Page 36 - Banking Finance April 2018

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laundering and to avoid anti-money laundering money is remitted, represent the sums received from
reporting. A sub-component of this is to use smaller the lawyers as a legacy under a will or proceeds of
amounts of cash to purchase bearer instruments and litigation.
then ultimately deposit these, again in small accounts.
Y Bank capture : In this case, money launderers or
Y Cash smuggling : This involves physically smuggling cash criminals buy a controlling interest in a bank, preferably
to another jurisdiction and depositing it in a financial in a jurisdiction with weak money laundering controls,
institution, such as an offshore bank, with greater bank and then move money through the bank without
secrecy, less regulation, reduced taxation and less scrutiny.
rigorous money laundering enforcement.
Y Casinos : In this method, an individual walks into a
Y Cash intensive business : In this method, a business casino and buys chips with illicit cash. The individual will
typically expected to receive a large portion of its then play for a relatively short time. When the person
revenue as cash, uses its accounts to deposit criminally cashes in the chips, they will expect to take payment in
derived cash. Such enterprises often operate openly and a cheque or at least get a receipt so they can claim the
in doing so generate cash revenue incidental to proceeds as gambling winnings.
legitimate business in addition to the illicit cash - in such
cases the business will usually claim all cash received as Y Real estate : Someone purchases real estate with illegal
legitimate earnings. Service businesses are best suited proceeds and then sells the property to outsiders, the
to this method, as such enterprises have little or no proceeds from the sale look like legitimate income.
variable costs and or a large ratio between revenue and Alternatively, the price of the property is manipulated,
variable costs, which makes it difficult to detect the seller agrees to a contract that under-represents
discrepancies between revenues and costs. Examples the value of the property and receives criminal
are parking structures, strip clubs, tanning salons, cash proceeds to make up the difference.
washes and casinos.
Y Black salaries : A company may have unregistered
Y Shell companies and trusts : Trusts and shell employees without written contracts and pay them
companies disguise the true owners of money. Often, cash salaries. Dirty money might be used to pay them.
launderers achieve this objective through the shell
companies, holding companies and offshore accounts. Y Life Insurance Business : Assignment of policies to
A shell company is an incorporated company that unidentified third parties and for which no plausible
possesses no significant assets and does not perform any reasons can be ascertained.
significant operation. To launder money, the shell
company purports to perform some service that would Y Online gaming : This is another increasingly common
reasonably require its customers to often pay with cash. way of laundering money. In a growing number of online
Cash transactions increase the anonymity of customers games, it is possible to convert money into virtual goods
and therefore decrease the regulators ability to trace / services / virtual cash, which can later be converted
the initial recipient of the dirty money. into money.

Y Round tripping : Here, money is deposited in a Y Trade Based Money Laundering (TBML) : International
controlled foreign corporation offshore, preferably in a trade system is subject to wide risks and vulnerabilities
tax haven where minimal records are kept and then which is being exploited by criminal organizations. TBML
shipped back as a foreign direct investment, exempt is the process by which criminals use a legitimate trade
from taxation. A variant on this is to transfer money to to disguise their criminal proceeds from their
a law firm or similar organization as funds on account unscrupulous sources. This is an alternative remittance
of fees, then to cancel the retainer and, when the system that allows illegal Organizations the opportunity

36 | 2018 | APRIL | BANKING FINANCE