Compliance By Nick Kochan

Compliance Privacy & Data Protection

By NICK KOCHAN

55

The Money Laundering Minefield

When you think of money launderers, the immediate image is of men who wear raincoats, carry suitcases stuffed with dirty money and behave furtively. The reality is far different.

The men who approached the managing director of a small firm wore suits, neatly pressed shirts and spoke intelligently. They worked for a Colombian computer assemblymaker but said they would pay their bills with checks issued by a small US legal firm. The MD accepted the arrangement. Checks amounting to $500,000 arrived and cleared successfully. But the MD later received a call from the FBI and his life was turned upside down. The Colombian company was controlled by a cocaine-growing cartel, related to the infamous Cali cartel, and had been charged with money laundering. There was a suspicious link with a terrorist group, said investigators. The MD had to give evidence at trial.

DEFINING MONEY LAUNDERING

Money laundering is most simply defined as the process of hiding the source of criminal money so that the recipient isn’t suspicious. If achieved, the launderer will be able to enjoy his gains safe in the knowledge that banks or the police will leave him alone. That was the intention of respectable Vietnamese surgeon Chihn Nguyen, who used his medical credentials to persuade a number of banks to set up a total of 27 accounts and proceeded to put approximately $ 9,000 in cash into each of them. The trigger for a bank to issue a suspicious report on a deposit is $10,000. He thought he was safe but when he started to move money to Vietnam, banks got suspicious. They discovered that when he wasn’t conducting surgery he was running a massive London-based cannabis growing empire. He’s now serving a five-year prison term. Other launderers are attached to politicians who receive corrupt funds. One such politician was Asif Ali Zardari, President of Pakistan, who allegedly took a massive bribe from Abdul Razzaq Yaqub, a Pakistani gold importer. He hired a Swiss lawyer to put the money into a private account using bogus names to disguise ownership. A more suspicious bank would have looked into the companies’ beneficial ownership. This case was first heard in Swiss courts, recently surfacing in the Pakistan media. Yaqub has denied paying the politician.

TOOLS OF THE TRADE

One laundering tool is the offshore financial system, whether large havens like Switzerland or smaller ones like Malta or Nairu. In each case the key to laundering is hiding the source of dirty money, whether acquired from drugs, illegal arms, fraud, counterfeiting or theft. The principal is simple; the process can be extremely complicated and needs an accountant’s brain and creativity. Money laundering is a massive business. The International Monetary Fund estimates the total amount of money laundered globally at between 3-5% of the gross domestic product: no less than $1.5-$2.5 trillion.

BUSINESS OWNERS, TAKE NOTE

Sean Holohan, a fraud and money laundering investigator and head of compliance at Royal Bank of Scotland, warns that companies “should not allow the prospect of often very lucrative business deals, deliberately offered by the money launderer as a carrot, to cloud their judgement, since the consequences are severe." Ros Wright, former director of the UK's Serious Fraud Office, says “The money launderer is likely to be a sophisticated operator who certainly knows enough to make sure he does not look like a money launderer. Many have financial or legal qualifications which are no different those possessed by legitimate businessmen.” •