facilities;
blue bullet point companies' representatives avoiding contact with the branch; and 
blue bullet point requests to borrow against assets held by the financial institution or a third party, where the origin of the assets is unknown or the assets are inconsistent with the customer's standing.

Use of "Pass Through" or "Payable Through" Accounts for Placement

Financial institutions must take care in opening accounts for foreign deposit-taking institutions because a foreign bank may open a chequing account to enable their clients, which the domestic bank may not have sufficient knowledge of, to conduct financial transactions in Canada.

Placement Using Electronic Wire Transfers

Criminals are making extensive use of the electronic payment and message systems for wire transfers.

Modern financial systems permit criminals to transfer instantly millions of dollars though personal computers and satellite dishes.

The rapid movement of funds between accounts in different jurisdictions increases the complexity of investigating and tracing the source of funds especially when non-customers and non-correspondent banks transfer to equally unknown third parties.

Placement Using Insurance Products

A particular area where the life insurance industry is vulnerable is the single premium product so they must now keep the client application form for every purchase of an immediate or deferred annuity and any insurance policy for which the client will pay $10,000 or more.

An individual who was convicted of stealing over $100,000 from two charitable organizations was discovered to be the owner of a fully paid annuity policy having a value of $140,000.

Unusual signs include:

blue bullet point a request by a client to purchase an insurance product where the source of the funds to purchase the product is inconsistent with the customers financial standing or is a third party cheque;
blue bullet point a client who does not wish to know about the performance of an investment but is concerned only about the early cancellation provisions of a particular product.

Placement Using Investment Related Transactions

Every person engaged in the "business of dealing in securities" must keep appropriate client data and records. Unusual activity includes requests by customers for investment management services (either foreign currency or securities) where the source of the funds is inconsistent with the customer's apparent standing, large or unusual settlements of securities in cash form and buying and selling a security with no discernible purpose.

Placement Through Collusion of Financial Institution Employees and Agents

Suspicious indications include changes in employee characteristics such as lavish life styles or performance, remarkable or unexpected increase in business volume of selling products for cash; consistently high levels of single premium insurance business far in excess of any average company expectation.

Placement Using Non-Bank Financial Services

There is a growing trend of money launderers moving away from the banking sector to the non-bank financial institution sector where the use of currency exchange houses and wire transfer companies to dispose of criminal proceeds remain among the most often cited threats.