BUSINESS AREAS PRONE TO MONEY LAUNDERING

BANKING.

Banking is covered under the Regulations. (see Money Laundering Regulations 1993)

"Bertolt Brecht"

The best method of both stealing and laundering money is to own a bank. And though banks are an at risk group in relation to their main functions of deposit taker and opening of accounts, what can be done against this crime if the bank is international and in complicity with vast numbers of its depositors. When the CIA moved money via the BCCI it called it "facilitating the national interest". When the Mafia and the Libyans do it, it is called money laundering.

The BCCI affair was a major scandal involving allegations of corruption, bribery, money laundering, etc.. One investigator quotes in the Kerry Report:

"It had 3,000 criminal customers and every one of those 3,000 criminal customers is a page 1 story. So if you pick up any one of [BCCI’s] accounts you could find financing from nuclear weapons, gun running, narcotics dealing and you will find all manner and means of crime around the world in the records of this bank".

As Powis (1992) said, "money laundering becomes a relatively easy thing to do when a banking institution and a number of its key officials co-operate in the laundering activity".

Sometimes called ‘parallel’ banking. These systems tend to mirror more conventional bank practices, but are highly efficient and wholly unauthorised methods of transferring money around the world. The best known among them are the Chop, Hundi, and Hawallah banking within various ethnic communities, which enables the avoidance of any conventional paper record of the financial transaction. Such methods do not require the actual movement of money but nonetheless facilitate the payment of funds to another party in another country in local currency, drawn on the reserves of the overseas partner(s) of the Hawallah banker. The system is dependant on considerable trust and considerable simplicity - the money launderer places an amount with the underground bank - the identifying receipt for a transaction being something as innocuous as a playing card or post-card torn in half, half being held by the customer and half being forwarded to the overseas Hawallah banker. The launderer then presents his receipt in the target country to obtain his money, thus avoiding exporting cash out of the country and limiting the risk of detection.

The UK experience showed that the futures market, through Capcom Commodities, a BCCI-related institution was another area that money launderers were taking advantage of for their money laundering schemes. Because of the ‘anonymous’ nature of the trading strategies, all brokers trading as principals and not in their client's name, the true identity of the beneficial owner is not known. Commodities therefore are a ‘zero sum’ game, which means you can only buy if someone is willing to sell, and vice versa. Launderers can take advantage by a strategy of buying and selling the same commodity, thereby taking a small hit for the commission charged by the broker. They pay the losing contract out of dirty money and receive a cheque that legitimises their profits and creates a paper trail for any one who asks where the money came from.

Accountants/Solicitors/Stockbrokers

If involved in investment activity, this group is covered in the Regulations. For example, their clients’ account can be used as a bank account by clients and can put him at risk under s93 CJA93. See Michael Relton - Solicitor convicted in relation to money laundering proceeds from Brinks Mat robbery.

As with banks, any suspicious transactions must be reported. Money deposits in these institutions are where the placement stage usually takes place so vigilance is called for by staff. Any unusual change in regular customers depositing habits need to be investigated and lenders also have to be aware that money laundering techniques can also involve paying off a debt faster than income would support. You would already know a customer’s declared income on the loan application.

Bureau de change/international money transmitters/travel agents.

All offer a wide range of services that can be used by the money launderer. Airline tickets, foreign currency exchanges in the form of cash and travellers cheques, are recognised as being widely used techniques. Money transmitting services in the form of wire, fax, draft, cheque or by courier exist for people unable to use traditional financial institutions. Customer anonymity is a primary feature of such transmissions which identifies the inherent level of risk. Covered under the Regulations if they offer currency exchange facilities.

Casinos and gambling establishments are particularly attractive to money launderers. Cash can be deposited with a casino in exchange for chips or tokens. After a few turns at the table the player can cash in the remainder for a cashier’s cheque which can be deposited in their account. Another method is to buy winning tickets from people in bookmakers and saying you have won making bookmakers vulnerable to being used.

Any area that possesses the characteristics which represent high value goods that possess great portability and in many cases are used to being paid in cash is an attractive area for money launderers. All the above satisfy these criteria and owners and staff have to be aware of their obligations under the legislation if they are to avoid being unwittingly used in a money laundering scheme.

The above is not an exhaustive list of at risk institutions, however, some of the characteristics can be recognised in other groups not mentioned.