Money Laundering In The United States Of America
Different Methods of Money Laundering
According to PricewaterhouseCoopers estimations, about 1-2 trillion dollars are laundered every year. Criminals are getting more and more creative regarding their ways for cleaning their illegal profits. All of these results later in updating bank controls to catch that elusive ML scheme. Typologies can be divided into two categories. The first are those related to the depositing of funds in such a way so as to avoid breaching reporting thresholds, since banks have paid less attention to low amounts. And the second are those which aim to depositing funds that are over reporting thresholds, however create cover story that is raising no concerns and appear legit - to dull a bank's vigilance. Nowadays, criminals are more aware that banks’ monitoring for money laundering schemes is getting more advanced, so below listed typologies almost are never occurring separately (ACAMS, 2016).
Structuring and Smurfing
Both structuring and smurfing pertain to actions resulting in the avoidance of reporting thresholds or any other record-keeping requirements. The most common way of structuring is dividing amount (which is meeting reporting criteria - e. g. Currency Transaction Report (CTR)) into smaller value. Structured deposits can be done in a timely manner e. g. every 2 days with same financial institution, or performed at the same day with different banks. Structuring has also a place in situations when a deposited amount matches the reporting criteria, however intentionally record-keeping step was avoided. In that way Isaac Kattan was laundering drug money, which was approximately 500 million dollars annually. He mainly was using The Great American Bank of Dade Country, as he bribed officials who were accepting his bulky cash deposits without filling CTRs. At the end of his money laundering carrier, he was convict and sentenced for 30-years.
The goal of smurfing is the same as in structuring, however the difference is the process is done with help of other parties, which in jargon are called 'smurfs'. 'Smurfs' can deposit funds into an account as a charity, payments for purchase goods or personal loan. ACAMS (Advancing Financial Crime Professionals Worldwide) Organization is also referring to micro-structuring, which have the same goal as typical structuring, however is characterized by deposits in much lower values - e. g. instead of 3 cash deposits for about 9 thousand dollars, there are about 30 deposits for approx. 900 dollars each. Such structuring is harder to spot, because these kinds of transactions indicate normal personal or business account usage in value, which is in financial reach of majority of US Citizens (ACAMS, 2016).
Bulk Cash Smuggling.
Another way of laundering money is cash smuggling, which involves the physical relocation of assets towards account that characteristics are high bank secrecy or low money laundering monitoring. In the majority of cases, it is related with moving cash towards countries, which are known as tax havens, like e. g. Delaware, Nevada. The best example of how a tax haven works was revealed after the Panama Papers leak in 2015, where over 200 thousand companies were revealed and shown to be connected with high ranked individuals and their close relatives. Even though the method is called bulk cash smuggling, it doesn't mean that assets are moved only in cash. As it was already mentioned before, there is always a more creative way - money can be exchange to arts or luxury goods such as jewellery or watch. Then exchanged goods arrive at the final destination, where they will be again monetized and deposited into account.
According to the United States Code (U. S. C. ), whoever avoid to fill out Currency or Monetary Instruments Transaction Report while transporting or transferring over 10,000 dollars will be guilty of a currency smuggling offense (ACAMS, 2016). Immigration and Customs Enforcements Homeland Security Investigations announced that they arrested 4,000 criminals during the period 2003 – 2016, who had been trying to smuggle bulk cash (the amount was more than 700 million dollars). (U. S. Immigration and Customs Enforcement, 2018) US federals and officials also informed that in 2013 they had seized over 160 million dollars in bulk cash which criminals had planned to transport to Mexico (money mainly came from drug business) (Morgan, 2014).
Charles Sublett who was a United States Army official also was sentenced for bulk cash smuggling and for giving wrong declarations to a government body. As per the investigation, he smuggled into the US over 100,000 dollars from Iraq and avoided to complete Currency or Monetary Instruments Transaction Report (as per law everyone is obligate to complete mentioned transaction report while transporting over 10,000 dollars into or out of the US). (Department of Justice, 2010). US soldier Tonya Long was also arrested for smuggling 664,000 dollars in bulk cash from Afghanistan to the US (Alsop, 2013). U. S. attorneys informed that another bulk cash smuggler, Bruce Watson, had tried to smuggle 62,765 dollars from New York to Canada in his car (Timbers, 2007).
Shelf and Shell Companies.
Shelf and shell companies are not only related with businesses aiming to launder money, since there are also legitimate reasons for creating them. The main characteristic of a shelf company is the fact that it is created to 'be put back on the shelf', to be sold after some period of time. The reason behind this is that the company with a long presence on market seems more reliable and in some cases the company established before a specific date is allowed be taken into consideration for public tenders. Another benefit of purchasing a shelf company is the possibility of operating on the market from the first day of a business acquisition, without waiting for the completion of the administration process related to the opening of a company from scratch. The mentioned benefits are quite often abused by criminals, since a long market presence can give additional comforts for high value transactions - assuming that since business was created long time ago, it is nothing unusual that it develops and brings higher profits.
A shell is made from legal regulations, which are protecting mainly the ownership of the said structure. As long as shell companies are mainly existing only on paper, they are readily availed of by criminals with the sole purpose of laundering money. Money launderers are using their shell companies to make payments for fake goods or for services, which they do not need. All of this is performed in order to create illusion of legitimate payments toward beneficiary accounts of criminals e. g. as salary for consultancy service directly to drug dealer personal account or as payment for multiple items, which are offered by launderer business. Mostly such companies are created in tax havens, where it is easier to deposit significant amount of funds. There is banking secrecy, but also very limited requirements to opening a company in such locations, which makes it perfect for the crime (ACAMS, 2016).
Delaware is the best place for shell companies due to the fact that it is a welcoming and business-friendly state. In total, over one million companies have established themselves in Delaware. The state does not require entity owners to identify themselves while registering them and therefore it was perfect for criminals to create shell companies (Delaware Division of Corporations, n. d. ). It is much easier to open a shell company in Delaware rather than in the Cayman Islands due to the fact that identification requirements are less.
For instance, the corrupt former head of Peruvian National Intelligence Service Vladimiro Lenin Montesinos created shell companies and used banks in United States such as the Bank of America, American Express Bank International in order to laundry his dirty incomes which he was receiving from drug lords. He laundered over 400 million dollars (related with drug/guns trafficking, arms dealing) through shell companies. (ACAMS, 2016). American shell companies have been also used by arm dealer Victor Bout in order to run his dirty business (Kasperkevic, 2016). According to the FBI, the former Soviet countries (such as Moldova, Latvia, Belarus, Russia etc. ) are using American banks and shell companies in order to laundry money ( approximately 36 billion dollar a year). Therefore, it is not a surprise that the FinCen 2004 review announced that most Suspicious Activity Reports were related with those countries (United States Government Accountability Office, 2006).
