EXAMPLES OF MONEY LAUNDERING
As much as Money Laundering is an organized crime; its dynamics differ to suit purposes. The following examples trace such attempts and highlights just how difficult it is for the government to keep track of cash-stash as well as monetary tidal waves that wash through the banking system. However, a culprit seldom walks free.
The Egmont Group has compiled actual one hundred sanitized cases on money laundering. One of the most common types of money laundering scheme is when a person uses his legitimate business to conceal large cash transactions originating from illegal activities example drug trafficking, smuggling etc.
Example 1. Mr. A, a citizen of an African country, ran a business in Europe of importing second hand electrical goods from Africa. On one occasion Mr. A visited several branches of his company’s bank in Europe depositing cash ranging in amounts US$ 15-40,000, all in a single day. The bank’s automated account-monitoring procedure raised an initial alert on this activity. The bank’s staff also became suspicious and questioned the need for Mr. A to deposit his cash in different branches instead of depositing the entire amount in his own branch. The bank then decided to report the deposits to the national Financial Intelligence Unit (FIU) for further investigations.
After analyzing transaction reports and bank records, FIU directed the bank to seek further documentary evidence from Mr. A’s company accountant supporting the business’s shipment of goods from Africa. Following an intensive cross examination and investigation, the Customs identified a shipment that contained a large quantity of Cannabis with a street value of US$ 300,000. The investigations confirmed this as a case of money laundering and identified the principal organizer of this scheme who was later convicted to six years imprisonment. Mr. A, however, managed to flee the country while a warrant was issued for his arrest.
Example 2. Mr. A, a European resident, exchanged different currencies in varying amounts at a financial institution. This, he claimed to do on behalf of his brother Mr. B who ran two businesses in a neighboring country; a photocopying business and a foreign exchange office. In order to prove the legitimacy of his brother’s businesses, Mr. A provided documents from the trade registrar of the country where the businesses were established. However, the financial institution viewed both the scale of these currency transactions with respect to the size of the businesses and the need for these funds to be brought across the border with suspicion. The matter was then disclosed to the national FIU.
Following investigation in collaboration with foreign FIUs, the national FIU learnt that the two brothers were the targets of an investigation for illegal drug trafficking in other European countries. They had used the two businesses as cover-ups for money they received from drug trafficking. Moreover, it was also learnt that Mr. B’s foreign exchange office was not authorized to operate by regulators of that country. Mr. A was sentenced to two years imprisonment.
In the above two examples, the key indicators that drew suspicion of the bank and the financial institution, respectively, are as follows;
- Large cash transactions were involved.
- There were unusual underlying business actions- in the first example a possibility of ‘smurfing’ and in the second example the action of cross border travel to exchange the currency.
- Questionable rationale of the underlying business- importing second hand electrical goods from Africa.
- Unrealistic business turnover- especially in the case of the photocopying business.
To combat money laundering, efforts are ongoing and evolve as policing such cases require to keep adept with criminals’ latest tactics. It definitely seems to be a war that will forever require constant vigilance.