Category money laundering

Meet some people behind the “offshore leak” companies

The whistleblowing group WikiLeaks caused a storm of controversy in 2010 when it was able to download almost two gigabytes of leaked US military and diplomatic files. The new BVI data, by contrast, contains more than 200 gigabytes, covering more than a decade of financial information about the global transactions of BVI private incorporation agencies. It also includes data on their offshoots in Singapore, Hong Kong and the Cook Islands in the Pacific. The first seismic wave of offshore leaks was registered end of 2011 with he revelation of the Vanagels Connection. This is just the second wave and it is only about a small portion of the reality of the off-shore industry. For more information see “Launderers Anonymous: How easy is to set up untraceable companies?”


Millions of internal records have leaked from Britain’s offshore financial industry, exposing for the first time the identities of thousands of holders of anonymous wealth from around the world, from presidents to plutocrats, the daughter of a notorious dictator and a British millionaire accused of concealing assets from his ex-wife.

The leak of 2m emails and other documents, mainly from the offshore haven of the British Virgin Islands (BVI), has the potential to cause a seismic shock worldwide to the booming offshore trade, with a former chief economist at McKinsey estimating that wealthy individuals may have as much as $32tn (£21tn) stashed in overseas havens.

In France, Jean-Jacques Augier, President François Hollande’s campaign co-treasurer and close friend, has been forced to publicly identify his Chinese business partner. It emerges as Hollande is mired in financial scandal because his former budget minister concealed a Swiss bank account for 20 years and repeatedly lied about it.

In Mongolia, the country’s former finance minister and deputy speaker of its parliament says he may have to resign from politics as a result of this investigation.

But the two can now be named for the first time because of their use of companies in offshore havens, particularly in the British Virgin Islands, where owners’ identities normally remain secret.

The names have been unearthed in a novel project by the Washington-based International Consortium of Investigative Journalists [ICIJ], in collaboration with the Guardian and other international media, who are jointly publishing their research results this week.

The naming project may be extremely damaging for confidence among the world’s wealthiest people, no longer certain that the size of their fortunes remains hidden from governments and from their neighbours.

BVI’s clients include Scot Young, a millionaire associate of deceased oligarch Boris Berezovsky. Dundee-born Young is in jail for contempt of court for concealing assets from his ex-wife.

Young’s lawyer, to whom he signed over power of attorney, appears to control interests in a BVI company that owns a potentially lucrative Moscow development with a value estimated at $100m.

Another is jailed fraudster Achilleas Kallakis. He used fake BVI companies to obtain a record-breaking £750m in property loans from reckless British and Irish banks.

As well as Britons hiding wealth offshore, an extraordinary array of government officials and rich families across the world are identified, from Canada, the US, India, Pakistan, Indonesia, Iran, China, Thailand and former communist states.

The data seen by the Guardian shows that their secret companies are based mainly in the British Virgin Islands.

Sample offshore owners named in the leaked files include:

• Jean-Jacques Augier, François Hollande’s 2012 election campaign co-treasurer, launched a Caymans-based distributor in China with a 25% partner in a BVI company. Augier says his partner was Xi Shu, a Chinese businessman.

• Mongolia’s former finance minister. Bayartsogt Sangajav set up “Legend Plus Capital Ltd” with a Swiss bank account, while he served as finance minister of the impoverished state from 2008 to 2012. He says it was “a mistake” not to declare it, and says “I probably should consider resigning from my position”.

• The president of Azerbaijan and his family. A local construction magnate, Hassan Gozal, controls entities set up in the names of President Ilham Aliyev’s two daughters.

• The wife of Russia’s deputy prime minister. Olga Shuvalova’s husband, businessman and politician Igor Shuvalov, has denied allegations of wrongdoing about her offshore interests.

•A senator’s husband in Canada. Lawyer Tony Merchant deposited more than US$800,000 into an offshore trust.

He paid fees in cash and ordered written communication to be “kept to a minimum”.

• A dictator’s child in the Philippines: Maria Imelda Marcos Manotoc, a provincial governor, is the eldest daughter of former President Ferdinand Marcos, notorious for corruption.

• Spain’s wealthiest art collector, Baroness Carmen Thyssen-Bornemisza, a former beauty queen and widow of a Thyssen steel billionaire, who uses offshore entities to buy pictures.

• US: Offshore clients include Denise Rich, ex-wife of notorious oil trader Marc Rich, who was controversially pardoned by President Clinton on tax evasion charges. She put $144m into the Dry Trust, set up in the Cook Islands.

It is estimated that more than $20tn acquired by wealthy individuals could lie in offshore accounts. The UK-controlled BVI has been the most successful among the mushrooming secrecy havens that cater for them.

The Caribbean micro-state has incorporated more than a million such offshore entities since it began marketing itself worldwide in the 1980s. Owners’ true identities are never revealed.

Even the island’s official financial regulators normally have no idea who is behind them.

The British Foreign Office depends on the BVI’s company licensing revenue to subsidise this residual outpost of empire, while lawyers and accountants in the City of London benefit from a lucrative trade as intermediaries.

They claim the tax-free offshore companies provide legitimate privacy. Neil Smith, the financial secretary of the autonomous local administration in the BVI’s capital Tortola, told the Guardian it was very inaccurate to claim the island “harbours the ethically challenged”.

He said: “Our legislation provides a more hostile environment for illegality than most jurisdictions”.

Smith added that in “rare instances …where the BVI was implicated in illegal activity by association or otherwise, we responded swiftly and decisively”.

The Guardian and ICIJ’s Offshore Secrets series last year exposed how UK property empires have been built up by, among others, Russian oligarchs, fraudsters and tax avoiders, using BVI companies behind a screen of sham directors.

Such so-called “nominees”, Britons giving far-flung addresses on Nevis in the Caribbean, Dubai or the Seychelles, are simply renting out their names for the real owners to hide behind.

Offshore-Leaks: Secret Files Expose Offshore’s Global Impact

The International Consortium of Investigative Journalists (ICIJ) today launches the next part of a multi-year project aimed at stripping away the biggest mystery associated with tax havens: the owners of anonymous companies. Drawing from a trove of 2.5 million secret files, ICIJ led what may be the largest cross border journalism collaboration in history.  ICIJ’s investigation opens the secrets of more than 120,000 offshore companies and trusts and nearly 130,000 individuals and agents, exposing hidden dealings of politicians, con artists, and the mega-rich in more than 170 countries.

A cache of 2.5 million files has cracked open the secrets of more than 120,000 offshore companies and trusts, exposing hidden dealings of politicians, con men and the mega-rich the world over.

The secret records obtained by the International Consortium of Investigative Journalists lay bare the names behind covert companies and private trusts in the British Virgin Islands, the Cook Islands and other offshore hideaways.

They include American doctors and dentists and middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, Eastern European and Indonesian billionaires, Russian corporate executives, international arms dealers and a sham-director-fronted company that the European Union has labeled as a cog in Iran’s nuclear-development program.

The leaked files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how offshore financial secrecy has spread aggressively around the globe, allowing the wealthy and the well-connected to dodge taxes and fueling corruption and economic woes in rich and poor nations alike.

The records detail the offshore holdings of people and companies in more than 170 countries and territories.

The hoard of documents represents the biggest stockpile of inside information about the offshore system ever obtained by a media organization. The total size of the files, measured in gigabytes, is more than 160 times larger than the leak of U.S. State Department documents by Wikileaks in 2010.

To analyze the documents, ICIJ collaborated with reporters from The Guardian and the BBC in the U.K., Le Monde in France, Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany, The Washington Post, the Canadian Broadcasting Corporation (CBC) and 31 other media partners around the world.

Eighty-six journalists from 46 countries used high-tech data crunching and shoe-leather reporting to sift through emails, account ledgers and other files covering nearly 30 years.

“I’ve never seen anything like this. This secret world has finally been revealed,” said Arthur Cockfield, a law professor and tax expert at Queen’s University in Canada, who reviewed some of the documents during an interview with the CBC. He said the documents remind him of the scene in the movie classic The Wizard of Oz in which “they pull back the curtain and you see the wizard operating this secret machine.”

Dozens of journalists sifted through millions of leaked records and thousands of names to produce ICIJ’s investigation into offshore secrecy ­

A cache of 2.5 million files has cracked open the secrets of more than 120,000 offshore companies and trusts, exposing hidden dealings of politicians, con men and the mega-rich the world over.

The secret records obtained by the International Consortium of Investigative Journalists lay bare the names behind covert companies and private trusts in the British Virgin Islands, the Cook Islands and other offshore hideaways.

They include American doctors and dentists and middle-class Greek villagers as well as families and associates of long-time despots, Wall Street swindlers, Eastern European and Indonesian billionaires, Russian corporate executives, international arms dealers and a sham-director-fronted company that the European Union has labeled as a cog in Iran’s nuclear-development program.

The leaked files provide facts and figures — cash transfers, incorporation dates, links between companies and individuals — that illustrate how offshore financial secrecy has spread aggressively around the globe, allowing the wealthy and the well-connected to dodge taxes and fueling corruption and economic woes in rich and poor nations alike.

The records detail the offshore holdings of people and companies in more than 170 countries and territories.

The hoard of documents represents the biggest stockpile of inside information about the offshore system ever obtained by a media organization. The total size of the files, measured in gigabytes, is more than 160 times larger than the leak of U.S. State Department documents by Wikileaks in 2010.

To analyze the documents, ICIJ collaborated with reporters from The Guardian and the BBC in the U.K., Le Monde in France, Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany, The Washington Post, the Canadian Broadcasting Corporation (CBC) and 31 other media partners around the world.

Eighty-six journalists from 46 countries used high-tech data crunching and shoe-leather reporting to sift through emails, account ledgers and other files covering nearly 30 years.

“I’ve never seen anything like this. This secret world has finally been revealed,” said Arthur Cockfield, a law professor and tax expert at Queen’s University in Canada, who reviewed some of the documents during an interview with the CBC. He said the documents remind him of the scene in the movie classic The Wizard of Oz in which “they pull back the curtain and you see the wizard operating this secret machine.”

Mobsters and Oligarchs

The vast flow of offshore money — legal and illegal, personal and corporate — can roil economies and pit nations against each other. Europe’s continuing financial crisis has been fueled by a Greek fiscal disaster exacerbated by offshore tax cheating and by a banking meltdown in the tiny tax haven of Cyprus, where local banks’ assets have been inflated by waves of cash from Russia.

Anti-corruption campaigners argue that offshore secrecy undermines law and order and forces average citizens to pay higher taxes to make up for revenues that vanish offshore. Studies have estimated that cross-border flows of global proceeds of financial crimes total between $1 trillion and $1.6 trillion a year.

ICIJ’s 15-month investigation found that, alongside perfectly legal transactions, the secrecy and lax oversight offered by the offshore world allows fraud, tax dodging and political corruption to thrive.

Offshore patrons identified in the documents include:

  • Individuals and companies linked to Russia’s Magnitsky Affair, a tax fraud scandal that has strained U.S.-Russia relations and led to a ban on Americans adopting Russian orphans.
  • A Venezuelan deal maker accused of using offshore entities to bankroll a U.S.-based Ponzi scheme and funneling millions of dollars in bribes to a Venezuelan government official.
  • A corporate mogul who won billions of dollars in contracts amid Azerbaijani President Ilham Aliyev’s massive construction boom even as he served as a director of secrecy-shrouded offshore companies owned by the president’s daughters.
  • Indonesian billionaires with ties to the late dictator Suharto, who enriched a circle of elites during his decades in power.

The documents also provide possible new clues to crimes and money trails that have gone cold.

After learning ICIJ had identified the eldest daughter of the late dictator Ferdinand Marcos, Maria Imelda Marcos Manotoc, as a beneficiary of a British Virgin Islands (BVI) trust, Philippine officials said they were eager to find out whether any assets in the trust are part of the estimated $5 billion her father amassed through corruption.

Manotoc, a provincial governor in the Philippines, declined to answer a series of questions about the trust.

Politically connected wealth

Imee MarcosMaria Imelda Marcos Manotoc

The files obtained by ICIJ shine a light on the day-to-day tactics that offshore services firms and their clients use to keep offshore companies, trusts and their owners under cover.

Tony Merchant, one of Canada’s top class-action lawyers, took extra steps to maintain the privacy of a Cook Islands trust that he’d stocked with more than $1 million in 1998, the documents show.

In a filing to Canadian tax authorities, Merchant checked “no” when asked if he had foreign assets of more than $100,000 in 1999, court records show.

Between 2002 and 2009, he often paid his fees to maintain the trust by sending thousands of dollars in cash and traveler’s checks stuffed into envelopes rather than using easier-to-trace bank checks or wire transfers, according to documents from the offshore services firm that oversaw the trust for him.

One file note warned the firm’s staffers that Merchant would “have a st[r]oke” if they tried to communicate with him by fax.

Tony Merchant.Tony Merchant.

It is unclear whether his wife, Pana Merchant, a Canadian senator, declared her personal interest in the trust on annual financial disclosure forms.

Under legislative rules, she had to disclose every year to the Senate’s ethics commissioner that she was a beneficiary of the trust, but the information was confidential.

The Merchants declined requests for comment.

Other high profile names identified in the offshore data include the wife of Russia’s deputy prime minister, Igor Shuvalov, and two top executives with Gazprom, the Russian government-owned corporate behemoth that is the world’s largest extractor of natural gas.

Shuvalov’s wife and the Gazprom officials had stakes in BVI companies, documents show. All three declined comment.

In a neighboring land, the deputy speaker of Mongolia’s Parliament said he was considering resigning from office after ICIJ questioned him about records showing he has an offshore company and a secret Swiss bank account.

“I shouldn’t have opened that account,” Bayartsogt Sangajav, who has also served as his country’s finance minister, said. “I probably should consider resigning from my position.”

Bayartsogt said his Swiss account at one point contained more than $1 million, but most of the money belonged to what he described as “business friends” he had joined in investing in international stocks.

He acknowledged that he hasn’t officially declared his BVI company or the Swiss account in Mongolia, but he said he didn’t avoid taxes because the investments didn’t produce income.

“I should have included the company in my declarations,” he said.

Wealthy Clients

The documents also show how the mega-rich use complex offshore structures to own mansions,  art and other assets, gaining tax advantages and anonymity not available to average people.

Baroness Carmen Thyssen-Bornemisza.Baroness Carmen Thyssen-Bornemisza.

Spanish names include a baroness and famed art patron, Carmen Thyssen-Bornemisza, who is identified in the documents using a company in the Cook Islands to buy artwork through auction houses such as Sotheby’s and Christie’s, including Van Gogh’s Water Mill at Gennep.

Her attorney acknowledged that she gains tax benefits by holding ownership of her art offshore, but stressed that she uses tax havens primarily because they give her “maximum flexibility” when she moves art from country to country.

Among nearly 4,000 American names is Denise Rich, a Grammy-nominated songwriter whose ex-husband was at the center of an American pardon scandal that erupted as President Bill Clinton left office.

A Congressional investigation found that Rich, who raised millions of dollars for Democratic politicians, played a key role in the campaign that persuaded Clinton to pardon her ex-spouse, Marc Rich, an oil trader who had been wanted in the U.S. on tax evasion and racketeering charges.

Denise Rich.Denise Rich.

Records obtained by ICIJ show she had $144 million in April 2006 in a trust in the Cook Islands, a chain of coral atolls and volcanic outcroppings nearly 7,000 miles from her home at the time in Manhattan.

The trust’s holdings included a yacht called the Lady Joy, where Rich often entertained celebrities and raised money for charity.

Rich, who gave up her U.S. citizenship in 2011 and now maintains citizenship in Austria, did not reply to questions about her offshore trust.

Another prominent American in the files who gave up his citizenship is a member of the Mellon dynasty, which started landmark companies such as Gulf Oil and Mellon Bank. James R. Mellon – an author of books about Abraham Lincoln and his family’s founding patriarch, Thomas Mellon – used four companies in the BVI and Lichtenstein to trade securities and transfer tens of millions of dollars among offshore bank accounts he controlled.

Like many offshore players, Mellon appears to have taken steps to distance himself from his offshore interests, the documents show. He often used third parties’ names as directors and shareholders of his companies rather than his own, a legal tool that owners of offshore entities often use to preserve anonymity.

James R. Mellon.James R. Mellon.

Reached in Italy where lives part of the year, Mellon told ICIJ that, in fact, he used to own “a whole bunch” of offshore companies but has disposed of all of them.  He said he set up the firms for “tax advantage” and liability reasons, as advised by his lawyer. “But I have never broken the tax law.”

Of the use of nominees, Mellon said that “that’s the way these firms are set up,” and added that it’s useful for people like him who travel a lot to have somebody else in charge of his businesses. “I just heard of a presidential candidate who had a lot of money in the Cayman Islands,” Mellon, now a British national, said, alluding to former U.S. presidential candidate Mitt Romney.

“Not everyone who owns offshores is a crook.”

Offshore growth

The anonymity of the offshore world makes it difficult to track the flow of money. A study by James S. Henry, former chief economist at McKinsey & Company, estimates that wealthy individuals have $21 trillion to $32 trillion in private financial wealth tucked away in offshore havens — roughly equivalent to the size of the U.S. and Japanese economies combined.

Even as the world economy has stumbled, the offshore world has continued to grow, said Henry, who is a board member of the Tax Justice Network, an international research and advocacy group that is critical of offshore havens. His research shows, for example, that assets managed by the world’s 50 largest “private banks” — which often use offshore havens to serve their “high net worth” customers — grew from $5.4 trillion in 2005 to more than $12 trillion in 2010.

Henry and other critics argue that offshore secrecy has a corrosive effect on governments and legal systems, allowing crooked officials to loot national treasuries and providing cover to human smugglers, mobsters, animal poachers and other exploiters.

Offshore’s defenders counter that most offshore patrons are engaged in legitimate transactions. Offshore centers, they say, allow companies and individuals to diversify their investments, forge commercial alliances across national borders and do business in entrepreneur-friendly zones that eschew the heavy rules and red tape of the onshore world.

“Everything is much more geared toward business,” David Marchant, publisher of OffshoreAlert, an online news journal, said. “If you’re dishonest you can take advantage of that in a bad way. But if you’re honest you can take advantage of that in a good way.”

Much of ICIJ’s reporting focused on the work of two offshore firms, Singapore-based Portcullis TrustNet and BVI-based Commonwealth Trust Limited (CTL), which have helped tens of thousands of people set up offshore companies and trusts and hard-to-trace bank accounts.

Regulators in the BVI found that CTL repeatedly violated the islands’ anti-money-laundering laws between 2003 and 2008 by failing to verify and record its clients’ identities and backgrounds. “This particular firm had systemic money laundering issues within their organization,” an official with the BVI’s Financial Services Commission said last year.

The documents show, for example, that CTL set up 31 companies in 2006 and 2007 for an individual later identified in U.K. court claims as a front man for Mukhtar Ablyazov, a Kazakh banking tycoon who has been accused of stealing $5 billion from one of the former Russian republic’s largest banks. Ablyazov denies wrongdoing.

Thomas Ward, a Canadian who co-founded CTL in 1994 and continues to work as a consultant to the firm, said CTL’s client-vetting procedures have been consistent with industry standards in the BVI, but that no amount of screening can ensure that firms such as CTL won’t be “duped by dishonest clients” or sign on “someone who appears, to all historical examination, to be honest” but “later turns to something dishonest.”

“It is wrong, though perhaps convenient, to demonize CTL as by far the major problem area,” Ward said in a written response to questions. “Rather I believe that CTL’s problems were, by and large, directly proportional to its market share.”

ICIJ’s review of TrustNet documents identified 30 American clients accused in lawsuits or criminal cases of fraud, money laundering or other serious financial misconduct. They include ex-Wall Street titans Paul Bilzerian, a corporate raider who was convicted of tax fraud and securities violations in 1989, and Raj Rajaratnam, a billionaire hedge fund manager who was sent to prison in 2011 in one of the biggest insider trading scandals in U.S. history.

TrustNet declined to answer a series of questions for this article.


The records obtained by ICIJ expose how offshore operatives help their customers weave elaborate financial structures that span countries, continents and hemispheres.

A Thai government official with links to an infamous African dictator used Singapore-based TrustNet to set up a secret company for herself in the BVI, the records show.

Nalinee Taveesin.Nalinee Taveesin.The Thai official, Nalinee “Joy” Taveesin, is currently Thailand’s international trade representative. She served as a cabinet minister for Prime Minister Yingluck Shinawatra before stepping down last year.

Taveesin acquired her BVI company in August 2008. That was seven months after she’d been appointed an advisor to Thailand’s commerce minister — and three months before the U.S. Department of Treasury blacklisted her as a “crony” of Zimbabwean dictator Robert Mugabe.

The Treasury Department froze her U.S. assets, accusing her of “secretly supporting the kleptocratic practices of one of Africa’s most corrupt regimes” through gem trafficking and other deals made on behalf of Mugabe’s wife, Grace, and other powerful Zimbabweans.

Taveesin has said her relationship with the Mugabes is “strictly social” and that the U.S. blacklisting is a case of guilt by association. Through her secretary, Taveesin flatly denied that she owns the BVI company. ICIJ verified her ownership using TrustNet records that listed her and her brother as shareholders of the company and included the main address in Bangkok for her onshore business ventures.

Records obtained by ICIJ also reveal a secret company belonging to Muller Conrad “Billy” Rautenbach, a Zimbabwean businessman who was blacklisted by the U.S. for his ties to the Mugabe regime at the same time as Taveesin. The Treasury Department said Rautenbach has helped organize huge mining projects in Zimbabwe that “benefit a small number of corrupt senior officials.”

When CTL set Rautenbach up with a BVI company in 2006 he was a fugitive, fleeing fraud allegations in South Africa. The charges lodged personally against him were dismissed, but a South African company he controlled pleaded guilty to criminal charges and paid a fine of roughly $4 million.

Rautenbach denies U.S. authorities’ allegations, contending that they made “significant factual and legal errors” in their blacklisting decision, his attorney, Ian Small Smith, said. Smith said Rautenbach’s BVI company was set up as “special purpose vehicle for investment in Moscow” and that it complied with all disclosure regulations. The company is no longer active.

‘One Stop Shop’

Offshore’s customers are served by a well-paid industry of middlemen, accountants, lawyers and banks that provide cover, set up financial structures and shuffle assets on their clients’ behalf.

Documents obtained by ICIJ show how two top Swiss banks, UBS and Clariden, worked with TrustNet to provide their customers with secrecy-shielded companies in the BVI and other offshore centers.

Clariden, owned by Credit Suisse, sought such high levels of confidentiality for some clients, the records show, that a TrustNet official described the bank’s request as “the Holy Grail” of offshore entities — a company so anonymous that police and regulators would be “met with a blank wall” if they tried to discover the owners’ identities.

Clariden declined to answer questions about its relationship with TrustNet.

“Because of Swiss banking secrecy laws, we are not allowed to provide any information about existing or supposed accountholders,” the bank said. “As a general rule, Credit Suisse and its related companies respect all the laws and regulations in the countries in which they are involved.”

A spokesperson for UBS said the bank applies “the highest international standards” to fight money laundering, and that TrustNet “is one of over 800 service providers globally which UBS clients choose to work with to provide for their wealth and succession planning needs. These service providers are also used by clients of other banks.”

TrustNet describes itself as a “one-stop shop” — its staff includes lawyers, accountants and other experts who can shape secrecy packages to fit the needs and net worths of its clients. These packages can be simple and cheap, such as a company chartered in the BVI. Or they can be sophisticated structures that weave together multiple layers of trusts, companies, foundations, insurance products and so-called “nominee” directors and shareholders.

When they create companies for their clients, offshore services firms often appoint faux directors and shareholders — proxies who serve as stand-ins when the real owners of companies don’t want their identities known. Thanks to the proliferation of proxy directors and shareholders, investigators tracking money laundering and other crimes often hit dead ends when they try to uncover who is really behind offshore companies.

An analysis by ICIJ, the BBC and The Guardian identified a cluster of 28 “sham directors” who served as the on-paper representatives of more than 21,000 companies between them, with individual directors representing as many 4,000 companies each.

Among the front men identified in the documents obtained by ICIJ is a U.K.-based operative who served as a director for a BVI company, Tamalaris Consolidated Limited, which the European Union has labeled as a front company for the Islamic Republic of Iran Shipping Line. The E.U., the U.N. and the U.S. have accused IRISL of aiding Iran’s nuclear-development program.

TrustNet Thousands of offshore entities are headquartered on this building’s third floor, which houses TrustNet’s Cook Islands office. Photo: Alex Shprintsen

‘Zone of Impunity’

International groups have been working for decades to limit tax cheating and corruption in the offshore world.

In the 1990s, the Organization for Economic Cooperation and Development began pushing offshore centers to reduce secrecy and get tougher on money laundering, but the effort ebbed in the 2000s. Another push against tax havens began when U.S. authorities took on UBS, forcing the Swiss bank to pay $780 million in 2009 to settle allegations that it had helped Americans dodge taxes. U.S. and German authorities have pressured banks and governments to share information about offshore clients and accounts and UK Prime Minister David Cameron has vowed to use his leadership of the G8, a forum of the world’s richest nations, to help crack down on tax evasion and money laundering.

Promises like those have been met with skepticism, given the role played by key G8 members — the U.S., the U.K. and Russia — as sources and destinations of dirty money. Despite the new efforts, offshore remains a “zone of impunity” for anyone determined to commit financial crimes, said Jack Blum, a former U.S. Senate investigator who is now a lawyer specializing in money laundering and tax fraud cases.

“Periodically, the stench gets so bad somebody has to get out there and clap the lid on the garbage can and sit on it for a while,” Blum said. “There’s been some progress, but there’s a bloody long way to go.”


Launderers Anonymous: How easy is to set up untraceable companies?

SHELL companies—which exist on paper only, with no real employees or offices—have legitimate uses. But the untraceable shell also happens to be the vehicle of choice for money launderers, bribe givers and takers, sanctions busters, tax evaders and financiers of terrorism. The trail has gone cold in many a criminal probe because law enforcers were unable to pierce a shell’s corporate veil.

The international standard governing shells, set by the inter-governmental Financial Action Task Force (FATF), is clear-cut. It says countries should take all necessary measures to prevent their misuse, such as ensuring that accurate information on the real (or “beneficial”) owner is available to “competent authorities”. More than 180 countries have pledged to follow it. A study scrutinises the level of compliance worldwide. The results are depressing.

Posing as consultants, the authors asked 3,700 incorporation agents in 182 countries to form companies for them. Overall, 48% of the agents who replied failed to ask for proper identification; almost half of these did not want any documents at all. Contrary to conventional wisdom, providers in tax havens, such as Jersey and the Cayman Islands, were much more likely to comply with the standards than those from the OECD, a club of mostly rich countries. Even poor countries had a better compliance rate, suggesting the problem in the rich world is not cost but unwillingness to follow the rules (see chart). Only ten out of 1,722 providers in America required notarised documents in line with the FATF standard.

Shell Games

Providers were often strikingly insensitive even to clear criminal risks. The authors sent three main types of e-mail: the first from a low-risk alias from a country such as Norway or Australia; the second from a high-corruption-risk individual purporting to work in government procurement in such places as Kyrgyzstan and Equatorial Guinea; the third a terror-financing risk, working for a Muslim charity in Saudi Arabia. Providers were less likely to respond to the corruption category than the low-risk one, but also less likely to ask for identification when they did reply. Finding takers for the terrorist financier was harder, but not impossible: one in every 17 providers was willing to set up an anonymous shell for him.

Informing the incorporators of the international rules they should be following made them no more likely to do so, even when penalties were mentioned. When the undercover authors offered to pay a premium to flout the rules, the rate of demand for identity documents fell precipitously. “Your stated purpose could well be a front for funding terrorism,” one American provider replied—and then indicated he would consider establishing and administering the shell for $5,000 per month.

This study, by far the most thorough of its kind, makes sobering reading for anyone who worries about the link between financial crime and corporate secrecy. OECD countries show little willingness to tackle their own weaknesses and end their hypocrisy. In America, by some measures the least compliant of all, the incorporation-friendly states and business groups opposing reform continue to have the upper hand, despite valiant attempts by Senator Carl Levin to push through legislation that would require the registration of beneficial owners. Movers of dirty money know where the best shells are to be had, and it is not on a Caribbean island.

Source: The Economist Sep 22nd 2012

The respectable façade of modern shell companies

Tropical island’s and Alpine town’s offshore tax havens have more and more competion in Britain, the US and few European countries. Anonymous shell companies are behind so many crimes and misdemeanours that eliminating them should probably be “a no-brainer”, but today the OECD’s “white list” facilitates the money laundering industry to paint their facades with a new image. It is so easy to set up a company with hidden ownership in Britain and the US that even a dead man can do it: The great thing is that they look more respectable.

Criminals and corrupt politicians have found in offshore havens a tool so perfect that it has permanently changed how business is done in the region. By using offshore laws that stress secrecy over everything else including crime prevention, they have been able to set up networks of offshore companies where they can hide their assets from police, launder their money and evade taxes all at the same time. According to the Tax Justice Network, more than $250 billion is lost each year in tax revenues from wealthy individuals and criminals who hide their money in offshore accounts. That is money that by rights should be going toward better education, health care and infrastructure. On top of that, around $1 trillion — often money that corrupt leaders have stolen — flows out of developing countries into offshore accounts and wealthy banking centres.

Offshore registry firms are one-stop shops that for a fee will do everything from filing tax and annual reports to acting as the director of a client’s company. They often work with a registration firm in the offshore country with connections to local government officials. They may provide proxies to serve as directors. They will help a client issue shares and can find proxy shareholders. They might set up bank accounts. If law enforcement or journalists come sniffing around, the trail often ends with them. They will also help set up companies in other countries that will own, be owned by or work with the client’s company. In this way they set up a network of companies that are seemingly independent — but owned by the same person. This confusing arrangement more thoroughly hides ownership and thwarts accountability. They usually do this over the Internet and within a matter of hours or days and without a question. If they ask for identification, they will almost never verify the information they are given.

Offshore tax havens bring to mind tropical islands or Alpine towns. Today, England, the US and some European countries are replacing the more exotic Caribbean or Indian Ocean Islands as the tax havens of choice. On the Tax Secrecy index, the US state of Delaware is listed as the No. 1 offender by the Tax Justice Network. Delaware earns $700 million per year in company registration fees, a significant part of its budget.

Delaware is becoming the preferred location for organized crime figures and corrupt politicians worldwide. Despite complaints from federal law enforcement officials, congressional testimony, and reports from the Government Accountability Office, procedures in Delaware – and similar processes in other states – still let criminal groups infiltrate the corporate system. Professor Jason Sharman, an expert in offshore havens for the Centre for Governance and Public Policy at Griffith University in Australia agrees: “The US has been pretty robust in making sure that other countries live up to these standards, but they have been lax about applying the same degree of rigor to themselves. It’s nowhere near what the US has signed on to do,” he said. Delaware requires no information on actual ownership when companies fill out incorporating documents. Federal law enforcement agencies complain that this lack of identification makes it difficult at best for investigating suspected wrong-doing.

Criminals simply do not fear a legal crackdown. Hampered by offshore secrecy law enforcement especially in Eastern Europe has no talent working across international boundaries figuring out the real owners of companies cloaked in proxies.

Governments scrutinize the offshore industry and blame it for aiding criminals, but do little about fixing the problem. Organized crime has found common cause with business organizations to squash any efforts to radically change offshore laws. Some countries only pay lip service to efforts to provide greater transparency. Some keep on promising important actions and nothing else.

Numerous companies registered in Delaware by offshore businesses controlled by persons accused of organized criminal activities. For example:

  • Serbian fugitive Stanko Subotic registered the planes in Delaware that Italian prosecutors said were used to ferry stacks of illegally earned cash to banks in Cyprus and Liechtenstein. The money was earned, prosecutors say, from tobacco smuggling between the Montenegrin government and the Italian Sacra Corona Unita mafia group.
  • Fugitive Serbian drug lord Darko Saric, who allegedly tried to move 2.1 tons of cocaine from South America to Montenegro last year, registered many of his companies in Delaware where they are still active.
  • Marian Iancu, a Romanian businessmen charged with organizing a criminal group by Romania prosecutors, used Delaware based companies in his takeover of a state oil refinery through an alleged corrupt privatization and in its eventual resale to controversial Russian businessman Mikhail Chernoy.
  • And romanian offshore consultant Laszlo Gyorgy Kiss used Delaware companies to bill Petrom Service in consulting contracts for work that was never done.

Anonymous shell companies are behind so many crimes and misdemeanours that eliminating them should probably be “a no-brainer,” as a US district attorney recently put it. International law enforcement, justice officials and academics agree that knowing who really is reaping the benefits of offshore shell firms is crucial. Jurisdictions must have a way to find out who the really owns companies and a method to close loopholes that make shells operate, such as use of proxies or bearer shares. A major selling point of offshore registry companies, in fact, it that police can’t identify owners. Authorities basically have to ask information from the very people hiding it.We’re operating in this 19th Century manner, yet the money is moving in seconds. It’s long gone. Griffith University Professor Jason Sharman, who last year used Google and $20,000 to find and pay agents to set up anonymous shell companies in 17 jurisdictions, suggested regulating those agents. Sharman recommended that the US and Britain stipulate that agents not be allowed to set up companies unless they themselves know the actual owner and they keep records of that information. Sharman also suggested that the UK and US restrict non-residents from forming shell companies in their countries. “The most acute problem is non-residents setting up ostensibly respectable companies in these jurisdictions and doing crime around the world,” he said. “The great thing about US and British companies is that they look more respectable, and they’re more secret, so you get the best of both worlds. It might raise eyebrows to have a company from any small obscure island, but New York is respectable.” In fact, urisdictions such as Bermuda and the Cayman Islands require far more certified ID from anyone wanting to establish a company or bank account there than do the US states of Nevada and Wyoming, which at the time require no certified ID documents at all. Member countries of the Organization for Economic Co-Operation and Development (OECD), an international organization that has tried to push for laws to reduce the worst abuses of offshores, should get their own houses in order before pointing fingers at other countries. The OECD’s “white list” is maybe problematic?


Myths and Realities: How to Launder Money in the 21st Century

Money laundering is a massive global problem. It allows criminals to infuse trillions of dollars of black money into the stream of commerce and business, corrupting financial institutions and officials and at the end the complete economy. It can be stated that, at the beginning of the 21st century, not the banks are the number one targets of the laundries, but in addition to conquest of cyber space their “activities” spread more and more to the global world of general business life, where dozens of companies which are deemed to be unblemished, having seemingly honest business operations can always be found.

Those wanting launder money, always going one step forward in front of the authorities, through the most different money laundering techniques, more and more overlie the still unexploited legal economic opportunities – causing some trillion dollar damages to the world economy – and resulting from it the difference between legal and illegal economy gets smaller and smaller and presumably will be terminated with the time. Today, the laundries make often use of many forms of parallel banking systems. This is facilitated by the globalisation of economy, new internet techniques of virtual currencies and the inability of the authority to combat transnational constructs. In essence, it is inspired by the Knights Templar banking system of about 1000 years ago, with their currencies, transaction systems and fortresses.

The battle is continuous, but as it’s known, the mine of technical achievements and of human ingenuity seems to be everlasting, thus who knows what the future will bring. There are so many money laundering systems existing that it’s difficult to note all of them, but all of them have common features and practically they mean only the endless variations of the same theme: deception of identities and camouflage of money transactions.

Classical techniques of money laundering

In countries where the banking system is underdeveloped yet, the simplest solution is when the criminals take over the control of the given financial institution and realize through it their dirty transactions.

One of the oldest usual method of money laundering, of presentation as legal of illegal money is the purchase of art treasures and jewellery easy to transfer and of stable value. The laundry presents the art treasures and jewellery in question – or rather the money obtained for them – as if they were the estate not found earlier of a deceased relative of him. To avoid denunciation, it’s expedient to sell by public auction the purchased valuable movables and to keep the received coverage certificate. In case of professional laundries it may also happen that they buy themselves the art treasures and jewellery at the auction, and later they sell them again. By so doing the valuables remain and the certificates are also obtained. Although the costs of auction are lost, but a further advantage is that it’s even more difficult clear up the origin of money and the valuables can be sold at a higher price.

The technique of illegal money import is excellent for the initial making disappear of the traces, when the smuggler himself, eventually by making use of a messenger or by international transport brings physically the dirty money to a foreign country where the regulation of money market is less developed and/or the legislation prefers the banking secret. Thereafter, as a result of different financial transactions, the money is mixed with the money of legal origin. Disadvantage of this method is that cash is heavy, therefore is difficult to hide, and has the risk to be stolen or the smuggler gets caught at the customs examination.

One of the simplest methods is the technique of smurfing or nominal partnership. A team of couriers (smurf, nominal partner) places small amount deposits every day in always other financial institutions. All deposits are below the amount which would call the attention of the banks (value below report limit). When the money is drawn later on, the origin can be certified with the documents belonging to it.

To further avoiding of reporting financial transactions, respectively to obliterate the traces indicating them, the split or divided into parts money laundering method is applied. A high amount transaction is divided into many smaller amount transactions.

Many money laundering activities are connected to the gambling too. The laundries legalize their income through casinos in most of the cases. They buy tokens for cash in high amount with the aim to play, but they use only a small part of the tokens or they don’t use them not at all. Then they redeem them and ask for certificate about the “prize”. In case an authority is asking for the origin of the amount, the answer is that it’s originating from gambling. A more perfect method is when the laundries have their own casino. In this case the only to do is to record the dirty money as income of the casino

A primitive but functioning method is to agree with the casino owner in a less developed country about the certificate of a higher amount prize.

In addition to the casinos, the gambling prize can origin from lottery, horse-race or even greyhound racing, as well as from activities outside of betting agencies. In this circle the most traditional method is the buying of the wining ticket. In such a case the lucky winner gets even more money than the prize, from the laundry who obtains this way a fully “legal” income. The main point of the fraud related to horse, respectively greyhound racings is that the race is hustled then the bet is made with “dirty” money for all possible outcomes of the result.

One of the most ingenious solutions is probably the technique of overpayment on tax account. As a result of “incidental procedure error”, the private person or the company effects an overpayment of considerable amount to the competent tax office. Then after observation of the error – following filling in of a self-control form – the overpayment is retransferred by the tax office to the bank account of the “erring” tax payer, and the origin of money is already certified.

The point of self-financing loan (Dutch sandwich) is that the “client” places the dirty money in a foreign country or in a financial haven. After that he transfers the money to a bank in an other country, and then applies for a loan at his own bank, the guaranty, collateral being the deposited money. The bank grants the loan, which will be invested into properties, companies respectively into different financial instruments. In case of any suspicion arisen (e.g. sudden richness) the person concerned can refer without fear to the bank loan. This technique can exploit the different countries’ regulations concerning banking secret.

The point of the technique related to real estate is when the laundry takes mortgage for the real estate from and off-shore company being in his ownership, or rents real estate from an off-shore company, of which he is anonymous owner.

One of the members of the organisation buys for cash high value article (e.g. car or period piece) and sells within short time, but in the way that the buyer pays already with transfer to one or more legal bank accounts indicated by the seller.

Buying of gift vouchers as simple all-day buyer, several times, in several places, in average, usual denomination and amount. Thanks to the increasingly spreading franchise systems, these vouchers can be spent at more and more points of the world, or can be simply legally owned, kept.

Assuring real estate credit for an investor, who for some reason could get credit only with difficulties (e.g. the investment is too risky or bizarre, or simply because the investor has no durable contacts established yet with the financial institutions). Let’s presume that the loan amount would be EUR 70 million. At this point these “companies” organise a EUR 100 million credit, to be paid back in say 5 year time. The borrower is obliged to buy investment trust unit for EUR 30 million. This is immediately conveyed to the real estate company (to the loaner). About the 70 million a bank is providing security for a letter of credit in amount equal to full interest paid for 70 million, using the investment (real estate) as for pledge. Of course, to avoid risk, this is also conveyed to the real estate company. Result: the investor obtains the necessary amount (70 million), the real estate company gets investment trust unit in the value of EUR 30 million, guaranteed interest payment for the loan, and credit balance certificate if the borrower could not perform his payment obligation. In 5 years time white clean money will be available at zero risk.

Establishing fictitious business organisation – which can’t be found at its residence, the manager and members are presumably homeless or persons engaged for money – transfers arrive to its account, and these amounts are collected in cash buy a person who is not member, not officer of the company, or the money is transferred through a subcontractor network among each other with fictitious contracts, as long as the money becomes clean.

Fictitious transactions. Here not the object of purchase is fictitious, but its price is not covering the real market value. Let’s suppose we have EUR 100 million. Let’s buy for example a real estate for EUR 25 million and let’s look for a “buyer” for it who will buy it from us for 75 million with the passing of a certain time. This is of course not a genuine buyer, only such a “blameless” person who could really have that much money without any problem. At the sale and purchase not his 75 million will be received but the our one which we gave him in cash. The payment is effected already with bank transfer, so the amount arrives in a “legal” clean form to our account. It’s true that the earlier invested 25 million, the duty and tax to be paid and the fee of “assistance” paid to our “buyer” are to be booked as “loss”, but even so, more than the half of our money became white (in addition the state got its part too from this with the paid in duty and tax). This method can work also in the way that a higher amount of down payment is “paid” for the real estate to be purchased, but the sale and purchase fails for some reason, so the amount of down payment is lost, or we get back its double (it makes no difference as the person of seller and buyer is the same).

Creating a cover company, dealing with trade of antiques, among others. It’s buying up continuously antiques for cash, which are of average value, popular and relatively many of them passes through many hands. When the stock is available the company offers these for sale, divided among different auction houses country- and worldwide. If one of the lots comes under the hammer the person in question lets to sell it to the person offering the most, or sends in secret one of his people to the auction to buy it back. Independent from the buyer, beside the certificate the purchase price reduced by commission from all lots gets legally to the bank account (in case of own purchase even the article offered for sale is also remaining which can be sold again). The commission can be booked as cost of money laundering.

One of the most perfect ways of perpetration is when the dirty money is mixed with legal money. It’s “worth” pumping money into enterprises which are cash intensive branches, i.e. it’s normal to have high physical cash flow (e.g. restaurants, casinos, currency exchanges). When the type of enterprise is accepted, i.e. cash forms the higher portion of their income and so of their banking transactions, the dirty cash can be incorporated without any problem into the system. It’s very difficult to follow this type of transactions and to prove how many portions of dishes have really been served per occasion. As long as the dirty money is gradually fed into the system, the matter remains undoubtedly unseen. The criminals can apply this technique in case of already existing enterprises or can establish their own one. Indeed they can establish a totally fictitious company too, which has absolutely no activities except invoicing, i.e. is a laundry.

We acquire or establish two companies. One where money was acquired, the other where the money is to be placed. The company, to where the money is to be sent, orders certain goods or services. The trick is: either the invoices containing the products or services are overvalued (the surplus corresponds to the amount to be cleaned) or false invoices are sent. The first method is much more difficult to be disclosed. The paid amount can be deducted by the company which one settled the false or overvalued invoice.

The underworld organisation acquires – possibly fully or partly in cash – an uncared-for restaurant or any kind of service unit in line with its “scope”. The renovation, paid mostly also in cash, artificially increases the unit’s value. At this point they could get out from the business and could sell the newly started business (even with profit too) as the money becomes legal in their bank account after being transferred. But this can be further increased. The appliances, materials needed to start the business and the continuous daily wasting assets are purchased from a company belonging to the interest of the organisation. At each daily order, the delivered quantity is 20 – 30 percent less than effectively ordered on the documents (e.g.: in case of a restaurant only 40 kg meat instead of 50 kg). The organisation pumps dirty money into the enterprise to replace the shortage. The same happens in case of the other wasting assets too.

The money flown through the different bank accounts of the covering companies established in several countries, more and more legal “layers” are placed, making more difficult to identify the real origin of dirty money. Finally, the off-shore covering ventures invest the money into real estates and wait until they will be suitable to be sold. Completed hotels and apartment houses stand empty for years, waiting for the owners’ dirty money to get clean through termination.

The property acquired from crime is inserted in a legally established company, there it’s recorded as revenue. Both the revenue and expenditure booking data are forged, i.e. the “cleaned” money is covered with fictitious invoices.

Technique of over- or undercharge. Products or services are purchased at artificially high price (in this case the “profit” remains at the seller) or at artificially low price (in this case the “profit” remains at the buyer) from the money passed through several transactions.

Method of acquisition and selling of companies. From the layered money, the laundries acquire, including assets, a low value company having very little own property. Then the assets are revaluated, the company is sold and “legal” profit is realised.

Insertion of phony companies. The laundries acquire control of a company of which true owners’ identity is hidden for the authorities. Trading, financial transaction, forging of balance sheet loss/ profit, borrowings and exploitation of tax benefits are performed under the mask of this covering company.

Acquisition of sports club, respectively player. The buying and selling for several million dollars of professional sportsmen (mainly football players, ice-hockey players), called also slaves of modern age, among the different sports clubs offers excellent opportunities to legalise dirty money. These so called “showcase” companies are ventures which in classical meaning are not connected to the criminal groups, but practically are under inspection and control of the underworld.

By increasing of layering the origin of money becomes untraceable through crossing and covering operations, purchases, electronic transfers, frequent transfers, such as:

– Repeated buying and selling of bearer securities

– Repeated buying and selling of registered securities with involvement of owner

– Electronic there and back transfers among the same accounts

– Buying and selling of traveller’s cheques, air-tickets, banker’s drafts

– Commodity exchange contracts

These transactions are easier to perform when the laundries are infiltrated to the brokerage institutions, or the employees of those are corrupted, blackmailed.

Merchandise laundering: In addition to the techniques of money laundering it’s also worth to mention the merchandise laundering, being a process similar to money laundering. In this case the merchandise is cleaned, that is it’s sold and purchased out of the banking system, adding the most possible masking “layers” as long as the merchandise respectively money becomes fully clean.

The use of gold purchase for criminal purposes is one of the most effective mechanisms to clean illegal money. Its outstanding role is due to the fact that it can be used in many different ways, can be changed in several ways, and can materialize, respectively. promote all separate phases of money laundering. Whether in form of bar, fragments or jewellery, this precious metal is easy to buy, can be got through geographical borders and can be resold, i.e. money can be relatively easily legalised.

The barter trade system of commercial products such as agricultural commodities, other non-ferrous metals and precious stones offers also opportunities the revenues to be “legalised” this way, especially when all this is made in the legal export-import guise between different countries.

The dirty revenues from drugs laundered in the African barter trade are also to mention here, getting greater and greater role in the money laundering transactions of the world.

Secret banking systems

The more and more strict regulation of banking system leads to that the laundries are forced to find new possible channels outside of the banking system. As stronger the regulation the more demand for new alternatives. It has to be promptly noted that this change is highly touching the legal operating companies of business life too as from now on these are the potential targets for money laundering. The targeted companies are menaced, exploited or their control is overtaken simply by force. Any kind of products can be interesting for the criminals which can be purchased for cash in adequate volume and then can be easily sold.

The laundries also make often use of many forms of the parallel or underground banking systems. These non official, secret banking systems were developed by criminal groups mainly due to political chaos and distrust in banks. The organised (family, tribal) contact is typical for their operation. The purpose during their use is to avoid the financial regulations in force in the different countries in order to bring out the dirty and/or clean money from the country, respectively to settle the goods purchased abroad (capital flight). The system can only work properly when the countries concerned have commercial contacts which each other and the operations can be balanced with the time.

The simplest form was invented by the Chinese under the name fei chien i.e. flying money. The process works as follows: e.g. the dirty money is deposited in a gold shop in Hong Kong – for which the owner gets an overstamped dollar note or a small piece of paper or card marked with an innocent looking secret sign. Later on this is presented at a moneychanger in the Chinatown of an American city and the owner gets his cash which can be further covered through new transactions.

The essence of Hawalah network is the laundry to place money at a hawalah-banker somewhere in the world, which can be drawn few hours later -after deduction of commission – in an other part of the world (a very good sample is the case of India and the United Kingdom, where it’s the interest of the significant Indian population living in Great Britain to bring money grom the subcontinent to Europe). The system works as the market is two-directional. That is, there are persons in both countries who have large amounts of cash surplus (organised criminals) and who are ready to pay in a big way for the possibility to make use of a paper free banking system.

New money laundering possibilities offered by the digital money system and by the development of Internet

By development of the techniques at the beginning of the 21st century the laundries have nearly everything available to enter the “space” and by conquering newer and newer dimensions they continue undisturbed their dirty activities.

While the authorities still concentrate on the problem of “terrestrial” money laundering – first of all of off-shore financial centres -, the criminals are one step forward and they move and clean their money in the cyber space, i.e. online, with no little success.

To the greatest pleasure of the laundries, the “face to face”, respectively “know your client” principle gets more and more injured by the expansion of online. It is not in the power of the banks, economic units to know who is standing exactly behind the transaction (phone, computer). Who has the disposal of user name and the password belonging to it, can open bank account online; can order international business enterprises; can participate in different share trading models; can communicate via nameless e-mail; can diffuse money through online casinos and betting offices; can buy houses via Internet; can penetrate money through online auctions; can open his own off-shore or online bank, i.e. can do nearly everything.

The spreading of prepaid credit cards in the US and Russia also offers opportunity for anonymity. These can easily be bought without knowing the buyer’s identity. Moreover, certain criminal groups are just sending the filled cards per regular terrestrial mail and nobody can notice it.

It’s possible to play in the virtual casinos sites and online sport bet sites from any point of the world. Most of them operate as off-shore company of course. There are 2’900 legally registered sites and additional 20’000 sites without any gambling license. The organised crime is standing in the background in many cases. The money laundering trick is as follows. In order to play for “prize”, first a credit line is to be registered at the casino. Exploiting the lack of regulation, the most simple is to send average amount of cash. Some gambling is played and the rest of credit line is claimed in form of cheque or transfer. This method is however not very efficient since it implies transactions limits. More sophisticated methods in the contest of online gaming is to use the fact that online gaming licenses are only issued in countries known as off-shores heavens. Even legally operated online sites can be used as pretext to dissimulate a high volume of fictitious transactions between cover companies.

The possibility of opening online bank account and the banking and electronic payment systems operated through this terminate more and more the need of personal contact. Making use of the free and anonymous services offered by e-mail have access via the Internet to the letters and bank accounts of their own and of others (e.g. in Internet café or in public library). Thus they can create an e-mail possibility which will be then used only from public terminals, that means it’s nearly impossible to follow that kind of communication access and utilization. To cover their transactions, they use online channels, deemed to be legal, suitable for money transfer, as e.g. Liberty Reserve or E-Gold or Gold & Silver Reserve or … Let’s imagine that one of these groups can create false identities. Then he can open with them as much accounts as he wants, has access to them anytime and from anywhere in the world, i.e. can easily launder money through them. You can try yourself and create a false identitiy in Liberty Reserve: just register with a fake name and address – It works! Liberty Reserve SA is registered in Costa Rica. Notice that Costa Rica is also the pioneer country in online gambling.

There are many virtual currencies available: MoneyMail, LiqPay, UkrMoney,, Z-Payment, NN-Money, AlertPay, DeltaKey, LibertyReserve, Perfect Money, AlterGold, Pecunix, V-Money, Webcreds, W1 RUR, Edram, E-Gold, C-Gold, iMoney, E-bullion, InoCard, Chebo Money, ECUmoney, Express Gold, ICQMoney, IntellectMoney, VRS, Wirex, Dengi 2.0, Younicrata. You can transfer virtual currencies to any Exchanger having a business relation with the issuer of the virtual currency. Some of the Exchangers can pay out in cash or make transactions into a correspondence bank or through Western Union without limits. As example you can find a list of the Exchanger working with Liberty Reserve here Just try it – It works!

With the use of virtual money the bank regulation can be evaded and the criminals can launder illegal money. The registered users can perpetrate different transactions evading the SWIFT control for the money “issued” by the company. Some companies accept this virtual money for means of payment too, i.e. changes into official currency, thus it becomes available everywhere in the world and can be transferred to everywhere.


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