Page 574 - IOM Law Society Rules Book

Non financial professions in money laundering (solicitors, notaries and accountants)

As anti-money laundering measures are implemented in financial institutions, the risk
of detection becomes greater for those seeking to use the banking system for
laundering criminal proceeds. Increasingly, money launderers seek out the advice or
services of specialised professionals to help facilitate their financial operations. This
represents an increasing trend toward the involvement of various legal and financial
experts, or gatekeepers, in money laundering schemes.

Solicitors, notaries, accountants and other similar professionals perform a number of
important functions in helping their clients organise and manage their financial
affairs. First of all, they provide advice to individuals and businesses in such matters
as investment, company formation, trusts and other legal arrangements, as well as
optimisation of tax situation. Additionally, legal professionals prepare and, as
appropriate, file necessary paperwork for the setting up of corporate vehicles or other
legal arrangements. Finally, some of these professionals may be directly involved in
carrying out specific types of financial transactions (holding or paying out funds
relating to the purchase or sale of real estate, for example) on behalf of their clients.

All of these perfectly legitimate functions may also be sought out by organised crime
groups or the individual criminal. They may do so for purely economic reasons;
however, more important is the desire to profit from the expertise of such
professionals in setting up schemes that will help to launder criminal proceeds. This
expertise includes both advice on the best corporate vehicles or offshore locations to
use for such schemes and the actual establishment of corporations or trusts that make
up its framework. Gatekeepers may also be used to offer the veneer of legitimacy to
their operations by serving as a sort of intermediary in dealing with financial
institutions.

The typologies below focus on one of the key activities of non financial professionals,
namely as trust and company service providers although other services, such as tax
advice may also form part of any money laundering scheme.

TYPOLOGIES

Typology 1: Multi-jurisdictional structures of corporate entities and trusts

In many instances, a structure consisting of a series of corporate entities and trusts —
created in different jurisdictions — is used to hide identity and carry out a fraud
scheme. The complex structure can give the appearance of a legitimate purpose,
which can then be used to easily attract investment from third parties. For the third
parties that are victims of such schemes, it is almost impossible to see behind the
structure of the various corporate entities to find out who is liable for their loss. By
setting up such a complex multi-jurisdictional structure, the seemingly logical money
flow between these entities is used to move and launder criminal money. These
structures can also be convenient for diverting the money flow or hiding payments.