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Some Signs of Money Laundering

Some Signs of Money Laundering

Laundering money is moving money in such a way that the sole economic purpose behind the movement is deny to a viewer or participant the ability of ever knowing the real source of the money.  It become money laundering when and if the original source was a crime – such as drugs, frauds, tax evasion, bribery….

Some Signs of Money Laundering…

The primary contract person does not appear to be the beneficial owners but appears to be acting as a nominee… when questions are asked about the fund – you get stories but no answers.  These front men have more stories than there are gains of sand on the beaches of the world.  Some are so good at answering the question – that they can say nothing for hours and have you agreeing with them – and you have no idea why.

The use of many different entities and transaction architectures that escapes understanding.  It is the “Clown Car” of finance.  We have seen the routine of a zillion clowns coming out of one car at a circus.  It is the same thing in finance.  The clown car and all of the antics of the clowns serves to distract the viewer that it s is the same number of clowns sneaking back into the car only to come out again from another door.

The purchase or sale of items whose values are intangible – such as designs, patterns, programs, databases, art, services.  My all time favorite is the use of art to launder money.  Programs and services eventually can be measured, but not the value of a rare and authenticated vase or antiquity.  Even better, you buy a vase for 30 million, but choose not to close on the vase. Thus, you have wired 30 million from say India to London, fail to close, and that the money refunded to an account in London or New York.

The dwell time of money in an account is very – very short and seems to come only from a few sources and go to a few sources.  Typically we have more customers than creditors or more creditors than customers – money laundering you will see few of either.  Also we have money on account as part of our planning process for cash flow irregularities.  Not so with a laundering account – the money come in from a few sources and goes out to fewer sources and the dwell time is as short as it can be.  The money is on the run, dwell in one place too long and it might be confiscated.

Action that are incongruent – such as 35 million invested in a private placement and the manager lost all 35 million in less than nine months, all in one taxable year – and none of the investors complained or sued.  The same investors came back the next near and lost another 30 million with the same person… go figure…  The securities industry is just waking up to the many ways it can be used to move money.  With improved information and trading – markets and be moved, manipulated and manhandled to move money in ways that were impossible only but a few years ago.

A cash business is as good as always, but a cash business will have many depositories to make it work.  Collect $12,000 a day from your restaurant, and deposit the cash in Bank A, have identical deposits in Bank B, Back C and Bank D.  Thus, if anyone comes to look at your business records – it all matches your deposits.  Just pray the different banks do not all merge.

Buying items for a serious premium over what they are worth, such as buying a $10 car part, from a Swiss Company, that buys the part from Japan for $2…  This way the owner of the company uses trade to launder gains and not pay taxes on the $8 of profit retained by the Swiss Company.

By far and away more money is laundered in conjunction with financial fraud than for any other crime origin, far more than drugs and buying influence…

There is nothing wrong with a cash based business, it only need to have real KYC and due diligence research done by the institution.  It is not wrong to have short dwell time on account – it is also a reflection of financial pressure on the business where money comes in and is paid to creditors quickly.  It is not wrong to buy and sell intangibles or work with transfer pricing – but all needs to be explained, be reasonable, and transparent to the parties.

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