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Appendix A

Case studies: Legal practitioners

Scope—Lawyers when they are involved in the management of assets and the creation, operation or management of legal persons

Australia: Solicitor involved in structuring

An Australian-based solicitor structured funds to an offshore account in Hong Kong. At times, it is believed, he actually carried cash to Hong Kong. His colleague, a Hong Kong-based solicitor, arranged for the creation of offshore companies in the British Virgin Islands and bank accounts in Hong Kong to receive structured funds from Australia. These funds were then transferred to other countries by the Hong Kong-based solicitor to hide from authorities or returned to Australia in order to appear legitimate (AUSTRAC 2007).

Australia: Legal practitioner involved in tax evasion

A legal practitioner was found guilty of conspiring to dishonestly cause a risk of loss to the Commonwealth in 2010. He outlined a mechanism to enable a client who had been convicted of tax evasion and a bankruptcy offence, to evade paying tax to the Australian Government by claiming income as payment for legal fees. The court found that he had received a fee of $22,000 for his role in the scheme. In March 2003, he was found to have sent an email to the Swiss-based accounting firm that the court held was a calculated deception to enable his client to evade his tax. He consented to a pecuniary penalty order for the fee he received and $1,000 in legal fees, and was sentenced to two years’ imprisonment to be released on recognisance after serving 12 months (R v G 2010 [VSC 121]; see also ACC 2011: 41).

Fiji: Legal practitioner used to establish an offshore shell company

A case was reported by a solicitor in Fiji where a shelf company in Hong Kong purchased 75 percent of shares in a local company. The company wired funds from Australia as deposits to the solicitor’s trust account without conducting any due diligence. The local shareholders were flown to Australia to secure the arrangement and all shares purchased were transferred to the remaining local shareholder. A total of FJ$1.5m was sent to the solicitor’s account. Investigations by foreign law enforcement authorities revealed the Hong Kong Company to be non-existent. Furthermore, the company had been subject to investigations by other international law enforcement authorities relating to lottery fraud. Investigations are continuing (APG 2008).

Vanuatu: Legal practitioner used to deposit funds

The Vanuatu FIU assisted another foreign jurisdiction where funds from a fraud in that country were transferred to a Vanuatu bank account. Enquiries revealed that the bank accounts were opened using a local lawyer as a service provider and the proceeds of the fraudulent activity were deposited with the Vanuatu banking institution masked as ‘business sales’. The offender via his local service provider advised the bank that the funds would be used to pay business-related expenditure, but instead they were withdrawn in small amounts in several European countries using an international debit card (APG 2008).

United Kingdom: Solicitor advising drug dealer

A 43 year old English solicitor in sole practice, became friends with and then represented a man who was later convicted of large-scale drug crime. The man had passed him £70,000 in cash between April and May 1997; £10,000 was for legal costs, £50,000 was for an investment in his practice and £10,000 was for another company established by him to promote his practice. In March 1998, the drug dealer was arrested in possession of £5m of cocaine. The solicitor was instructed to act for him. In September 1998, he was accused of a much wider drug conspiracy. At this point, the solicitor became suspicious. He consulted Law Society literature and reached the conclusion that he was within the law. He took no advice from the Law Society or from another legal adviser. In April/May 1999, the drug dealer was convicted. The solicitor took advice about his interpretation of the legislation and was reassured by another solicitor that he was correct. He was arrested in October 1999. When interviewed he was not entirely frank, although he later said this was a result of having no proper advice. He pleaded guilty to two counts under s 52 of the Drug Trafficking Act 1994 and was sentenced to six months’ imprisonment. The Court of Appeal dismissed his application for leave to appeal that sentence (R v D [2003] 1 Cr App R (S) 88).

United Kingdom: Conveyancing solicitor

A UK solicitor undertook the conveyance of property to a long-time friend and business associate from a convicted criminal, at a significant undervalue and was subsequently convicted for failing to disclose to authorities that he knew or suspected money laundering was taking place. The original sentence was to 15 months imprisonment that in 2006 was reduced to six months on appeal on the grounds that the offence represented a lapse in judgement rather than a desire to benefit from criminal activity. The conviction brought an end to his professional life (R v G&P [2006] EWCA Crim 2155).

United Kingdom: Bowman v Fels

The UK Court of Appeal judgment arose out of a property dispute between ex-cohabiters. Prior to a county court hearing, Bs legal advisors suspected F had included the costs of some work he had carried out on the property in question in his business and VAT lodgements. Bs legal advisors filed a report of their suspicions to the National Criminal Intelligence Service (NCIS— now the NCA). Bs legal advisor believed the POCA 2002 UK prevented disclosing to either the client, or to the defendant’s legal team, that a report had been filed. The solicitor sort to adjourn the property dispute proceedings out of concerns that ‘appropriate consent’ regarding the matter would not be forthcoming by the hearing date. There was concern over whether the report would affect the court proceedings. The appeal questioned whether a lawyer acting for a client in legal proceedings must disclose suspicions of money laundering immediately in order to avoid being guilty of the criminal offence of being concerned in an arrangement that he knows or suspects facilitates criminal activity. The question was whether the offence applied to a legal advisor who came to suspect the other party had engaged in money laundering. The secondary question was whether POCA 2002 UK was intended to override the issues underlying LPP. The case concluded that the offence in POCA 2002 UK s 328 was not intended to cover ordinary conduct of litigation and the legislator would not have thought those activities to constitute ‘being concerned in an arrangement’ that facilitates money laundering. The case confirmed that the POCA 2002 UK was not intended to override LPP in relation to money laundering. When deciding whether to make a disclosure to SOCA, lawyers need to consider whether the information on which the suspicion is based on is subject to LPP (B v F [2005] EWCA Civ 226).

United Kingdom: Solicitor laundering proceeds of drug trafficking

In March 2011, a solicitor in Wales was convicted at Cardiff Crown Court of money laundering and perverting the course of justice in connection with the purchase of properties on behalf of a convicted drug trafficker. The solicitor was sentenced to four years and eight months’ imprisonment. The solicitor acted on behalf of his friend to fraudulently secure mortgage advances and to launder the proceeds of drug trafficking by buying property. Fraudulent mortgage transactions worth more than £650,000 were involved over an 18 month period that were in direct contravention of regulations that clearly stated that a solicitor cannot act for a buyer and provide funds at the same time. In October 2009, police undertook a search of the solicitor’s home leading to the restraint of all his assets, including his black Lamborghini Gallardo worth more than £80,000. In February 2011, the solicitor applied to the court for permission to sell the car but further investigations revealed that it had already been sold in defiance of the court order. The solicitor was again arrested and further charged in relation to this offence (Wales Online 2011).

United Kingdom: Solicitor laundering proceeds of drug trafficking

In the United Kingdom, a partner in a law firm allegedly used the firm’s account to transfer proceeds of drug trafficking. According to court documents, ‘[t]he way in which the accused M dealt with these receipts was complex. They were transferred to the firm’s client account in the names of six different clients, not all of whom appeared to have been under the direct control of W. Individual disbursements were then made in respect of what purported to be ordinary solicitor and client transactions, but were a cover for transfers of a very different kind, for example, for the purchase of a yacht or an expensive car. Over £4.5m was transferred from B to a company . Sums in excess of £1.5m were transferred from different clients’ ledgers to W. These transfers were all for the benefit of W and formed the subject of the third offence of which M was convicted’ (R v A and others [2009] EWCA Crim 8 (20 Jan 2009)). The accused was found guilty by a jury at Birmingham Crown Court on 19 March 2003 of three offences of assisting another person to retain the benefits of criminal conduct contrary to s 93A(1)(a) of Criminal Justice Act 1988 as amended. The trial judge found that the true nature of the receipt of the relevant funds by the accused person was such as to amount to an obtaining of them within the meaning of s 71(4) of Criminal Justice Act 1988. A confiscation order of £410,077.20 was made against the accused person on 20 April 2004. A subsequent appeal against the confiscation order was dismissed by the Court of Appeal on 20 January 2009.

Canada: Use of lawyer’s trust accounts

An individual used a law firm to purchase property through the law firm’s trust account using bank drafts purchased overseas from the proceeds of criminal activity. The same law firm was used to set up family trust accounts and various companies (APG 2008).

Canada: Lawyers used to establish offshore companies

A lawyer was employed by an international drug importer to launder the proceeds of his criminal activity. The lawyer established a web of offshore companies in a country with weak corporate regulations on behalf of his client. These companies were then used to hide the movement of the proceeds of crime case. He also cooperated with several other lawyers for the use of their trust accounts to receive cash and transfer funds (APG 2008).

Canada: Use of lawyer’s trust accounts

On the instruction of his drug-trafficking client, a lawyer deposited money into his trust account and then used this money to make regular mortgage payments from this account for properties owned by the trafficker. The lawyer admitted that he accepted deposits and administered payments, but claimed no knowledge of the origin of the funds (APG 2008).

Canada: Collusion between lawyer and mortgage broker to avoid STRs

A common law couple used a variety of methods to launder revenue from cocaine trafficking, including depositing money in financial institutions, buying real estate and purchasing vehicles. The financial institution staff facilitated numerous transactions and even advised the couple’s nominees how to conduct transactions in a way that would ostensibly reduce any suspicion. A mortgage broker and a lawyer helped with the purchase and financing of real property, and an accountant provided advice on investing funds in order to raise as little suspicion as possible. A car was also purchased with cash at a dealership (APG 2008).

Canada: Lawyers used as professional launderers

A drug trafficker, who headed an organisation importing narcotics into Canada from Country A, employed a lawyer to launder the proceeds of his operation. To do so, the lawyer established a web of offshore corporate entities incorporated in Country B, where scrutiny of ownership, records and finances was not stringent. A local management company in Country C administered these companies. These entities were used to camouflage the movement of illicit funds, the acquisition of assets and the financing of criminal activities. The main trafficker in this case held 100 percent of the bearer share capital of these offshore entities. In Canada, a distinct group of persons and companies without any apparent association to the main trafficker transferred large amounts of money to Country C. There, the funds were deposited in, or transited through, the trafficker’s offshore companies. This same group also transferred large amounts of money to a person in Country D, who was later found to be responsible for drug shipments destined for Canada. Several other lawyers and their trust accounts were used to receive cash and transfer funds, ostensibly for the benefit of commercial clients in Canada. When law enforcement agencies approached them during the investigation, many of these lawyers cited ‘privilege’ in their refusal to cooperate. Concurrently, the main lawyer in this case established a separate similar network that included other lawyers’ trust accounts, to purchase assets and place funds in vehicles and instruments designed to mask the beneficial owner’s identity. In 2005, this lawyer and three other accomplices pleaded guilty to money laundering and to possession of proceeds of crime in Canada and received a combined fine in lieu of forfeiture that totalled approximately $2.7m (APG 2008).

Japan: Lawyer and false loans and contracts

A lawyer, who received a consultation from criminals to avoid confiscation of crime proceeds, advised criminals to counterfeit a loan contract to pretend that criminals borrowed money from their acquaintance, and made an illegal procedure for attachment of property (abovementioned crime proceeds) at Court (APG 2008).

Singapore: Former lawyer laundering proceeds of embezzlement

A former lawyer in Singapore allegedly embezzled S$12m from clients’ account of his law firm. The individual then bought S$2m worth of jewellery and precious stones from a high-end jewellery store before leaving the country. He reportedly transferred S$1.8m to the jeweller’s bank account and paid the remaining S$270,000 using a cash cheque from the clients’ account of his law firm (Lum 2007).

United States: Attorney’s trust account used

A chiropractor was convicted of bankruptcy fraud and money laundering for allegedly channelling US$205,000 via an attorney’s trust account into the bank accounts of two shell corporations that had been established using the names of straw men. In June 2008, the defendant was convicted on one count of making false declarations under penalty of perjury in a bankruptcy case, one count of fraudulently concealing property in a bankruptcy case and 26 counts of money laundering (FBI 2008f).

United States: Lawyer assisting laundering

In the case United States v F, the defendant agreed to assist in the laundering of illicit funds by transferring them through his client account to a fictitious corporation in the Cayman Islands. The offender advised the proprietor of the funds that the Internal Revenue Service could not reach the Cayman Islands corporation due to there being no relevant tax treaty between the United States and the island. The defendant also suggested that a corporation with an associated bank account be established in Liechtenstein as an additional destination for illicit funds to be transferred to via his client account. The defendant later unknowingly confessed to undercover agents that due to his lawyer–client privilege, he believed that would not be forced to answer to the queries of law enforcement services nor the criminal justice system regarding his client account (Bell 2002).

United States: Attorneys’ conspiracy

In July 2007, two attorneys pleaded guilty to conspiracy to commit money laundering and conspiracy to obstruct justice respectively. Two months later, both defendants were sentenced by US District Court to (a) 41 months’ imprisonment, followed by two years of supervised release and (b) five months imprisonment and five months home confinement, followed by two years’ supervised release respectively. In addition, both defendants were ordered to pay a fine of US$75,000 and US$30,000 respectively (FBI 2007b).

United States: Lawyer involved in smurfing

In United States v G(148 F 3d. 784 (7th Cir. 1998)), the defendant, a lawyer, agreed that he would launder $50,000 to $75,000 for a fee of 10 percent. An undercover agent met him in his office and gave him approximately $75,000 plus a fee of $7,000. Later that day, he gave about half of that amount to someone to ‘smurf’ into accounts of less than $10,000. The smurfer and others purchased seven money orders from currency exchanges and he subsequently delivered $75,000 worth of negotiable instruments to the undercover agent (Kennedy 2004).

Case studies: Accountants

Scope: Accountants when they are involved in the management of assets and the creation, operation or management of legal persons

Australia: Accountant charged over $10m tax evasion

Twelve people were charged after an investigation into a $10m offshore tax evasion and money laundering scheme. A total of 153 charges were laid against a Sydney accountant, her husband and 10 of her clients, as part of the ATO ‘sOperation Wickenby. The AFP seized documents after raiding business and residential premises in Sydney between May and December 2007. The Vanuatu Police Force executed search warrants on associated business premises in Port Vila on April 28, 2008. The AFP alleged a 62 year old Warriewood woman ‘devised, promoted, facilitated and implemented tax evasion schemes on behalf of Australian-based clients’. Police alleged the 12 people laundered about $5.2m. The investigation was one of 10 being conducted by the AFP as part of Operation Wickenby, targeting tax avoidance and evasion linked to tax havens. The 62 year old Warriewood woman was charged with six counts of conspiring to defraud the Commonwealth, 23 counts of conspiring to obtain a financial advantage by deception and five counts of conspiring to deal in money with intent that the money would become an instrument of crime. She faced a maximum penalty of 20 years in jail. The other 11 people were charged with money laundering, obtaining a financial advantage by deception and defrauding the commonwealth. All 12 people were due to appear at Sydney’s Downing Centre Local Court on 10

the bank accounts of two shell corporations that had been established using the names of straw men. In June 2008, the defendant was convicted on one count of making false declarations under penalty of perjury in a bankruptcy case, one count of fraudulently concealing property in a bankruptcy case and 26 counts of money laundering (FBI 2008f).

United States: Lawyer assisting laundering

In the case United States v F, the defendant agreed to assist in the laundering of illicit funds by transferring them through his client account to a fictitious corporation in the Cayman Islands. The offender advised the proprietor of the funds that the Internal Revenue Service could not reach the Cayman Islands corporation due to there being no relevant tax treaty between the United States and the island. The defendant also suggested that a corporation with an associated bank account be established in Liechtenstein as an additional destination for illicit funds to be transferred to via his client account. The defendant later unknowingly confessed to undercover agents that due to his lawyer–client privilege, he believed that would not be forced to answer to the queries of law enforcement services nor the criminal justice system regarding his client account (Bell 2002).

United States: Attorneys’ conspiracy

In July 2007, two attorneys pleaded guilty to conspiracy to commit money laundering and conspiracy to obstruct justice respectively. Two months later, both defendants were sentenced by US District Court to (a) 41 months’ imprisonment, followed by two years of supervised release and (b) five months imprisonment and five months home confinement, followed by two years’ supervised release respectively. In addition, both defendants were ordered to pay a fine of US$75,000 and US$30,000 respectively (FBI 2007b).

United States: Lawyer involved in smurfing

In United States v G(148 F 3d. 784 (7th Cir. 1998)), the defendant, a lawyer, agreed that he would launder $50,000 to $75,000 for a fee of 10 percent. An undercover agent met him in his office and gave him approximately $75,000 plus a fee of $7,000. Later that day, he gave about half of that amount to someone to ‘smurf’ into accounts of less than $10,000. The smurfer and others purchased seven money orders from currency exchanges and he subsequently delivered $75,000 worth of negotiable instruments to the undercover agent (Kennedy 2004).

Case studies: Accountants

Scope: Accountants when they are involved in the management of assets and the creation, operation or management of legal persons

Australia: Accountant charged over $10m tax evasion

Twelve people were charged after an investigation into a $10m offshore tax evasion and money laundering scheme. A total of 153 charges were laid against a Sydney accountant, her husband and 10 of her clients, as part of the ATO ‘sOperation Wickenby. The AFP seized documents after raiding business and residential premises in Sydney between May and December 2007. The Vanuatu Police Force executed search warrants on associated business premises in Port Vila on April 28, 2008. The AFP alleged a 62 year old Warriewood woman ‘devised, promoted, facilitated and implemented tax evasion schemes on behalf of Australian-based clients’. Police alleged the 12 people laundered about $5.2m. The investigation was one of 10 being conducted by the AFP as part of Operation Wickenby, targeting tax avoidance and evasion linked to tax havens. The 62 year old Warriewood woman was charged with six counts of conspiring to defraud the Commonwealth, 23 counts of conspiring to obtain a financial advantage by deception and five counts of conspiring to deal in money with intent that the money would become an instrument of crime. She faced a maximum penalty of 20 years in jail. The other 11 people were charged with money laundering, obtaining a financial advantage by deception and defrauding the commonwealth. All 12 people were due to appear at Sydney’s Downing Centre Local Court on 10 accountancy firm. The firm was initially approached on the basis that one of the suspects had substantial funds overseas that he wished to repatriate to Australia. At the time, the person was a bankrupt and money could not be held in his own name. Advice was sought from the accountants to devise a structure to enable the repatriation of the funds and acquisition of real estate. The accountants were given A$20,000 to be used as a deposit on a real estate purchase. The accountants were aware of reporting thresholds and deposited the money into bank accounts in amounts less than the A$10,000 reporting threshold. The accountants recommended a number of money laundering schemes to the principals of the drug ring. Their standard approach was to launder the money into a number of bank accounts in amounts less than the reporting threshold of A$10,000 and to then draw cheques on those accounts. The accountants used 15 different bank accounts to receive the cash. These included personal accounts, the bank accounts of others, unwitting family members, the accountants’ business accounts (including trust accounts) and the bank accounts of corporate entities established for the purpose.

Two other methods used to launder the funds were use of bookmakers and gamblers. In the case of the bookmakers, the method was to attend race days with substantial amounts of cash. The person would seek out a bookmaker he knew, express his discomfort at carrying such a large amount in cash and ask them to hold his cash for him until he either used it for bets or collected it at the end of the day. He would then leave it with the bookmaker and deliberately not collect it at the end of the day. Early the following week, he would contact the bookmaker and ask him to post him a cheque for the money.

The accountants had a business association with a wealthy businessman who was a frequent gambler at Australian casinos. The accountants approached the businessman and offered to provide cash at short notice to him or his associates for gambling at casinos. The accountants offered to accept 95 percent of the value of the cash they provided on the basis that the gambler later repaid the money by depositing money into a foreign bank account that had been set up for the purpose (APG 2008).

United States: CPA transferring drug funds

In January 2006, a certified practising accountant was convicted of drug trafficking and money laundering charges. It was alleged that the defendant made wire transfers totalling over US$100,000 of drug distribution proceeds between New Hampshire and Arizona (the end points of the drug operation) during 2004. In December 2007, the defendant was sentenced to 30 months’ imprisonment followed by a three year period of supervised release during which the defendant’s behaviour will be monitored by the Department of Probation in the United States. (US DoJ 2007a).

Case studies: Real estate sector

Scope: Real estate agents and property developers when buying and selling real property

Australia: Property purchase in false name

A drug offender was arrested for growing a large crop of cannabis on a property. Upon investigating the offence, it was established that the property had been purchased under a false name. Enquiries revealed that the registered owner had the same first name as the offender, however, their surnames were different. In addition, the registered owner had the same year and month of birth as the offender but the days differed. The fraud was able to occur as at the time of signing the contract the real estate agent failed to ascertain proof of identification (AUSTRAC 2008).

Australia: Corporate property purchase

A cult that conducted sarin gas attacks in the Tokyo subways in March 1995 had some of its members based in Western Australia. They purchased a 500,000 acre sheep farm 375 miles north-west of Perth and they formed two companies. In June 1993, one company was used to import electrical February 2009. A total of 33 people were charged as a result of Operation Wickenby (Twelve charged over $10m tax evasion. News.com.au 10 February 2009. http://www.news.com.au/breaking-news/twelve-charged-over-10m-tax-evasion...).

Australia: Involvement in drug trafficking

Australian law enforcement authorities launched an investigation into allegations of a Colombian-based syndicate’s involvement in the importation of cocaine to Australia. Proceeds generated by the sale of the drugs were reportedly repatriated to the United States and then laundered through the black market peso exchange. Investigations in the United States and Australia revealed that the offenders had purchased debt owed to the Colombian-based syndicate in exchange for cash that they received in Australia. The syndicate enlisted the services of an accountant/financial advisor to assist in the laundering of the proceeds that was facilitated via a foreign exchange company that remitted funds to multiple overseas accounts. Upon the foreign exchange company and the syndicate deciding on a rate for the exchange of Australian dollars into US dollars, a syndicate member immediately commenced depositing funds into multiple accounts held by the foreign exchange company throughout the city. The syndicate gave the foreign exchange company instructions that upon their deposit in accounts, the illicit funds were to be immediately remitted to overseas bank accounts. Aside from these funds, the syndicate also held approximately A$800,000 cash in a safe deposit box at a bank (AUSTRAC 2008).

Australia: Accounting firms facilitating fraud

Mr A was involved in a multi-million dollar tax fraud lodging fraudulent GST claims. He used stolen and false identities and forged documentation to open and operate bank accounts, obtain credit cards, register companies and open serviced and virtual offices. Following the GST fraud, Mr A’s company’s received the proceeds of the fraud and subsequently transferred the funds into other company accounts and various stolen identity accounts. These funds were moved constantly to have the appearance of being legitimate. Mr A also falsified trade documents to launder money between the companies controlled by him. Mr A also employed international accounting firms using stolen identities and provided forged documentation to help undertake the fraud. He used these gatekeepers to help distance himself from the underlying fraud. Once the proceeds had been layered, Mr A then withdrew or spent funds via automatic teller machines, business cheques, credit cards, cash cheques, electronic debit system, direct transfers to other parties and cash withdrawals. The cash withdrawals were varied in amounts and were both structured and non-structured (APG 2008).

Australia: Use of legal arrangements for real estate

Accountants and lawyers helped to organise several loans and set up the various legal arrangements needed for the purchase of real estate. Non-trading real estate companies were set up and then used to purchase real estate on behalf of the client. To further insulate the client from the laundering scheme, the accountants and lawyers actively participated in the management of these companies (APG 2008).

Australia: Firm facilitating structuring

This case involved the production of large quantities of amphetamines in several states of Australia. The suspects laundered most of the proceeds of the manufacture of the amphetamine with the assistance of Australian entities. The Australian-based entities deposited cash supplied to them by the wife of the main suspect (usually in structured amounts under the A$10,000 reporting threshold) into their own accounts. The funds were drawn from the accounts using cheques payable to the suspect’s wife or a company or business over which she and her husband had control. The Australian-based entities were also instructed to send some of the money to overseas accounts by international wire transfer. Money was often moved through different accounts, before being wire transferred offshore.

The case involved approximately A$5m. Over A$1m was also laundered by the group through an equipment including transformers, static converters, generators and cable, to Australia. The purpose was to set up a false company where they would eventually undertake testing in Australia. They used the front company to purchase the property for approximately $400,000 that required them to make transfers over the sum of A$10,000 (APHR 2008).

Australia: Mortgage provider

In October 2008, a mortgage provider in Melbourne severed links with one of its agents after it became known the agent was closely associated with one of Melbourne’s most infamous organised crime figures. Exactly what was behind the fact that the connection had already been known for a year or so was not made clear. What was made clear was that laundering illicit gains from narcotics was the ultimate intention. Victoria Police’s Purana gangland taskforce alleged in an affidavit lodged in the Victorian Supreme Court in October 2007 that the agent was involved in a ‘large-scale money laundering operation’ intended to hide drug trafficking profits (Hughes & Ferguson 2008).

Hong Kong: Drug trafficker investing in real estate

Hong Kong Narcotics Division, Security Bureau reported the case of a drug trafficker, Mr Z, who had made several investments in real estate and was planning to buy a hotel. An assessment of his financial situation did not reveal any legal source of income. He was subsequently arrested and charged with an offence of money laundering. Further investigation substantiated the charge that part of the invested funds were proceeds of his own drug trafficking. The purchase of a hotel has an added advantage for money laundering as hotel business is a cash intensive business (Hong Kong Narcotics Division 2007).

United Kingdom: Real estate agents involved in financing of terrorism

Mr A admitted to writing information on how to establish an extremist cell and a training course on the manufacture of explosives. He was charged with providing material support to a terrorist organisation with the aim of overthrowing the Libyan Government and replacing it with a fundamentalist Islamic state. The US Treasury alleged that five British residents of Libyan origin had links with the Libyan Islamic Fighting Group, as well as three real estate companies operated by one of the men and an aid agency (Agence France Presse 2007).

United States: Use of shell companies for mortgage fraud

In a case involving a former branch manager and his wife, it was alleged that the defendants obtained mortgage and other loans from numerous banks and a finance company, where one of the defendants was the branch manager. His wife, the other defendant, allegedly laundered the loan proceeds through a series of shell companies. On 24 October 2006, both defendants were sentenced to nine years imprisonment, followed by five years of supervised release and ordered not to be employed in any mortgage-related business. They were also ordered to pay restitution of US$416,652 (US DoJ 2006).

United States: Mortgage fraud

In October 2008, the US Department of State announced a more than 14 year federal prison sentence for a former Georgia real estate agent for mortgage fraud. He was ‘ordered to pay US$11,194,300 in restitution on charges of conspiracy, bank fraud, wire fraud and money laundering related to a multi-million dollar mortgage fraud scheme’ (Nahmias 2008: np). He orchestrated a convoluted scheme with very overpriced properties where all parties except the mortgage providers were complicit. Eleven others in related cases were also given prison sentences, including a closing attorney and a loan broker (Nahmias 2008).

Case studies: Trust and company service providers and insolvency practitioners

Scope:

• Trust and company service providers: Including post office boxes and locked bags providers,

company formation agents, office space providers, secretary service providers and businesses that provide a registered address to third parties

• Public trustees

• Insolvency practitioners when performing their duties in insolvency matters and when buying or selling precious metals and stones

Australia: Safety deposit box

A Colombian-based drug syndicate that imported cocaine into Australia used a safe deposit box to store approximately A$800,000 of laundered cash proceeds. Prior to being deposited into the safety deposit box, these funds had been transferred from Australia to multiple overseas bank accounts via a foreign exchange company (AUSTRAC 2008).

United States: Use of shell companies in health care fraud

In the case involving a US$6.4m health care fraud and money laundering scheme, one of 12 defendants allegedly ‘laundered a substantial portion of the health care fraud proceeds through a series of shell corporations set up for the sole purpose of concealing the illicit monies’. On 7 December 2007, the defendant was sentenced by US District Court to 78 months’ imprisonment on charges of money laundering conspiracy and of making false statements to a Federal Grand Jury (US DoJ 2008a).

United States: Use of shell companies in visa fraud

In a case involving two individuals from Houston, it was alleged that both defendants

created more than one hundred shell companies to facilitate employment based visa fraud on behalf of aliens from various countries throughout the world, including countries now designated as Special Interest Countries (US DoJ 2008b: np).

Falsified documents were then reportedly submitted as support documents in hundreds of fraudulent visa petitions and applications. On 6 February 2008, one of the defendants was sentenced to 18 months imprisonment, two years of supervised release and 100 hours of community service on charges of visa fraud. The defendant was also ordered to pay to the United States US$50,000 as proceeds gained from the illegal activity. The other defendant is currently a fugitive and is believed to reside in the United Kingdom (US DoJ 2008b).

Case studies: Dealers in precious metals and stones

Scope: Dealers in precious metals and stones including jewellers, auctioneers, pawnbrokers, secondhand dealers and antique-dealers when buying and selling precious metals and stones.

Australia: Structured silver purchases

An investigation into money laundering offences revealed the case of an individual who purchased approximately A$180,000 worth of silver using cash amounts of under A$10,000. The individual also enlisted five other people to purchase silver in similarly structured amounts on his behalf (AUSTRAC 2008).

United States: New York jeweller

In June 2003, 11 individuals were arrested at various jewellery stores in Manhattan’s diamond district for allegedly participating in an international money laundering scheme. Intelligence indicated that Colombian drug organisations were instructing their US employees to purchase precious stones in New York with drug proceeds, then smuggle these items to Colombia, where they were resold to refiners for ‘clean’ pesos that the traffickers could use risk free. Based on this information, ICE agents launched an investigation in 1999 into several New York jewellers alleged to be involved in the money laundering scheme. According to the charges, the New York jewellers were approached by undercover agents posing as drug dealers who informed the jewellers that they were looking to buy gold and diamonds with their illicit funds in order to smuggle these precious metals to Colombia and resell them to refiners in exchange for ‘clean’ cash. According to the charges, the jewellers willingly accepted some US$1m in drug funds from undercover agents. They also offered to smelt the gold into small objects, such as belt buckles, screws and wrenches, in order to facilitate the smuggling of these goods to Colombia (DHS 2003).

United States: Diamond smuggling

In a recent case in the United States, a US County Sheriff’s deputy and two co-defendants allegedly transported diamonds from New Jersey to South Florida that were represented to be the drug proceeds of a Colombian drug trafficker, in violation of Title 18, United States Code, s 1951 (FBI 2008g).

United States: Jewellery stores

In December 2007, an individual was sentenced to six years’ imprisonment, ordered to pay a personal money judgment of US$1,610,400 and had his condominium forfeited for allegedly laundering drug proceeds and undercover sting money at various jewellery stores including two jewellery stores owned and/or operated by the defendant. The defendant was also found guilty of failing to notify the Internal Revenue Service of cash received by his jewellery businesses. In August 2007, his two jewellery businesses were reportedly sentenced to five years’ probation, ordered to pay fines totalling US$350,000 respectively and approximately US$6m in inventory and all funds held in the companies’ bank accounts were forfeited (US DoJ 2007b).

Canada: Use of diamonds as monetary instruments

A money laundering investigation was initiated after the seizure of US$600,000 at an airport during a random search. Subsequent investigation revealed that the subject was operating two money service businesses with jewellery workshops in the back. A search of the money service businesses revealed thousands of high-quality diamonds. Information obtained following the seizure revealed a complex international money laundering network involving foreign diamond suppliers. Total payments of US$7.4m were made to two diamond suppliers, one located in Europe and the other in the Middle East. The seized diamonds were being used as monetary instruments to move currency across international borders (APG 2008).

Singapore: Jewellery purchases

A former lawyer in Singapore allegedly embezzled S$12m from accounts of clients of his law firm. The individual then bought S$2m worth of jewellery and precious stones from a high-end jewellery store before leaving the country. He reportedly transferred S$1.8m to the jeweller’s bank account and paid the remaining S$270,000 using a cash cheque from the clients’ account of his law firm (Lum 2007).

Middle East: Diamond supplier

A group was revealed to be involved in money laundering activities and marijuana trafficking. The group was also laundering criminal proceeds from other criminal organisations. A link was established between the group and a diamond supplier in the Middle East. Between July and December 2002, a total of $1.2m was transferred by wire to the diamond supplier. The diamonds were then sent to the group’s contact overseas (APG 2008).

Last updated
3 November 2017