Money Laundering – Why the Traditional Model of Money Laundering is Obsolete
15 Feb 2016

In May 2013, the Costa Rican currency business Liberty Reserve was shut down after an investigation, spanning 17 countries, found that the company had laundered an alleged $6 billion of proceeds from an array of criminal activities, including drug trafficking, child pornography, credit card fraud, identity theft, computer hacking, and identity theft. One of Liberty Reserve’s founders, Vladimir Kats, pleaded guilty to charges which carry a combined maximum sentence of 75 years. It is thought to be one of the largest ever cases of money laundering.[1]

This is a far cry from the position 30 years ago, when the offence of money laundering did not exist, and criminal property was laundered with impunity by criminals mindful only of their desire to avoid detection. Now, money laundering is universally regarded as an essential component of a successful criminal enterprise and as such is treated as a serious offence in many countries around the world.

Since the attacks on 11 September 2001 money laundering has become closely associated with terrorist financing. The term ‘AML/CFT’ (anti-money laundering and countering the financing of terrorism) is frequently employed by compliance staff when carrying out checks on customers for the purpose of detecting and preventing both. The two concepts are distinct to the extent that money laundering is concerned with the origin of the money, whilst terrorist financing is largely (though not exclusively) about the destination of the money.

The approach of the international community to both issues can be seen from the assessments of national legal frameworks on anti-money laundering and counter terrorism financing conducted by supra-national bodies. These include the Organisation for Economic Co-operation and Development’s (OECD) Financial Action Task Force (FATF) and the Council of Europe body, Moneyval. FATF originally issued 40 ‘Recommendations’ on countering money laundering, which were supplemented by nine Special Recommendations which mainly address terrorist financing; these global standards are endorsed by 36 member nations. Moneyval oversees the compliance of its member states not only with FATF’s standards, but also with the terms of various UN conventions. Countries judged to be ‘non-cooperative’ in the global war on money laundering and terrorist financing are identified and coerced into taking action.

On one level then money laundering appears to be a poster child for international cooperation. However, the issue has also caused tension between those countries that have abided by the spirit of the rules by implementing robust money laundering laws and jurisdictions that have tackled money laundering superficially thereby creating arbitrage opportunities for financial institutions and their customers. The uneven playing field has been fully exploited by criminals.

The origins of money laundering are imprecise but we know that the activity began to develop on an industrial scale in the US in the middle part of the twentieth century as Mafia bosses recognised the need to demonstrate that their enormous pools of wealth had derived from ‘legitimate’ sources. Meyer Lansky, known as the ‘Mob’s accountant’, developed a significant gambling empire that stretched across the US to Cuba. He was able to successfully utilise casinos and race tracks to place and launder criminal money for the Mob. More sophisticated methods involving financial institutions subsequently evolved as the financial services industry grew and globalised.

The criminalisation of money laundering occurred some decades later, again in the US. In an effort to shore up support from the American middle classes horrified at the devastation caused by drugs in the towns and cities across America, Ronald Reagan sponsored legislation in 1986 that made money laundering a federal crime. Even though the Bank Secrecy Act had since 1970 required the filing of reports designed to create a paper trail for currency transactions, the criminalisation of money laundering was a highly novel concept. The government for the first time effectively press ganged the financial services industry into helping it wage a war on drug trafficking by threatening prosecution and regulatory censure if banks did not play their full part. This was to be the thin end of a very thick wedge.

Given the global interconnectivity of financial services, the criminalisation of money laundering in only the US had limited impact, and in 1988 through the vehicle of the UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances all signatory states committed to implement a range of measures including the criminalisation of behaviour that came universally to be referred to as ‘money laundering’.

Less than a decade after the legislation on drug money laundering was introduced, governments realised the value of expanding the scope of money laundering laws beyond the proceeds of drug trafficking to encompass the proceeds of other crimes. The thinking was that if it was illegal to handle drug money why should  it not be illegal to handle the proceeds of a bank robbery and other forms of crime? Countries did this by adapting the existing legal formulations of drug money laundering offences and applied them to wider definitions of criminal conduct. In the US, a long list of predicate crimes was used under the umbrella term ‘specified unlawful activities’. Proceeds from any of the long list of crimes – including bribery, embezzlement, kidnapping, illegal gambling, and terrorist financing – became subject to money laundering legislation.

It was at this stage that certain countries formulated money laundering legislation which appeared effective but which in fact framed a narrower definition of criminality than applied in competitor jurisdictions. Some adopted ‘dual criminality’ models requiring conduct to be illegal both in the country where the laundering took place and in the country where the crime occurred. Switzerland and Singapore introduced euphemistically termed ‘all crimes’ legislation. This legislation in fact excluded from its ambit the proceeds of foreign tax evasion thereby attracting tax evaders who could no longer risk doing business in jurisdictions such as the UK and the Channel Islands, which had outlawed the laundering of the proceeds of tax evasion in the late 1990s. It was over a decade later that Singapore finally took that step, whilst Switzerland remains to do so. Some countries even formulated a standard of suspicion for reporting that was lower than the standard that applied elsewhere. In Dubai for example, the offence of not reporting is only committed where a person has actual knowledge, whereas in many other countries the offence is committed on the basis of an objective standard of knowledge.

Enhanced legislation has been supplemented by rules requiring financial institutions to obtain and verify identity data from customers. That obligation has also evolved significantly. Industry is now required to adopt a risk-based approach to customer due diligence including in certain circumstances obtaining information on a customer’s source of funds and source of wealth. Such an approach ought to account for the risks associated with the services and products a bank offers, as well as the risks inherent in the nature and background of a customer (whether they are politically exposed being one of the most significant risk factors).

The introduction of ‘all crimes’ money laundering laws seems in retrospect to have been part of a natural evolution in society’s efforts to combat crime. In reality however, criminalising the failure of one person to report the suspected wrongdoing of another was a profound innovation. To this day it is not an offence to ignore a suspicion that your neighbour is a serial killer but it is an offence for a banker not to report a suspicion that his customer is a money launderer. This is all the more remarkable given that a banker (unlike the neighbour) owes his customer a fiduciary duty of care. At the time the drug trafficking reporting obligation was introduced, nobody could have foreseen that governments would progress so quickly from penalising drug money laundering to penalising all crimes as money laundering. Financial institutions were, at the same time, required to obtain a steadily increasing amount of data from customers, heightening the likelihood that they might become fixed with information that obliged them to report their customers to the authorities.

The latest development in what has been a relentless erosion of customer confidentiality, and not only of customers suspected of criminality, involves the imposition of an obligation upon financial institutions by the US authorities to share customer data under the provisions of the Foreign Account Tax Compliance Act (FATCA). FATCA will be examined in greater detail in Chapter 10 but suffice it to say at this stage that failure to comply with the terms of FATCA will result in institutions being barred from accessing the US dollar – a form of sanction for failing to share data on customers that 30 years ago was regarded as sacrosanct.

How can this exponential increase in the burden upon the finance industry be explained? Financial intelligence is extremely valuable to the authorities as the notorious mobster Al Capone realised when he was jailed in 1931, not for murder, racketeering, or extortion, but for tax evasion. Power is not just about exercising control over large pools of capital, it is ultimately about being able to access information relating to it. No industry is better placed to conduit that information to the state than the finance industry.

The resulting flood of intelligence material has been a boon for law enforcement agencies as financial institutions started collecting identity documentation on customers that was discoverable by the authorities and to file so-called Suspicious Activity Reports (SARs) on customers they suspected of being up to no good. What became clear very quickly was that whilst individual SARs were not always terribly enlightening, they often proved to be highly revelatory when pieced together with SARs made in other countries. This highlighted the importance of cross-border cooperation between law enforcement agencies which then rapidly developed, posing a major new challenge to international organised crime groups.

The upshot is that today a substantial quantity of intelligence is provided by financial institutions to law enforcement agencies around the world. Speak to any law enforcement official and they will tell you what an enormously valuable role the finance industry now plays in helping them to tackle crime. Whatever failings there have been in the industry (we will look at many more of them in the following chapters) they all need to be viewed against the backdrop of tens of thousands of SARs made every year by financial institutions, many of which take their anti-financial crime responsibilities seriously.

So what exactly is money laundering? A good place to start is the original UN Convention that laid the groundwork for the formulation of national anti-money laundering laws relating to drug money.[2] The Convention required the criminalisation of:

  1. The conversion or transfer of property derived from criminal offences.
  2. The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property derived from criminal offences.
  3. The acquisition, possession or use of property derived from criminal offences.

Just as many different types of criminal offences that are carefully defined in law come to carry a convenient name tag (human trafficking or piracy being two such examples), so the conduct that the UN Convention sought to prohibit, came to be labelled as ‘money laundering’. This, as we shall see, was to have a series of unfortunate consequences.

The label ‘money laundering’ is in fact misleading. It has harmed efforts to prevent the activity it seeks to describe. One of the reasons is that money laundering need not (and frequently does not) involve money either in the form of cash or money in a bank account. Instead it can involve a wide variety of property or asset types (anything from real estate to intellectual property rights), and can make use of various financial instruments and mechanisms for handling money (securities, Bitcoin, credit cards). Another reason is that the active verb ‘laundering’ suggests that money laundering always involves some form of activity. Just as dirty laundry does not get cleaned unless a washing machine follows a particular cycle, the assumption is that criminal money must also be subjected to some form of laundering cycle to be properly decontaminated. The thinking goes that the more activity the criminal property is subjected to the more effective the process is. In fact as we will see in subsequent chapters, the opposite can be true. Criminal money can be very effectively laundered in relatively passive financial arrangements not identified by financial institutions as suspicious because they do not have the characteristics of a ‘typical’ money laundering relationship.

The difficulties of perception created by the term ‘money laundering’ have been compounded by attempts by regulators, law enforcement agencies, and industry trade bodies to help the finance industry identify money laundering activity through the provision of guidance that has in its various iterations attempted to describe what money laundering looks like in practice. Whilst the aim of the guidance is laudable, the execution has generally been lousy because of the reliance placed on a tabloid-like description of money laundering known as the ‘three-staged’ or ‘placement, layering, and integration’ model. Regrettably, this mischaracterisation of money laundering is still being perpetuated.

The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) adheres to the model, describing money laundering as: ‘the process of making illegally-gained proceeds (i.e., “dirty money”) appear legal (i.e., “clean”)’, typically involving ‘three steps: placement, layering and integration’.[3] It explains that: ‘First, the illegitimate funds are furtively introduced into the legitimate financial system. Then, the money is moved around to create confusion, sometimes by wiring or transferring through numerous accounts. Finally, it is integrated into the financial system through additional transactions until the “dirty money” appears “clean”.’ Even FATF, the supra-national body responsible for evaluating country compliance with its globally recognised standards, describes money laundering as a process involving placement, layering, and integration.[4] Relationships in which money is being laundered can exhibit these characteristics, but very often they do not. The difficulty with the model therefore is that it frames money laundering too narrowly by creating a mental picture of money laundering that encourages the possibility that a banking or brokerage relationship in which any or all of placement, layering, or integration activity that is unidentifiable will be above suspicion – even though it may well in fact be toxic.

In subsequent chapters dealing with a range of predicate crime types, I examine hypothetical scenarios to illustrate how crimes are facilitated by the finance industry, and the manner in which the proceeds are laundered in practice. But at this stage, the old theoretical model of money laundering bears closer analysis in order for its limitations to be fully understood.

Placement – The assumption is that criminal property is ‘placed’ into the financial system, for example through the use of front companies or structured cash deposits. It ignores the obvious point that many modern day crimes generate forms of benefit that do not need to be placed into the financial system because they are already in it at the moment the crime is committed. The proceeds of insider dealing and bribe payments on arms contracts made by wire transfer are two examples of numerous crime types that generate proceeds which sit directly at the heart of the financial system.

Layering – The model assumes that at the layering stage the ‘placed’ criminal property undergoes some form of transformational process through the medium of financial transactions. The thinking goes that the more complex the transactions, the more effective the metamorphosis of the property from ‘dirty’ to ‘clean’. The expectation of layering activity in all relationships in which customers launder money results in the financial services industry failing to consider the dangers of passive relationships where criminal proceeds do not do the kinds of transactional somersaults typified in this model.

Integration – The model assumes that following the layering process, the virgin white property is integrated into the legitimate economy where it is then used by criminals for their benefit and enjoyment, for example, through the purchase of real estate, yachts, private jets, and other luxury items. This has no basis in reality because the so-called integration stage is frequently indistinguishable from the laundering activity that precedes it.

Reliance on this flawed model has led to a disjunction between the activity that the law was designed to prevent and the activity that financial institutions have been attempting to identify and report. Whilst the model suitably applies to the laundering of cash-generative crimes such as drug trafficking, it is positively misleading when it comes to identifying the laundering of non-cash-generative crimes such as bribery, tax evasion, market manipulation, and cyber-crime – crimes which have become much more prevalent since anti-money laundering guidance was first issued over 20 years ago.

A comparison of two examples of money laundering illustrates both the applicability of the old model to the proceeds of street crimes and its irrelevance to the proceeds of non-cash-generative crime.

Example 1

A drug trafficking organisation in the US sells drugs to street dealers in exchange for cash. The cash is accumulated in safe houses where it is collected by associates who variously deposit batches of less than $10,000 in numerous bank accounts (any amount above this sum and the bank is required to file a report to FinCEN), and place it into cash-intensive front businesses (nightclubs, restaurants, taxi companies, and the like). Once in the banking system, the money is wired to the account of an offshore company where it is used to purchase bonds and stocks. The securities are subsequently sold. The money is transferred to the account of another company under cover of a loan, where it is eventually used to pay the credit card bills of the wife of a senior member of the trafficking organisation who has difficulty resisting the temptations of designer boutiques in Paris.

Example 2

A corrupt politician wants to establish a corporate vehicle in which to park a bribe. He sets up a front company in order to disguise his control and beneficial ownership, especially since he does not want his politician status flagged to the bank as it may prompt unwanted scrutiny. The front company’s bank account receives a $10 million bribe by way of wire transfer. The money remains in the same bank account and is used as collateral for a loan to purchase a property in Mayfair which he uses during occasional trips to London.

The first example involves easily identifiable cash placement (into banks and businesses), layering (transactions within the banking system), and integration activity (the acquisition of designer clothes). The second example does not. In the second example there is no recognisable placement activity as the bribe money was already in the legitimate financial system before it was wired to the front company; layering is more difficult to identify because the proceeds of the bribe remain passive in the account acting only as collateral; and there is no obvious integration activity because the bribe money does not move. Instead it is used as security for a loan.

The second example of money laundering bears no resemblance to the old model of money laundering upon which so much practical reliance has been placed by the finance industry and law enforcement. Yet, it involves serious criminal money laundering activity to which significant liability attaches, if discovered. How would a financial institution that had designed its internal anti-money laundering defences by relying on the old model (and trained its staff accordingly) have recognised its relationship with the politician as one in which the proceeds of a bribe were being laundered? The uncomfortable reality is that many relationships in which money is being laundered in plain sight are not reported to the authorities because of the expectation gap created by the placement, layering, and integration model.

A new model of money laundering is needed based not on theory but on practice.

A new model of money laundering

Designing a new model of money laundering requires trying to place ourselves inside the mind of a criminal. There we will see the desire to:

  1. Succeed in perpetrating a crime
  2. Avoid detection
  3. Benefit from the crime
  4. Retain the benefit of crime

In short, criminals want to commit crimes, get away with them, and enjoy the proceeds of them. As Ronnie Biggs, perhaps the most notorious of the British Great Train Robbers of the early 1960s said, ‘The flaw from our point of view was that everything was planned up until we divided up the money’.[5]

The key to understanding the new model is to recognise that the finance industry can be exploited to help criminals achieve not just one but all four of the above objectives.

The criminal, the crime and the property are each connected by three axes. Each of the four objectives of the criminal can be met by using financial services along each axis to achieve different ‘disconnects’. Consider the following example involving the perpetrator of an advanced fee fraud who is conning naïve victims into advancing money to him or her in anticipation of a larger return:

Disconnect 1

Instead of committing the fraud in his or her own name, the fraudster incorporates a company administered and controlled by a law firm on his or her behalf. The emails are sent to the victims in the name of the company. By utilising a company, the fraudster significantly reduces the chances of being detected because the fraudulent activity is less likely to appear suspicious when transacted by a company than by an individual. It is the financial crime equivalent of a burglar taking the precaution of wearing gloves so as not to leave any fingerprints at the crime scene. Even if the emails are identified as suspicious, his or her connection to the company needs to be established in order for the involvement in the fraud to be revealed. This is a clear example of the type of facilitation of crime through the provision of a financial service touched upon in Chapter 1.

Disconnect 2

As an alternative to secreting the proceeds of the fraud under the mattress, the fraudster arranges for the company which he or she controls to open bank and brokerage accounts into which the money is transferred. The fraudster then transforms the proceeds from their original form (cash in a bank account) into a yacht moored lazily in a Mediterranean harbour via a series of share and currency transactions. It becomes very difficult for the yacht to be traced back to the fraud because of the numerous intervening transactions.

Disconnect 3

The fraudster is clever enough to know that he or she should not risk owning the yacht in his or her name. Recognising the risk that the frauster could be connected to the fraud through the yacht if it were ever to be traced back to the crime, he or she instead ‘owns’ the yacht through a trust administered on his or her behalf by a private bank-owned trust company. The trustees in turn own a company which acts as the legal registered owner of the yacht. In this way the fraudster’s connection with the yacht is disguised but he or she gets to enjoy roleplaying Aristotle Onassis on board each summer.

I refer to this model as the ‘enable, distance, and disguise’ model of money laundering. It encompasses a wider range of facilitation and laundering conduct than the old ‘placement, layering, and integration’ model and is thus much more effective in helping to identify the potential involvement of the financial sector in enabling crime, laundering the proceeds of crime, and disguising the ownership of the proceeds of crime.

The new model allows individual financial products or services to be plotted against it so that the full extent of their criminal vulnerability can be evaluated as a necessary component of product and service risk assessment. It can also be used to assess whether the explanations given by prospective customers of the reasons why they want to buy or use particular products and services are genuine. If a business appreciates that a product is highly susceptible to criminal exploitation, it will be far better placed to both enhance its defences and undertake more effective due diligence on whether the proposed relationship or transaction has a legitimate purpose. This is particularly important because, as countless examples have demonstrated, the most effective question that a financial professional or lawyer can ask in guarding against money laundering and facilitation risk is ‘why?’ What advantage does this particular product or service confer upon my client?

Product & service vulnerabilities

Because every financial service or product has a number of different legitimate uses, it can be very difficult to discern when they are being exploited. Whereas a bank robbery always looks like a bank robbery, the abuse of a product such as a bank account or an investment fund for laundering purposes can appear completely innocuous. Some products and services (and by extension the businesses that offer them) are however inherently at greater danger of abuse by criminals than others because of the extent to which they empower criminals to achieve disconnects. What follows is not an exhaustive list of vulnerable products and services but a selection of those that I have most commonly witnessed during the course of investigations both on and offshore.

The inclusion of each of the product and service types that follow should not be misinterpreted as suggesting that they are illegal or inherently toxic. The opposite is true. They are all frequently used for legitimate commercial objectives. Their inclusion in this chapter is warranted because of their susceptibility to abuse by criminals who are attracted to them because of their legitimacy. Often abuses look just like genuine uses.

Companies & corporate services

Mention the word ‘company’ to most people and they will immediately think of offices, employees, assets, and activities. In fact a company is simply a form of legal structure represented by several important pieces of paper – a memorandum of association (a document that governs the relationship between the company and the outside world), articles of association (the rules governing the internal operation of the company), and share certificates (evidencing ownership of the company). Anybody can own and control a company and if you were of a mind to do so you could establish one very easily and have change out of a couple of thousand dollars.

Companies have many legitimate uses, but they are also hugely attractive to criminals for three reasons: (1) they are a form of legal person that can contract, own assets, run bank accounts, and have credit cards in their own right; (2) they can be owned and controlled by criminals either in their own name or through nominees, often cross-border; and (3) they bestow a degree of formality and respectability to activities which if conducted in the name of an individual might appear unusual and thus potentially suspicious.

The degree of attraction that a company holds to a criminal is dictated by a range of factors controlled by the jurisdiction of its incorporation such as the rules governing the disclosure of beneficial ownership, the permissibility of bearer shares (basically a type of instrument whose ownership need not be officially registered and is freely transferrable), the acceptability of corporate directors, and the nature of company disclosure requirements. The more opaque a company is capable of becoming, the more attractive it will be to the wrong type of client. The British Virgin Islands, for example, has significantly more companies registered than other, considerably larger international financial centres. One reason for this is likely to be that the details of a BVI company’s beneficial owners, directors, and shareholders are not a matter of public record. Whilst such characteristics will attract legitimate clients with a genuine desire for confidentiality their magnetism for criminals is patently obvious.

The vulnerability of companies is materially enhanced by the corporate services connected to them. Such services are offered by organisations variously referred to as trust companies, management companies, or corporate service providers (depending on which part of the world you are in). For ease I shall refer to them as corporate service providers. Every company is constituted of the following actors – directors (responsible for the stewardship and management of the company), shareholders (the owners of the company), and a company secretary (responsible for the administration of the company). It is also necessary for every company to have a registered office in the jurisdiction of its incorporation. Corporate service providers sell the following ‘corporate services’:

  • Company directors – corporate service providers utilise ‘in-house’ companies to act as directors of client companies. In jurisdictions where corporate directors are prohibited, corporate service provider employees act as directors.
  • Registered offices – corporate service providers allow their offices to serve as the registered office of the client companies.
  • Company secretaries – corporate service providers utilise a specific ‘in-house’ company to act as company secretary for client companies.
  • Nominee shareholders – corporate service providers utilise further in-house companies to act as registered shareholders of client companies under the terms of a so-called declaration of trust between the nominees and the ultimate beneficial owner.

Such corporate services can of course be used for perfectly legitimate purposes but the uncomfortable truth is that they can create disconnects between the ultimate owners and the companies that are either used in the commission of crimes or in the ownership of criminal property. What bribe payer, for example, would choose to pay a bribe personally when he or she can create a disconnect by using a company to pay it – particularly when that company is legally owned and controlled by a corporate service provider? Similarly, what corrupt politician is going to take the risk of receiving a bribe payment into his or her personal account when he or she can utilise a company managed and controlled by a corporate service provider to receive it on his or her behalf that allows for plausible deniability?

The degree of vulnerability of a particular corporate service provider is ultimately determined by the manner in which it performs its duties, both in the sense of providing services to companies and with respect to properly identifying its clients in the first place. Many corporate service providers operate volume-based businesses in what is after all a highly competitive and price sensitive market. The result is that volume militates against the conscientious performance of duties, gifting to criminals all the benefits of owning and controlling companies that can be very difficult to evidence on paper.

The number of companies administered by corporate service providers can be staggering. The average number administered by a single company administrator varies greatly between jurisdictions. In poorly regulated jurisdictions where ‘conveyor belt’ corporate service business models are tolerated there is an inevitable absence of ‘know your customer’ information and the rationale for why clients are using the companies is often unknown.

The extent to which a corporate service provider will attract criminals will also be influenced by its location and the nature of the regulatory regime applicable to it. Over the last 10–15 years, many of the better quality financial centres have subjected corporate service providers to fairly rigorous licensing obligations requiring them to follow laws, regulations, and codes of practice. Predictably, this has led to industry contraction as corporate service providers have hunted down arbitrage opportunities and moved to friendlier climes where the regulation of corporate services remains either non-existent or more relaxed. Just as water always flows to the lowest point, so criminals will always identify the weakest spots in the international financial system.

Trusts

Unlike companies, trusts are not legal persons. They are instead forms of legal arrangement recognised only in common law jurisdictions but viewed with great scepticism everywhere else. Their existence usually boils down to a single document or deed, although they can also be a matter of verbal agreement. Trusts can exist by operation of law, for example when a financial institution holds the proceeds of political corruption and is deemed by the courts to do so as a trustee for the benefit of the victim country, or more frequently by the express wish of the trust creator.

Several hundred years ago when the trust concept was first recognised in England, it was intended to serve a particular and relatively narrow purpose by ameliorating the strictures of the law which recognised very narrow property ownership rights. Amongst other uses, they were clearly a welcome tool for protecting the interests of women in family homes at a time when they could not legally own property. The concept allowed a registered owner of property (the ‘settlor’) to transfer it to the legal ownership of another person (the ‘trustee’) for him to hold for the benefit and enjoyment of one or more others (the ‘beneficiaries’). Trustees were usually family members or friends, but as trusts became increasingly professionalised, ‘protectors’ were introduced to safeguard the interests of the registered owner. A trust structure may look something like this:

Unfortunately the equitable concept of the trust originally conceived in recognition that the law can truly be an ‘ass’ has evolved (and many would say exploited) to such an extent that trusts are now used on an industrial scale for purposes that bear little resemblance to the original ideals of equity and fairness.

Trusts have a variety of legitimate uses in tax planning, estate planning, and asset protection but criminals are also attracted to them for the following reasons:

  • They are not subject to registration in most jurisdictions. Unlike a company, the existence of a trust is not a matter of public record.
  • They can enable criminals to divest themselves of the legal ownership of property in favour of a trustee whilst allowing them to benefit from that property either directly or indirectly through nominees.

The very same corporate service providers that offer the corporate services outlined above also frequently specialise in acting as trustees of trusts. As with companies, the vulnerability of trusts to criminal exploitation depends heavily on the assiduousness with which the corporate service provider discharges the role of trustee. If the responsibilities are discharged with care and attention such that the trustee exercises substantive, not superficial, control the opportunity for criminal exploitation is limited. If, however a trustee is content to act like a puppet on strings controlled by a client, the scope for criminal abuse is substantial. Again, the nature of the regulatory and enforcement environment is key and the differences in quality between competing jurisdictions are stark with many continuing not to regulate the provision of trustee services.

The portability of trusts is particularly alluring to criminals. Consider the following example:

ACME Corporate Services International administers a number of trusts for South African clients through its London office. Many of the clients are in fact evading tax and violating South African capital controls. The UK introduced legislation for all crimes money laundering in 1999 that recognised tax fraud as a predicate crime (i.e., one which would give rise to an offence of money laundering if a financial institution were to handle its proceeds). ACME has, however, contented itself (self-servingly) on the basis of assurances from its clients that they are in fact paying the tax due from them. South Africa then announces a tax amnesty and a number of clients contact ACME alerting the business to the fact that they have actually been evading tax. ACME responds by boxing up the trusts and moving them overnight, lock stock and barrel to ACME’s Swiss office in Geneva. By the morning there is no trace that the trusts were ever administered in London. No consent from the UK authorities is required for the transfer because the existence of the trusts is not a matter of public record in the UK.

In recent years various international financial centres specialising in trust administration have developed new forms of trust in their efforts to distinguish themselves from competitor jurisdictions and to attract more business. Such trusts, including the British Virgin Islands VISTA trust and the Cayman STAR trust, have characteristics that make it even easier for clients to benefit from disconnects whilst retaining control of underlying assets.

The subsequent chapters show that trusts are frequently used in concert with underlying companies. It is very rare to observe a stand-alone trust in an illicit structure. Trusts are almost always to be found at the pinnacle of ownership structures with numerous companies and subsidiaries beneath them. In such situations, structures may look something like this:

It is unfortunate that those financial centres that have recognised the criminal vulnerability of corporate and trustee services and acted to regulate them properly have not received appropriate recognition for doing so. Such efforts are fundamental to efforts to prevent the disguise and ownership of criminal capital.

Foundations

Foundations have until relatively recently been a creature of civil law countries but in a curious development which illustrates the fierce competition that exists between international financial centres, some common law jurisdictions have introduced legislation enabling the establishment of foundations.

Rather like a company, a foundation has the benefit of sounding like something it is not. To many people, a foundation is a structure that exists for benevolent purposes such as the Bill & Melinda Gates Foundation. But in fact a foundation can exist for a purely commercial purpose.

The rules pertaining to foundations differ between jurisdictions but for the purposes of this analysis private law foundations in civil law jurisdictions such as Lichtenstein and Luxembourg have the greatest degree of susceptibility to criminal abuse because they combine elements of both companies and trusts. Like trusts, they are not subject to public registration, but like companies they are legal entities with their own internal organisation. In effect they have the benefit of legal personality without the inconvenience of their existence being a matter of public record.

The object of a foundation is to achieve a specific purpose by means of an endowment made by a person known as the ‘founder’ or ‘donor’. Each foundation is controlled by a ‘foundation council’ akin to a company board or trustee. The endowment (property) within the foundation is applied for the benefit of ‘beneficiaries’.

As with trusts and companies, foundations have a wide variety of legitimate applications, for example in succession planning. But, their vulnerability to criminal exploitation is obvious because of their potential to be used by criminals to disguise ‘ownership’ whilst retaining de facto control.

Bank accounts

For reasons of security, convenience, and necessity almost every adult in the developed world has at least one bank account. Even in developing countries such as India which is said to have a low level of financial inclusion, the growth in the number of bank accounts in recent years has been rapid with almost 700 million of the 1.2 billion population having savings accounts. A bank account may seem harmless enough but it can enable anybody with control of it to access the global banking and financial system. With a bank account you can wire money to anybody, anywhere, in a millisecond. Bank accounts are a highly effective means by which value can be received, stored, and transferred.

Historically of course, bank accounts were operated on a face-to-face basis allowing bankers ample opportunity to eyeball customers and consider whether what they saw was lawful. Paradoxically, since the introduction of anti-money laundering legislation the manner in which bank accounts are operated has changed almost beyond recognition. Many bank customers will not have seen the inside of a bank in recent years, preferring instead to manage their accounts on a non-face-to-face basis either by utilising automated teller machines (ATMs) to deposit and withdraw funds or by controlling their accounts through telephone, online, or mobile banking services. The non-face-to-face operation of bank accounts has made them particularly susceptible to manipulation by undisclosed parties. Foreign students who ‘sell’ their UK bank accounts after they return home having ended their studies do so by handing over their ATM cards and online account log in details to the highest bidders thus enabling potential terrorists to access the global financial system with ease.

Some bank accounts come with optional extras including hold or no mail agreements. A hold mail service obliges the bank not to send correspondence to the customer but instead to hold it for collection. A no mail service obliges the bank not to produce statements. Such services could be of value to a genuinely paranoid customer but they are clearly of enormous value to criminals. A person wishing to create disconnects may not wish to take the risk of mail being intercepted by law enforcement, or indeed anyone else, and being found to be in receipt of mail from overseas banks. An alternative means of achieving the same objective involves the use of numbered accounts routinely offered by banks in Switzerland and in the Middle East. Such an account does not bear the name of the customer but a number and a code word. The customer is able to identify him or herself to the bank as the customer through the production of the number and the code word. Notwithstanding that Swiss bankers are now obliged to verify the identity of numbered account holders, they are preferred by criminals over regular accounts because of the additional layer of disguise they provide.

Correspondent accounts

A correspondent account (often also referred to as a vostro or nostro account) is essentially an account maintained by one bank for use by another. They are most commonly used by foreign banks requiring the ability to pay and receive funds denominated in the currency of the country where the correspondent account is located. They allow foreign banks to receive and transfer funds into them and offer customers currency denominated loans and deposits.

Correspondent banking makes use of the SWIFT system, which sends ‘messages’ to instruct institutions involved in a payment transfer. ‘MT103’ messages, for instance, instruct a cross-border transfer of a single payment from the originator’s bank to the beneficiary’s bank. ‘MT210’ messages are simply a notice to receive funds. Figure 2.8 sets out a typical chain of events in correspondent banking, where Customer 1 wishes to pay Customer 2 in dollars, when they, and their local banks, are located outside of the US:

As the US dollar is the world’s de facto reserve currency, every bank must have access to it to enable customers to transfer and receive US dollars. Non-US banks do so by maintaining correspondent accounts with US banks. The ability of foreign banks to access the US dollar caused great consternation in the US a decade or so ago with concerns voiced by the Senate that correspondent accounts were a gateway to the US financial system for money launderers.[6] Those concerns have since been compounded by numerous examples of foreign banks transacting in US dollars with enemies of the US sanctioned by OFAC (these abuses will be examined in greater detail in Chapter 9).

Historically, though to a lesser extent today, correspondent accounts were vulnerable to exploitation by shell banks controlled by criminals. Shell banks are entities that hold a banking licence in very poorly regulated centres in which they have no physical presence. They usually have no substance either in the form of facilities or staff. They operate as banks simply by virtue of the correspondent facilities afforded them by real banks. Whilst it remains possible to incorporate and own shell banks registered in jurisdictions such as Antigua, banks in the UK and the US are now prohibited from running correspondent accounts for shell banks, and they are obliged to conduct due diligence on all banks to whom they provide correspondent banking facilities.

The danger remains, however, that shell banks continue to access the global financial system through correspondent accounts they maintain with banks in less well regulated jurisdictions. Those banks in turn provide shell banks with indirect access to the global banking system through their correspondent account relationships with US and European banks.

Loans

Loans seem at first blush to be harmless but in their simplest form they are a means of value transfer that is susceptible to exploitation. Many different types of business, some more tightly regulated than others, offer a multitude of different types of loans. Credit card companies, payday lenders, banks, leasing, and finance companies all offer loans which may in turn be abused by utilising the following methods:

  1. A criminal arranges a loan to purchase property. The loan is repaid over time using the proceeds of crime. In so doing he or she has transformed criminal property through the loan arrangement into equitable interest in the property.
  2. A criminal uses criminal property as collateral for a loan advanced by a bank. In so doing he or she transforms the criminal money into loan proceeds made by a legitimate financial institution that, handily, provides a ‘clean’ source of funds.

Credit & charge cards

Strip away all of the fringe benefits such as Air Miles and free shopping vouchers, and credit cards are simply mechanisms by which holders spend money they often do not have by borrowing it at extortionate rates of interest. Charge cards generally have to be repaid in full each month. Unlike suitcases full of cash, credit and charge cards are mobile. They cross borders without arousing suspicion. They can be utilised anywhere in the world not only in financial institutions but in retail outlets, hotels, restaurants, travel agents, and money service businesses. In short, armed with a credit card you can pretty well go wherever you want and provided the credit limit is high enough, do whatever you please.

Quite apart from their mobility and convenience, credit cards are also vulnerable to criminal exploitation because they can be registered in the name of one person but be utilised by another. Historically, this required the user to fake the cardholder’s signature but with the advent of ‘Chip and Pin’ technology, the user simply needs to be made aware of the four-digit code. Indeed, armed with the credit card number, expiration date, and four-digit security code, the user can transact over the internet or by telephone without even being in possession of the card. As a means of value storage and transfer, credit and charge cards are highly efficient tools that are frequently exploited by criminals.

Investment funds

Investment funds are large pools of capital contributed by investors and managed by investment professionals on their behalf by following a particular investment strategy as set out in a fund prospectus. Investors put in their hard earned cash, pay a fee (generally calculated as a percentage of the amount invested, plus a performance fee) and pray that they will eventually get more back than they put in. There are tens of thousands of investment funds worldwide invested in a vast array of different asset classes that are managed by thousands of different investment managers. It is a truly enormous industry. According to the Pensions & Investments/Towers Watson World 500 study, the 500 largest fund managers in the world look after some $68 trillion of assets.[7] There are very many different types of investment funds categorised either according to asset types (bond funds, equity funds, property funds, etc.), markets (Europe, Asia, emerging markets, etc.), strategies (long only, hedge funds, fund of funds, etc.), or indeed internal structures (protected cell company, incorporated cell company, etc.).

Each investment fund, which can either take the form of a company, a partnership, or a unit trust, operates through what are known as its functionaries – a custodian (responsible for exercising custody over the fund’s assets), an administrator (responsible for administering the fund), a manager (normally responsible for promotion), and an investment manager/adviser (the brains responsible for making investment decisions). Functionaries may stand in relation to a fund in the following manner:

Again perception plays an important part. To most people the term ‘investment fund’ conjures an image of a monolithic structure managed by one of the big names such as Fidelity or Blackrock, but in reality many investment funds are managed by much smaller players less well equipped to resist the attentions of criminals.

Funds look inoffensive enough particularly when they are jazzed up by glossy prospectuses, but they can be highly susceptible to abuse depending upon the following factors:

  • The ease with which they can be established. In certain jurisdictions, the establishment of investment funds can be ‘fast tracked’. Indeed many international financial centres compete partially by reference to the speed with which they authorise new investment funds. Many of the same jurisdictions apply a very light touch authorisation process to funds that are essentially self-certified by local fund sponsors. In certain properly risk-assessed scenarios, this can be viewed as sensible, pragmatic regulation, but there is always also a danger that toxic individuals will sneak under the radar and come to enjoy all of the benefits of controlling an investment fund. When that happens, they deflect attention by taking on the guise of institutions.
  • Whether they allow bearer securities. Whereas most respectable international financial centres abolished highly risky bearer share companies in the 1990s, there remain investment fund structures managed, for example, in Luxembourg, that issue bearer securities. This means that their ownership is not registered and can be transferred at the drop of a hat.
  • The rules governing redemptions of units or shares. If a fund allows an investor to redeem their investment to a third party there is a danger that the redemption may be in favour of a criminal or person who a criminal controls.
  • The rules governing the transfer of shares or units. If a fund allows an investor to direct the re-registration of their shares or units to a third party then again the transfer may be in favour of a criminal or his or her associates.

As subsequent chapters show, the vulnerability of investment funds is largely dictated by the ease with which they can be used as a mechanism for value transfer between two or more parties, thereby allowing criminals to transfer money to their counterparties in exchange for illicit goods and services. However, they can also be used as vehicles to facilitate predicate financial crimes such as:

  1. Front running – an employee or principal of a fund uses his or her knowledge from pending orders of customers to carry out transactions on the fund for his or her own personal benefit.
  2. Insider dealing – a fund manager and his or her associates act on his or her knowledge of price sensitive information.
  3. Warehousing –a fund house is involved in a takeover and instead of using its own capital directs its funds to build up substantial stakes in the target company. To conceal the accumulation of shares, the size of the investments will be just below any minimum obligatory disclosure amount.
  4. New issues – a fund management company may be offered participation in new issues of shares. They will have the right to allocate them amongst their funds. It is relatively easy for a manager to give an upward boost to the performance of any one fund by allocating new issues to it at the expense of other eligible funds, thereby potentially artificially inflating their performance fee.

Letters of credit

A letter of credit is essentially a document issued by a bank which guarantees that a vendor will be paid for their goods, subject to certain conditions having been met. The risk that the buyer will fail to pay is transferred from the seller to the bank issuing the letter of credit. Letters of credit are frequently relied upon to grease the wheels of international trade. They appear on their face completely innocuous but they regularly feature in trade-based money laundering schemes in which criminal property is transferred upon the satisfaction of the terms of a letter of credit in circumstances where no actual trade takes place. Because an issuer of a letter of credit is several steps away from the supposed trading activity, they place reliance on documentary evidence that can be easily falsified. Money laundering through trade finance, often involving letters of credit can be achieved in the following ways:

  1. Over invoicing: overstating the price of the goods as a means of transferring funds to the seller under cover of trade. A similar result can be achieved by under shipping less goods than are stated in the trade documentation.
  2. Under invoicing: understating the price of the goods as a means of allowing the buyer to gain value under cover of trade. A similar result can be achieved by shipping more goods than are stated in the trade documentation.
  3. Ghost shipping: this occurs when no goods are transported and all trade contract documentation is falsified but relied upon by a bank in transferring funds on the back of a letter of credit.

Lawyers

Lawyers are well placed to facilitate crime and money laundering. They have the expertise to draft and put in place complex financial transactions. They operate client accounts through which large sums of money flow and which can effectively enable lawyers to offer clients a banking service. They are respected by financial services providers and viewed as being above suspicion. For these reasons they have been described as potential ‘gatekeepers’ for illicit financial arrangements.

Investigations have illustrated the involvement of lawyers in money laundering in at least four ways:

  1. The crooked lawyer who allows his or her client account to be used to harbour or channel illicit funds;
  2. The lawyer who acts as adviser to criminals by drafting documents and setting up structures without concerning him or herself with the fact that what he is helping to achieve is illegal;
  3. The lawyer who does not facilitate but whose advice is sought on matters such as banking secrecy whilst turning a blind eye to the blatant criminal ambition of his or her client;
  4. The lawyer who owns and is a director of a corporate service provider business associated with his or her law firm.

The degree of ‘privilege’ (that is non-disclosability, even to law enforcement agencies) that attaches to communications between a lawyer and his client differs significantly between jurisdictions. In most common law jurisdictions, communications between a lawyer and client designed to further a criminal enterprise are not privileged. In other jurisdictions, the rules are much tighter.

In many jurisdictions, anti-money laundering rules for lawyers apply only to certain areas of their practice such as conveyancing and handling client assets. Such limitations, the reasons for which are predicated upon the old model of laundering, can make it very difficult for the authorities to get a firm handle on the activities of lawyers.

Private banking relationships

Private banks as distinct from retail and investment banks cater to ‘high net worth individuals’ (HNWIs) through customer service usually delivered by a dedicated relationship manager and the provision of a vast array of services and products designed to cater to the various needs of HNWIs. These include not only banking, but investment management, insurance, and the cross-border management and administration of wealth management structures (usually in the form of companies, trusts, and foundations). Minimum requirements are usually one or a combination of a client’s net worth, minimum opening deposit, and minimum average balance, ranging from the tens of thousands to the millions.

Having made a pile of money, most HNWIs spend most of their time worrying about how not to lose it. Private banks are geared towards helping them to hang on to it and grow it. Traditionally and to a large extent it remains the case that private banks also offer the allure (if not always the reality) of confidentiality and discretion. Private banks in Switzerland benefitting from a history of Swiss banking secrecy have long traded on this, but private banks in many EU member states have also sought to emphasise the discretion with which they are willing to handle their client’s affairs.

The vulnerability of private banking stems from two sources: firstly the nature of the clients that the sector attracts as a result of the emphasis it places on service and discretion; and secondly the willingness of private bankers to accommodate their client’s desires because of the heavy emphasis on customer service. HNWIs come in all shapes and sizes but the most problematic are Politically Exposed Persons (PEPs) such as politicians, their family members and associates, as well as other wealthy individuals at risk of involvement in bribery and corruption, including senior military figures, members of the judiciary, and high ranking civil servants. In Chapter 5, I examine examples of bribe facilitation and money laundering by private banks for PEPs.

All private bankers are under pressure to maintain lucrative relationships and that does not always sit comfortably with the need to conduct due diligence on valued clients to ensure probity. Few relationship managers with an eye to career progression are oblivious to the danger of damaging highly valued HNWI relationships by scrutinising their client’s affairs and creating an atmosphere of distrust. Questions such as ‘where are the funds coming from?’, ‘what do they represent?’, ‘where are the funds going to?’, ‘why are they being transferred?’ risk undermining the relationship between a private banker and his or her client. This can be particularly problematic in certain cultures where posing such questions can be tantamount to accusing a client of impropriety. The result is that the degree of due diligence that some private banks conduct is inversely proportionate to the degree of risk posed by money laundering clients. After all, what private banker wants to be responsible for jeopardising his or her employer’s multimillion dollar relationship with the nephew of the ruler of an oil rich African country for the sake of asking one or two additional due diligence questions about where the funds have come from and what they represent?

Securities

Securities come in all shapes and sizes: equities, bonds, certificates of deposit, bills of exchange, investment trusts, mutual funds, options, futures, credit default swaps, to name but a few. They collectively present a veritable sweet shop of sugar-coated opportunity for money launderers for two reasons: (1) the securities market is enormous, thus creating the opportunity to conduct transactions that are virtually impossible to identify amongst the billions of securities transactions that take place on a daily basis in the primary and secondary markets throughout the world; and (2) the market is incredibly diverse, involving dozens of different securities types that can be bought and sold with ease internationally thereby creating an audit trail that can be virtually impossible to follow with the result that securities can be very difficult to link back to criminality.

The securities market can be used both for the purposes of committing predicate crimes (e.g., market manipulation, fraud, and insider dealing) and for laundering the proceeds of other crimes. Examples of securities being used to either of those ends are as follows:

  1. Penny stocks: Chapter 10 shows that penny stocks destined for stock exchange listing represent a type of low-value security vulnerable to criminal abuse. The scenario in that chapter presents just one example of how the manipulation of the value of publicly listed penny stocks facilitates tax evasion. These sorts of securities are also used for the purpose of laundering funds: a criminal may acquire penny stocks with the proceeds of crime, then sell the stock once it has been listed on an exchange, giving the criminal’s funds a newly acquired air of legitimacy.
  2. Bearer securities: Bearer securities pose a threat to the financial system due to their anonymity and ease of transfer. The proceeds of crime can be introduced into the financial system via the acquisition of these types of securities and may be transferred to another party without the need for a financial institution to request ‘Know Your Customer’ (KYC) information.
  3. Insurance contracts: a criminal may invest a lump-sum into a range of securities, such as a mutual fund or a unit investment trust, via products touted by insurance companies. The ‘cooling off’ period attached to these products offers an opportunity for criminals to purchase a contract with illicit funds, and a few days later demand a refund from the insurer, thereby quickly generating ‘clean’ money.
  4. Internet traded securities: the trade of securities over the internet is a growth industry, and the decreasing costs associated with obtaining a licence for a trading platform are broadening the field of applicants. There have been reported cases of criminals posing as securities dealers, defrauding investors by establishing an online trading platform by using a company incorporated in a poorly regulated jurisdiction. Risks are also heightened due to the difficulties of gathering comprehensive and legitimate KYC information for those involved in trades which require so little face-to-face interaction.
  5. Securities trading: the general activity of buying and selling securities is vulnerable to the predicate crime of insider trading. When a person holds non-public information which he or she knows will affect the value of shares and proceeds to trade on the basis of this knowledge, there are significant illegal gains to be made.

An important figure in the securities market is the securities broker or dealer. The very nature of this role carries with it a handful of vulnerabilities, and not necessarily because of a willingness or advantageous position to engage with any criminality, but because of misguided assumptions by the broker/dealer. Key amongst these is related to KYC checks, which many a broker/dealer will assume have been satisfactorily completed by a financial institution which has already opened an account on behalf of its client.

Digital currencies

The emergence over the past 20 years of the internet and rapid connectivity has catalysed the development of digital currencies (sometimes also referred to as electronic money or virtual currencies). Just like conventional currencies, digital currencies are mediums of exchange that can be utilised to purchase goods or services. The relative simplicity of digital currencies enhances their attractiveness to criminals – unlike conventional currencies they do not leave a paper trail for law enforcement to follow and in the case of decentralised digital currencies, records of transactions are not maintained by an intermediary again making effective investigations into their abuse very challenging. One particular decentralised digital currency, Bitcoin, has recently gained widespread notoriety. Bitcoins are digital coins that can be sent from one person to another without the need to deal through a financial institution such as a bank or credit card company thereby reducing transaction costs for users. This makes Bitcoins very attractive to online traders who typically have to absorb 2–3% in credit card transaction fees.

Whilst all digital currencies are inherently vulnerable to criminal exploitation simply because they are virtually anonymous mediums of exchange – you give me drugs and I give you digital currency that you can spend – historically there has been limited cross-over between digital and conventional currencies making cashing out of digital currencies into conventional currencies tricky and thus less than ideal from a laundering perspective. However, because Bitcoins can be –  and are –  widely exchanged for conventional currencies such as US dollars and British sterling they are regarded in certain quarters as having a particular vulnerability not only to exploitation in illicit online activities but also in facilitating non-web based crimes. Such concerns are well founded – Bitcoin has a very low barrier to entry and allows any user to transfer value in nanoseconds whilst remaining anonymous. Obfuscation is easy through the transfer of a myriad number of different Bitcoin addresses before cashing out for goods, services, or conventional currencies. The world of electronic money is a paradise for money launderers.

Informal transfer system

Hawala or hundi are ancient and widely used value transfer systems that originated in the Middle East. They enable the transfer of value without the physical or electronic movement of money by the existence of two brokers (hawaladar), one in the origin and one in the destination country. The person sending the funds hands them to the hawaladar, who in turn contacts a fellow hawaladar in the destination country. Details and a code are agreed, and then the recipient approaches the second hawaladar and is given the sum of money. Value has been transferred but no money has crossed borders. Periodically, the two hawaladars balance out each other’s accounts with transactions in the opposite direction, or with occasional cash transfers.

Hawala systems are operated worldwide by companies such as Al Barakat and Dahabshiil, and they are particularly prevalent in countries where there is no other way of moving money, such as Somalia. The 750,000 Somalis living in North America, Europe, Australia, New Zealand, and the Gulf states are said to send around $1.3 billion to Somalia through these kinds of transfer companies.[8] This figure represents around a quarter of the country’s income.

Offices of such perfectly legitimate companies are common on British high streets where there is a large community of immigrants who make use of them. Although regulation of such transfer systems is increasing (in 2010 Dahabshiil received FSA authorisation in the UK), and technically all hawalas are required to be registered, the transfer of funds in this manner is still much less likely to attract scrutiny than doing so by a normal bank. In Chapter 6, I examine a scenario involving the criminal exploitation of hawala to move funds from Somalia to the US. Whilst the example provided in that chapter is entirely hypothetical, Chapter 8 will demonstrate how the compliance risks posed by the hawala transfer system have made certain banks very nervous in maintaining relationships with hawala businesses.

This paper is a re-production of Chapter 2 of the #1. Best-selling book ‘Criminal Capital’ written by Stephen Platt available here

 

[1] ‘Bitcoin Soars While Liberty Reserve Draws Guilty Plea’, Forbes, 8 November 2013 (www.forbes.com/sites/robertwood/2013/11/08/bitcoin-soars-while-liberty-reserve-draws-guilty-plea/); ‘Co-founder of Liberty Reserve Pleads Guilty to Money Laundering in Manhattan Federal Court’, Department of Justice press release, 31 October 2013 (www.justice.gov/opa/pr/2013/October/13-crm-1163.html)

[2] United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, 1988 (www.unodc.org/pdf/convention_1988_en.pdf)

[3] www.fincen.gov/news_room/aml_history.html

[4] www.fatf-gafi.org/pages/faq/moneylaundering

[5] ‘”The crime of the century”: The story of the Great Train Robbery’, Daily Express, 18 December 2013 (www.express.co.uk/news/uk/449356/The-crime-of-the-century-The-story-of-the-Great-Train-Robbery)

[6] See ‘Correspondent Banking: A Gateway for Money Laundering’, a report released by the US Permanent Subcommittee on Investigations Committee, dated 5 February 2001 (www.hsgac.senate.gov/download/report_correspondent–banking-a-gateway-for-money-laundering)

[7]‘The World’s 500 Largest Asset Managers’, Year end 2012 (www.towerswatson.com/en-GB/Insights/IC-Types/Survey-Research-Results/2013/11/The-Worlds-500-Largest-Asset-Managers-Year-end-2012)

[8] ‘Of waffle and remittances’, The Economist, 20 September 2013 (www.economist.com/blogs/baobab/2013/09/somalia)

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