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.
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