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To take advantage of the benefits of these countries, there are numerous vehicles that can be used. These include:
Before we address how these vehicles are used, we should first look at how drug violators transfer their illicit gains to these havens. The first step in this process is the changing of small bills into large bills. This is called "refining" money. This is tedious work that includes visiting a number of different banks in order not to arouse suspicion.
The secret of transferring large amounts of drug money from the United States to a haven country, is to persuade a financial institution with access to international transfer facilities to accept an uncommonly large amount of cash.
There are several commonly known procedures to transfer such large amounts of monies:
Money Exchange: Money exchanges have been known to accept large amounts
o Brokerage Houses : Brokerage houses have also been known to accept large
quantities of cash if they believe they are really executing orders for
If the broker is suspicious, the courier can go to a money exchange and
Lateral Transfer: Lateral transfer have been used by drug dealers in America as a convienent way to payoff their suppliers without physically exchanging money. Using lateral transfers, a heroin dealer simply instructs his bank to transfer payment to the bank of his supplier.
Lateral transfers became popular during the Viet Nam War. The black
Hand Payments: Aside from utilizing financial institutions with international transfer facilities, a drug violator can have his monies hand carried to a foreign country.
The best method of smuggling to these countries is to have a courier take the money their in either a suitcase or a moneybelt. This would leave no paper trail.
There are several routes couriers can take when smuggling currency. Couriers can travel to Canada; the offshore Caribbean Islands, or the numerous European countries for deposit in branches of foreign banks.
Money couriers are lawyers or businessmen who ordinarily make trips to foreign countries. They smuggle dirty money for themselves, friends and business associates.
Other couriers go by the title of "bank agents". In some cases, these agents are salaried employees of Swiss and Caribbean banks. Swiss bank agents are most prevalent in South America where they open Swiss bank accounts and smuggle money to these accounts for affluent Latin Americans. Laws in most South American countries forbid sending money out of the country.
Money Orders: Another method of smuggling dirty money is to buy a
REPATRIATION OF MONEY
After dirty money has reached a Swiss/offshore bank or dummy corporation either by cable, courier or corporate transfer, only part of the laundering cycle has been completed. To complete the cycle, it is necessary to repatriate the once dirty money in such a way that it appears to have been earned from a legitimate transaction.
Repatriating money refers to transferring money back to its owner's country of origin. Repatriating money is often done in the guise of a bank loan. Thus, the "loan-back" technique.
Illustration of the Loan-Back Technique: A New Jersey gambler has
The fact that he must repay the principal on the loan does not bother the criminal, since, he chooses, as soon as these payments have been made he can immediately relend the money to himself. Through a continuous use of of the loan-back technique, a criminal can recycle his money between the United States and Switzerland on a perpetually moving conveyor belt that connects the criminal, his Swiss bank and dummy foreign companies together with his legitimate American business enterprises.
The cooperation of the Swiss bank is not needed to complete the loan-back. In fact, in only a few instances is the money tendered directly from the bank to the criminal. Usually it travels through a number of layers of insulation, and the Swiss and other financial institutions involved may not even suspect that the loan is not legitimate.
To provide more insulation, the foreign representative or the courier who
o Direct Investments: Instead of using a loan-back to penetrate legitimate
business, a criminal may make his investment directly, using one of his dummy foreign companies as a front. Legitimate businesses sometimes agree to accept a new criminal "partner". This partner then makes his new investment with dirty money funneled through one of his foreign companies.
A legitimate business bought with money that has been laundered abroad
Profits from successful foreign business or stock/real estate transactions:
o Purchasing your own property: Using money held in a foreign bank account
to secretly buy your own property is another favorite laundering technique. By transferring funds to your secret dummy Liechtenstein trust, the criminal can buy his own business (car wash) and repatriate even more money to the United States.
Double Invoicing: Double invoicing (over pricing) is a good technique
Example: A Dutch company obtains from a British company, an agreement to pay for goods received against two invoices for each shipment. One invoice, the smaller of the two, is paid directly to the Dutch firm in the normal way against shipment or sight of goods. The second invoice usually representing the difference between the smaller invoice and the real price of the goods, calls for payment directly to the bank account of the Dutch company in Switzerland.
Using the above scheme, a criminal can forma corporation and double invoice non-existent products. The cost for incorporation is only a few hundred dollars.
o Fiduciary Accounts:
A fiduciary account separates your name from the account. The fiduciary deposit occurs through your authorizing your Swiss bank to place a given deposit for a specified period of time with another bank outside Switzerland. The funds are placed in the name of the Swiss bank but at your risk, the fiduciary connection. The deposits are not subject to the 35% withholding rate or negative interest, as the interest is earned outside Switzerland.
A fiduciary in Italy is a cross between a trust agreement and an investment company. It is intended to be used as a vehicle for general investment by groups of individuals or families with sizeable sources of funds within the country. A fidciaria can legally invest or hold funds outside of Italy where an individual cannot. It can also bring funds in the country.
Customs in Chiasso, Switzerland, found an envelope in a suitcase on a train going Milan-Zurich. This envelope revealed that two brothers (owners of a pasta empire in Italy) held bank accounts outside Italy and mostly in Switzerland with almost $50 million there. These brothers circumvented Italy's tight currency outflow control through the use of fiduciaria.
Swiss and other foreign banks maintain "omnibus accounts" at American brokerage houses. An "omnibus account" is a variety, general, all
, purpose account of a Swiss/foreign bank. Through the use of a Swiss bank's omnibus account, a criminal with a bank account at that Swiss/ foreign bank would instruct his bank to purchase/sell certain securities. The Swiss bank would telex or call the brokerage house with which it maintains an omnibus account and instruct the broker to purchase these securities. The broker's records would show the bank as the purchaser/ seller and not the criminal.
O Corporation and Trusts :
The establishment of corporations and trusts in tax-haven countries is a popular method used to launder money by criminals. Some of the more popular methods are:
International Finance Subsidiary: This is usually an arm of
Banks and Trust Companies: These companies are able to pay