FIGURE 3.3
Basic Cross-Border Wire Transfer Process
Instruction
Originating customer (jurisdiction A)
Credit
Wire
Originating bank (jurisdiction A)
Beneficiary bank (jurisdiction B)
Beneficiary customer (jurisdiction B)
Source: Authors’ illustration.
3.4.4 Wire Transfers Previous corruption cases have shown that large amounts of corruption proceeds are placed in financial institutions and then moved around the world through wire transfers (also referred to as “electronic funds transfers”) in an effort to break the audit trail and secure funds in bank secrecy havens. A wire transfer is initiated with a request by a customer (financial institution, legal entity, or individual) to direct funds elsewhere, either domestically or across borders.84 The request gives instructions through a system of messages by telephone, e-mail, fax, and/or cell phone (see figure 3.3).85 Before the proceeds reach their final hiding place, such wire transfers are used to launder the funds through several financial institutions and transit jurisdictions using correspondent bank accounts, serial wires, cover payments, shell companies, and offshore jurisdictions. Some financial institutions have even been complicit in helping corrupt politicians, their relatives, and close associates launder funds through complex transactions using corporate vehicles and establishing special private wealth account privileges.86 A wire transfer comprises two components: (1) the instruction, which includes information on both the originator and the beneficiary institutions, and (2) the actual movement 84. This can include a chain of wire transfers that has at least one cross-border element (for example, a correspondent bank in another jurisdiction). See also FATF, Interpretative Note to Special Recommendation VII. 85. According to the FATF Special Recommendation VII on Wire Transfers, promulgated in 2001, the terms “wire transfer” and “funds transfer” refer to “…any transaction carried out on behalf of an originator person (both natural and legal) through a financial institution by electronic means with a view to making an amount of money available to a beneficiary person at another financial institution.” 86. See United States Senate, Minority Staff of the Permanent Subcommittee on Investigations, “Money Laundering and Foreign Corruption: Enforcement and Effectiveness of the Patriot Act. Case Study Involving Riggs Bank” (Washington, DC, July 15, 2004), http://hsgac.senate.gov/public/_files/ACF5F8.pdf. Furthermore, a large international bank had a training manual for its employees so they would know how to “strip” (remove) information from a wire transfer to hide the fact that the transfer was for or on behalf of a sanctioned jurisdiction. See information at http://www.justice.gov/opa/pr/2009/December/09-ag-1358. html.
Securing Evidence and Tracing Assets
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