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    Money Laundering

    An interesting read...

    Criminals with large cash inflows, from drug traffickers to stock and telemarketing fraudsters, must launder the money made from their crimes in order to hide the evidence trail and protect it from investigation and seizure, before cycling it back for personal or business use.

    This generally involves a series of multiple transactions used to disguise the source of the financial assets as they try to transform the monetary proceeds derived from illicit activities into funds with an apparently legal source.

    Due to the clandestine nature of money laundering, rough estimates can only place the annual worldwide value in the range of $300 billion to $1 trillion. The illegal movement of funds is estimated at between $5 and $17 billion in and through just Canada each year.

    Steps Involved

    There are three elements to the complete laundering of funds:
    "Placement": getting currency into the financial system so as to convert illicit funds from cash straight into a financial instrument or a bank account;
    "Layering": the movement of funds from institution to institution to hide the source and ownership of the funds, obscure the audit trail, and sever the link with the original crime;
    "Integration": the reinvestment of those funds in an ostensibly legitimate business so that no suspicion of its origins remains and to give the appearance of legitimizing the proceeds.

    A criminal's objective in laundering illicit proceeds is to: Get it out; cover it up; bring it back.

    The more successful a money-laundering apparatus is in imitating the patterns and behavior of legitimate transactions, the less the likelihood of it being exposed.


    HEADWAY IN EFFORTS TO COMBAT MONEY LAUNDERING

    Canada and the U.S. traditionally cooperate closely on law enforcement matters and have a mutual legal assistance treaty and a customs mutual assistance agreement. While Canada has seized record amounts of currency in recent years, actual forfeitures are negligible by comparison because Canadian law requires proof of a direct link between seized property or currency and specific drug transactions.

    The international narcotic trade launders a minimum of $200 billion a year. Law enforcement efforts in the best of years recovers amounts in the range of $100 million to $500 million. In most cases, law enforcement investigations start with an identified crime and follow the money trail.

    Laundered money is most vulnerable to detection at the placement stage. Methods to make it difficult to place illicit funds without detection are measures such as suspicious transaction reporting requirements, cross-border monetary declaration requirements, and "know your customer" rules for those accepting cash deposits.

    Sophisticated anti-money laundering strategies have driven the cost to launder money- the percentage fee charged by the launderer - from approximately six to twenty-five percent in the last fifteen years. Criminals, thwarted by these tougher anti-money laundering measures in the United States, are now increasingly attempting to smuggle cash to foreign countries and launder money overseas.

    Successful prosecutions however are not frequent. This is partly because of the complexity of dealing with other jurisdictions. When success involved international cooperation, it was facilitated by the fact that authorities knew exactly where to go and what kind of financial information they needed to obtain. In the majority of cases, the offshore financial institutions are unknown or uncooperative and the success rate of investigations is very low.

    Efforts are being made to make it more difficult for criminals to assume that after "integration" they have successfully protected their money from the law. Although lawyers have told clients that they can retain control of offshore trust assets, the U.S. government states that you can't be in control of the assets if you try to use foreign asset protection trusts to hide money from them.

    There has been growing international recognition that bank secrecy rules must give way to permit law enforcement agencies to review financial records in cases where there is an active criminal investigation pertaining to the source of the funds.


    Off Shore Example
    Offshore banks sometimes stretch the rules when assisting wealthy individuals (commonly telemarketers ) in concealing their income from the IRS.

    Assuring them that their money would remain secret from the IRS, one bank routinely set up accounts for individuals using fictitious names and shell corporations so that the true owners of the accounts would be disguised.

    They would receive payments from the U.S. and, in return, would provide false and inflated sales invoices to create the appearance that legitimate goods and services were being purchased which allowed the depositors' businesses to then take fraudulent tax deductions.

    They would also issue VISA gold credit cards that permitted access to the offshore account without revealing the existence or ownership of the bank account. They will also assist in the creation of Dutch Corporations that allow depositors to secretly borrow mortgage funds from their own deposits.

    The Dutch Corporations are created to issue sham mortgages that are designed to give the appearance that the depositor is borrowing money from a legitimate foreign lender. Such mortgage loans have the threefold fraudulent benefit of allowing the depositors use of the unreported income, providing a sham tax deduction for interest on the mortgage that they were paying back to themselves, and the re-deposit of the mortgage interest into the secret offshore account.


    PLACEMENT TECHNIQUES OF MONEY LAUNDERING
    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.


    Smurfing

    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 that he sent out of the country both to purchase more drugs and for safekeeping.
    This first hurdle is bypassed by customers paying by certified check, money order or credit card as opposed to the more prominent use of cash in drug sales.


    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:

    use of Letters of Credit and other methods to move money between countries where such trade is inconsistent with the customer's usual business;
    customers who make regular payments or receive wire transactions from countries which are tax havens;
    frequent requests or use of travelers checks, foreign currency drafts or other negotiable instruments;
    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;
    using accounts with several financial institutions then consolidating them prior to onward transmission of the funds;
    greater or unusual use of safe deposit facilities;
    companies' representatives avoiding contact with the branch; and
    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 checking 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:


    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 check;
    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.

    LAYERING TECHNIQUES OF MONEY LAUNDERING
    The amount of energy and expense that will be put into an effort to multiply the levels of cover and obscure the trail will depend on an assessment of how serious and effective police probes are likely to be in that jurisdiction.

    Tax Havens and Offshore Banks
    Launderers tend to move their activity to jurisdictions where there are few or weak money-laundering countermeasures. A main resource in money-laundering are the financial havens and offshore centers which started out as a business to service the needs of a privileged few.

    An "offshore bank" can be a bank anywhere in the world that accepts deposits solely on behalf of non-residents. While we generally think of the Caribbean when referring to offshore banks there are dozens of locations right around the world which are just as accommodating.

    Offshore banking centers are home to more than $5,000 billion in assets - $1,000 billion in bank deposits and $4,000 billion held in the form of stock, bonds, real estate and commodities.

    The Cayman Islands, for example, one of the most important offshore jurisdictions, is generally judged to be the fifth largest financial centre in the world behind London, New York, Tokyo and Hong Kong. There are over 570 banks licensed there, with deposits of over $500 billion.

    During the last decade, many countries, drained of foreign exchange and with limited natural resources and no prospects of significant economic opportunities, have realized gains in economic and financial strength by becoming safe havens for foreign tax and law evaders.


    They freely offer low or non-existent tax rates that are attractive to investors, company owners and ordinary citizens anxious to reduce their tax burdens for they do not regard tax evasion in another country as a crime. These havens also offer tools, available only to non-residents and only to be used offshore, which are designed to defeat the laws of other countries.

    Bank Secrecy Laws as a Layering Tool
    In many cases, these havens enforce very strict financial secrecy, effectively shielding foreign investors from investigations and prosecutions from their home countries.

    Money-laundering can still occur without bank secrecy and some depositors actively avoid it precisely because it acts as a red flag. Professional launderers advise their clients that the only really effective form of secrecy is keeping their mouths shut.

    Corporations and Shell Companies as a Layering Tool
    Any reasonably sophisticated money launderer will establish a bank account in a financial haven as a corporation rather than as an individual with a "numbered account". To increase the appearance of legitimacy it is preferable that such a company already have a history of actual activity. Once the corporation is set up, a bank deposit is then made in the haven country in the name of that offshore company.

    The incentive for businesses to be registered in offshore havens is to escape the severe tax and registration regulations on domestic companies. They can funnel large amounts of capital to and from offshore countries without the need to declare the transactions to domestic fiscal authorities.

    On the condition that it do no business where it is set up, having an international business (IBC) or "offshore" corporation enables its owners to act with complete anonymity and not pay taxes.

    In many jurisdictions it is not even required to keep corporate books or records and thus is perfect for concealing the origin and destination of goods in international commerce. Companies can even be capitalized with bearer shares, so that while there is no owner on record anywhere, the person who physically possesses the share certificates owns the company.


    Use of Trusts as a Layering Tool

    In many jurisdictions, trusts and IBCs are administered by unregulated trust companies. Many laundering schemes then devise another layer of cover where control of the company is transferred to the offshore trust. The trustees then simply give the owner instant access and control over the assets while hiding true ownership.

    The unregulated trust companies can help conceal assets by moving the shares of a corporation from one account to another, by changing corporate names, by merging corporations and by changing trust documents on the instruction of the account holder.

    They have also been known to manufacture false paper trails and false documentation to assist money launderers and they have routinely provided invoices, receipts and other documents to help fool the customs and tax authorities of other countries.

    Offshore trusts may have an additional level of insulation in the form of a "flee clause" that compels the trustee to shift the location of the trust whenever the trust is threatened by war, civil unrest, or more likely, the activities of law enforcement officers or litigious investors and consumers.

    Use of Walking Accounts as a Layering Tool
    In some instances, criminals will open an account in one jurisdiction but with instructions for any incoming funds to be transferred immediately to another location. Additionally, the bank will be instructed that, in the event of inquiries, bank officials in the second location must be informed. Once they are informed, they in turn have instructions to transfer the money elsewhere.

    These schemes, known in law enforcement circles as "walking accounts", pose serious problems for efforts aimed at seizing dirty money.

    The first account is simply the initial depository, and money moves in to it and then immediately moves out. The function of the account is, essentially, to act as an early warning mechanism to identify any inquiries by law enforcement and to set off further countermeasures to protect the money.

    Establishing a Self-Owned "Instant Bank" as a Layering Tool
    The trail can be further complicated if the launderer purchases their own "instant bank" in one of several jurisdictions that offer such facilities. He then just makes sure that his "bank" is one of those through which his money passes so he can either close the bank or destroy the records to evade authorities.

    On just one of the haven islands there are approximately 300 banks operating with only about ten actually maintaining physical banking offices there. The others are operated by management firms for absentee owners or exist only as accounts in other banks.

    Use of Intermediaries as a Layering Tool
    Money launderers frequently use various lawyers along the route so that they will also be protected by the confidentiality of the lawyer/client relationship. There is also an increasing reliance in offshore centers on brokers and agents to generate customers, to act as intermediaries in establishing accounts, trusts, and the like, and to act as an additional layer of insulation and confidentiality.

    These professional launderers include accountants, lawyers and private bankers who, while offering money-laundering services to a wide range of criminals, are adept at not asking questions that would require them to refuse business or even to report their clients or potential clients to the authorities. They are aware that those who fail to comply with professional "best standards" might be liable under the "want of probity" principle.

    Some offshore financial institutions will generate false invoices, bills of lading, end-user certificates and other forms of documentation to give the appearance of legitimacy to a variety of illicit transactions. Over-invoicing using false documents can be an excellent cover for moving the proceeds of drug trafficking and other crimes, while false invoices, bills and receipts can be used for a variety of tax 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.

    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 racetrack 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.


    FACTORS WHICH SEVERELY HAMPER LAW ENFORCEMENT EFFORTS

    Acceptance of Flight Capital by Western Countries
    The desire of foreign private citizens and government officials to accumulate hidden wealth is accommodated by Western businesses and banks. By assisting in this activity - this movement of flight capital that passes illegally out of one country but almost always legally into another country - they are providing exactly the same channels through which criminal money is laundered.


    The easiest thing for criminals to do is to make their criminal money look like it is merely tax-evading money, and when that is done it passes easily through the international financial system. The approximated $100 billion a year in illegal flight capital coming to the west provides cover for a far larger amount of criminal money that is laundered there.

    These two flows, criminal money laundering and illegal flight capital, use the same international financial system. The Treasury Department estimates that 99.9 percent of the criminal money that is presented for laundering in the United States is successfully deposited into secure accounts.

    Authorities will never effectively curtail criminal money laundering while at the same time attracting and facilitating illegal flight capital. The United States enacted cash deposit reporting requirements and anti money-laundering legislation some 25 years ago. In contrast, Treasury Department officials have stated on multiple occasions that it is U.S. policy to attract flight capital out of other countries, with little or no heed paid to whether or not it is tax-evading.

    Laws and Limitations of Other Countries
    Police and judicial systems in many countries are ineffective, and many countries have outdated or nonexistent extradition, immigration, asset seizure, anti-money laundering, computer, and anti-corruption laws.

    Many countries have neither the resources nor the expertise to mount complex or sustained investigations of international crimes. Criminals use these shortcomings to find safe havens for themselves and their money, while governments and law enforcement remain constrained by national boundaries.

    In many European and other countries there are no cross-border controls on the movement of cash, and it is relatively simple for launderers to take large sums of cash by road to neighboring countries. As with drugs, law enforcement officials believe that while passengers are carrying large amounts of cash, an even greater amount is probably being hidden in cargo shipments.

    The trend around the world is now to criminalize the very act of laundering money and to make it, completely independent of the underlying offense, grounds for asset forfeiture. In fact, in some jurisdictions, laundering the proceeds of crime can lead to far more severe penalties than the underlying offenses.

    This creates a means for imposing potentially heavier sentences on those charged with the underlying offense and for using the threat of such heavier charges to secure cooperation and as a device for financing police activities.


    Jurisdictional Conflicts and Lack of International Coordination
    Currently the country and the law enforcement agency that initiates a criminal investigation is in charge but must also fund the investigation. While requests for assistance come from that agency as the investigation proceeds, it tends to overlook aspects that they cannot prosecute.

    A formal system of large case coordination would speed law enforcement efforts. Law enforcement officials should also be able to identify the responsible agency official in each country by consulting an on-line directory.

    There is also a tendency for police to give foreign requests for assistance a low priority. Efforts to share forfeited proceeds with countries that cooperate on money laundering investigations and prosecutions to help offset the expense of this assistance, have proven to be a successful inducement.


    Banking's Role in Facilitation of the Activity

    In some countries the primary role of banking supervision is to maintain the overall financial stability and soundness of banks rather than to ensure that individual transactions conducted by bank customers are legitimate.


    While even the perception of foreign tax evasion is supposed to generate a suspicious transactions report, banks handling the transactions in major money centers appear to be fully aware that tax evasion is the purpose, yet fail to act as criminally compliant foreign banks regularly inundate them with the proceeds of ill-gotten gains.

    And though they often facilitate it, banks are unlikely to be found guilty of money laundering because authorities have to prove that it was criminal in origin, and that there was a lack of proper care in seeing to the flow of that money. It should be an explicit policy that significant business transactions will not be conducted with customers who fail to provide adequate evidence of their identity.

    Public confidence in banks may be undermined through their association with criminals and banks may lay themselves open to direct losses from fraud, either through negligence in screening undesirable customers or where the integrity of their own officers has been undermined through association with criminals. Money-laundering has become so lucrative that bank officials and others with access to the financial system are sometimes corrupted.


    An organized crime syndicate laundered the proceeds of its drug trafficking business by making cash deposits several times a week at a branch of a Montreal bank. Total cash deposits equaled $13 million dollars (US). In one month alone, a single deposit of $1.2 million was made. The amount of money being laundered was so great that cash would be stuffed into tote bags and suitcases, loaded onto pick-up trucks and backed up to the front door of the branch.

    So much cash was deposited that the bank requested it be organized in bundles of $5,000 before being brought in. The request was complied with, and the bank accepted these large cash deposits without question. They even created a special account for the customer.

    The greater the overlapping in the financial services that are offered by banks, the more difficult the job of detecting money-laundering becomes. Once money passes the first barrier to gain entry into the financial supermarket (which is itself competing vociferously for new business), there are no more layers of scrutiny to pass, while the capacity to shift funds from asset to asset and from place to place is greatly enhanced.


    Bank Secrecy

    Today, more than ninety jurisdictions offer the protection of bank secrecy laws that impose criminal sanctions on those who release information regarding clients' transactions. Even bankers who cooperate with law enforcement are safe from bank secrecy prosecution in less than one fourth of the world's financial community.

    There are countries where the trust law requires no disclosure of beneficiary or trustee or amount or anything relating to the trust. In the event a banker breaches that confidentiality, clients also have recourse in civil court.

    At present, most data requests to bank secrecy jurisdictions are made under bilateral mutual legal assistance agreements. While some countries comply, others assert their complete unwillingness to cooperate with any foreign investigation.

    There are also cultural barriers to overcome. Secrecy has been a hallmark of Asian banking for centuries, and officials there are not accustomed to the invasiveness of reporting requirements.

    Many banking systems remain obliged to inform account holders that someone is both investigating them and may seize their accounts, providing criminals the opportunity to move assets and leave town.


    Volume and Complexity of International Transfers
    Criminal money is frequently moved abroad and then cycled through the international payments system to obscure the audit trail. Money in electronic form can now move anywhere in the world with speed and ease using advances in technology and communications. The volume and value of the transactions each day is more than 665,000 wire transfers valued at more than $2 trillion dollars.

    There can be multiple bank transfers, again from country to country, where each transfer is protected by secrecy laws that must be breached one at a time. The funds-transfer trail can be broken on occasion with the launderer picking up the money in cash from a bank in one place, re-depositing it in a bank somewhere else and then wiring it to yet a third location.

    US banking law does not require reports on bank to bank transfers, let alone transfers from one branch to another of the same bank. Transactions in bulk conducted outside traditional foreign exchange venues are probably also escaping conventional monitoring systems.

    The fields for sender and receiver should be completed with their respective names and addresses in an effort to ensure that the SWIFT system is not used by criminals as a means to break the money laundering audit trail.


    Internet Based Banking

    New banking practices such as direct access banking undermine the ability of banks to monitor account activity.

    Certain bank products offering electronic cash management services may be used by bank customers to launder money. These products are available through third party vendors, although some institutions have developed proprietary products where customers have access to diverse electronic banking services and can manage their accounts from their own computers. This feature allows bank customers to engage in a wide variety of transactions affecting their accounts from virtually anywhere in the world, without significant bank involvement.

    The central problem with virtual banks is that there is virtually no oversight, not least because it is not clear who has jurisdiction or where the crime is being committed. In many cases, banks and other financial institutions have no inclination to know their customers, especially if it puts them at a competitive disadvantage.

    Very shortly people will be able to transfer money across the planet without it being traced.

    There will be private banks that will take it and deposit it and invest it, and nobody will be able to tell who the owners are or who the bankers are.


    Tax Havens as Sanctuaries
    Although many offshore financial centers say that they will cooperate with requests from foreign law enforcement agencies, such cooperation can intentionally involve considerable delays. The result is that there is an opportunity for money to be moved to another jurisdiction.

    These mini-states are in the business of selling sovereignty and operating completely outside international laws. By their competitive under-enforcement of money-laundering regulations the effectiveness of controls are being undermined while those countries who take their regulations seriously are subject to outflows of capital as a consequence of their integrity.


    Offshore Corporations

    There are an estimated three million anonymous corporations, with assets of $8 trillion, that have no identifiable officers, directors, employees or financial statements.

    Criminals can have multiple systems of interlocking companies, all incorporated in different places, forcing law enforcement officers to proceed from haven to haven. Vast quantities of funds can be transferred overseas without arousing any suspicion, especially since inter-company transactions become a black hole in any efforts to detect money-laundering.


    Having to Prove Fraudulent Transfer
    State laws generally do not permit an individual to place assets in trust for his or her own benefit while at the same time effectively placing those assets beyond the reach of creditors. For this reason, people look to the laws of offshore jurisdictions that have extended protections to self-settled trusts, provided the trusts are not created or funded with pending, threatened or expected claims against the person setting up the trust.

    To set aside a fraudulent transfer, fraudulent intent must be established beyond a reasonable doubt and it must leave insolvent the settlor who created it. Moreover, in some jurisdictions the statute of limitations on fraudulent conveyance claims may be as little as two years, which is likely to have already expired by the time suit is brought in that jurisdiction.

    Even if a creditor manages to prove a fraudulent conveyance, the recovery is then limited to the amount of the tainted transfers, rather than the entire trust fund.


    Shortfalls of Reporting Requirements

    Ultimately cash deposit reports are of little use unless there are not only the resources to process them but also personnel who know what they are looking for. It may well be that all reporting requirements can offer is assistance in following money flows once crimes have already been detected using traditional investigatory techniques. Artificial intelligence is no substitute for human intelligence.

    Even data mining systems can hardly anticipate all the criminal variations on techniques and methods that appear to be innocent but are intended to hide illegally obtained money.


    Non-bank Financial Institutions

    Non-bank financial institutions which are unevenly regulated in most parts of the world include a wide variety of exchange houses, check cashing services, insurers, mortgagors, brokers, importers, exporters and other trading companies, gold and precious metal dealers, casinos and express delivery services which can move money with ease, speed and virtually no oversight.

    Currency exchange houses, particularly ones located near the U.S. border, are suspected of moving large amounts of laundered money between the U.S. and Canada.


    Criminals Influencing Government and Bank Support
    The increasing concentrations of wealth among criminal groups in a number of jurisdictions is a concern because of possible impacts on investments, real estate values, legitimate commerce and government integrity. They also appear to be directing large cash deposits into new building and land development projects. On Bonaire, certain groups have attempted to provide unconventional financial services to hotel facilities that are in need of refinancing. There are increasing indications that money launderers are utilizing legitimate businesses as straw purchasers.


    They can also make large campaign contributions to candidates, who in turn agree to assist the criminals. On the other hand, if a haven develops too unsavory a reputation as a home for "dirty money" or a haunt of organized crime and drug traffickers, then not only will legitimate money go elsewhere, as respectable companies move their businesses to avoid tarnishing their reputations, but so too will more sophisticated criminals who want to avoid any taint by association.

    Antigua, criticized for lacking discrimination about its customers, is where anyone with $1 million can open a bank that can consist of nothing but a brass plate or a room with a fax machine.


    Differentiating From Legitimate Business Transactions
    The use of cash in day-to-day transactions is shrinking rapidly. Criminals now have only to gain access to a merchant direct access terminal to allow direct payments rather than troublesome cash.


    The more the business structure of production and distribution of non-financial goods and services is dominated by small and independent firms or self-employed individuals, the more difficult the job of separating legal from illegal transactions. As well, the greater the facility for using checks, credit cards and other non-cash instruments for effecting illegal financial transactions, the more difficult is the detection of money-laundering.

    The Widespread Use and Acceptance of Trade Mispricing

    Falsification of pricing in international trade is a major mechanism of routing illegal flight capital. These are situations where buyers and sellers cooperate in the movement of money. It is the most common component of illegal flight capital. It is done in secret, almost never put in writing but based on verbal agreements to facilitate the movement of illegal flight capital by means of trade mispricing.


    To do this an exporter from a developing country under-invoices his exports to here. Say he ships $6 million worth of goods but indicates to his country's officials that it is an order for $5 million. The actual payment by the U.S. importer is $6 million as agreed, but that's deposited into two bank accounts in the United States. The $5 million is transferred back home and reported but the $1 million balance is now safely out of the exporters country, free of taxation.


    It's done on both imports and exports. It's tax evading, and therefore illegal out of the countries in which it's done but perfectly legal for Western businessmen to do this. Because there is no law or company policy that says that it shouldn't be done, it's done all the time. The Western business is happy to help his supplier out as long as it does not hurt him. In cases where kickbacks are offered as inducement, it may even be profitable to do so.

    Sometimes the buyers and the sellers are the same entity, where the company in the foreign country has set up its own purchasing subsidiary in the United States.


    The United States requires a customs declaration to be filed in connection with imports and exports into and out of the United States, and it is an offense to file a false declaration. Yet, in practical terms the customs declaration is signed by a freight forwarder, not by the buyer or seller, and so long as it accords with the commercial invoice accompanying the transaction, it is rarely challenged by the U.S. Customs Services.

    Because of this laxity, trade mispricing in the form of commissions, rebates and kickbacks is often routine practice in winning and maintaining export and import orders in soft currency markets and is present in hundreds of thousands of transactions handled by U.S. commercial and banking interests.


    Postal Laws
    Outbound international letter-class mail is virtually the only means by which merchandise can be transported across the U.S. border without being subject to Customs inspection (unless a warrant is obtained). This handicaps efforts to deal with this relatively safe and inexpensive means for criminals to transport currency out of the country.

    Under Postal Service regulations, a letter-class mail parcel can weigh up to four pounds when mailed internationally, and up to 60 pounds when mailed to Canada. A single four-pound letter-class parcel can accommodate approximately $180,000 in $100 bills while a sixty-pound box will hold $2,700,000 worth.

    this is compiled from two different laundering articles: Crimes of Persuasion: *****ian email scams, consumer frauds. and a stealth circle article, link to come.
    Last edited by Purple Sprite; 07-23-2008 at 09:55 PM.

    Money Laundering
  2. #2
    Stans Dad's Avatar Banned
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    Direct copy and paste -

    Layering Techniques in Money Laundering Fraud Scams

    and other links on this page.

    Ok at least your gave credit now.
    Last edited by Stans Dad; 07-23-2008 at 09:48 PM.

  3. #3
    7itanium's Avatar Banned
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    Phail man.. this is a direct copy/paste

    yes you gave credit NOW-- but it wasnt there in the first place

    not cool

    Good compilation tho-- to whoever acctually made it

  4. #4
    Purple Sprite's Avatar Banned
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    What?

    .

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    Stans Dad's Avatar Banned
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    We're basically saying in your first post you pretty much did nothing except copy and paste this. This is pretty much useless IMO, it is an interesting read, but I don't think it belongs in the WoW Scamming Section.

  6. #6
    Purple Sprite's Avatar Banned
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    Yeah probably the wrong section, but I didn't see anywhere else

    sorry, delete it or w/e

  7. #7
    ubrpwnt's Avatar Banned
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    Hey stop flaming him god damnit, there is no rules against copying and pasting from a site without giving credit, feel free to try and correct me you damned flamers.

  8. #8
    Stans Dad's Avatar Banned
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    I wasn't really flaming, I was just letting him know that you shouldn't really copy and paste information without giving credit. That is called plagerism.

  9. #9
    Naxxiusrawr's Avatar Member
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    Ty man. that helps a lot. Now i wont go to jail.

  10. #10
    Purple Sprite's Avatar Banned
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    Originally Posted by Stans Dad View Post
    I wasn't really flaming, I was just letting him know that you shouldn't really copy and paste information without giving credit. That is called plagerism.
    I wasn't plagiarizing, as you probably know, I got all over Puh's case when he tried to do it. It's obvious I didn't write this, as it's in a quote.

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    SokelnikJho's Avatar Member
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    There is such a big amount of information in this thread about money that only I can say it is thanks. People really don’t know where to find such quality posts and they are just going to scammers who will ruin their days and will just steal their money. It happened to all of us for not one time, but you can read right here about borrowing even more. When I needed to find additional money to pay for a subscription I was looking everywhere for a change to borrow some amount and that time was awful.
    Last edited by SokelnikJho; 01-29-2022 at 09:51 AM.
    love you!

  12. #12
    kattyjack's Avatar Member
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    There is so much information on money in this post that only I can say thank you. People have no idea where to go for such high-quality content, so they end up falling victim to scammers who disrupt their days and take their money. It occurred to all of us at some point, but you can learn more about borrowing right here. When I needed extra money to pay for a subscription, I looked everywhere for a chance to borrow some money, and it was a terrible time.

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