A Beginner’s Guide to Laundering Money

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Let’s suppose you have some extra money — maybe up to a few hundred dollars, or perhaps a million that is squandering away in your wallet. Maybe you’ve stumbled across it through a questionable source. Or perhaps you’d prefer to keep it from the tax authorities from different jurisdictions. Maybe you don’t want to let your spouse know the tax. Or your kids.

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It’s important to note the flow of capital from illicit sources has been disrupting the world economy, removing the wealth of emerging countries and causing a rise in the price for assets across the advanced world. This doesn’t seem to discourage individuals from engaging in this activity all the time.

China is the world leader by a longstanding tradition. Between 2002 and 2011, $1.08 trillion left the country without permission, despite the laws governing currency control that require citizens to have a permit to exchange more than a year’s worth of yuan to any currency outside of the country.

It’s a global leisure activity. In the same period, it was estimated that $880.96 billion was taken from Russia, $461.86 billion left Mexico, $370.38 billion left Malaysia, $343.93 billion left India, $266.43 billion left Saudi Arabia, and $192.69 billion went to Brazil. The total outflow, which included 20 emerging economies total, reached $5.9 trillion, equivalent to $49 billion per month.

From corrupt police and drug cartels to tax evaders and alimony cheats, More or less everyone is doing it.

Americans looking to transfer their money abroad are experiencing difficulties due to Obama’s Foreign Account Tax Compliance Act which obliges foreign banks to turn over account information held in the name of US citizens. However, there are plenty of options for those dedicated to smuggling money — especially if they’re willing to break the law.

Here are the essentials:

LESSON 1: THE PEOPLES’ REPUBLIC Offshore

Macau and Hong Kong are considered Special Administrative Regions of the People’s Republic of China, and one of the reasons that make them unique is the fact that they’re great locations to make cash launder. Macau is the gambling capital in the entire world, having seven times the gaming revenue as Las Vegas, and Hong Kong is home to a variety of regulated banks and intermediaries who can transfer funds anyplace in the world without needing to answer a lot of questions for a cost.

First, you must find yourself Junk.

Let’s suppose you reside or work in China and wish to hide the cost of bribes. You must first change it from yuan to an alternative currency without the government noticing. The easiest method to do this is to call an agent, a junket located in the mainland of China, who will offer you casino chips in exchange for cash and will waive fees of up to 20 percent.

Hit The Casino

You can take the chips to a reputable cooperative casino, where you can play on them, exchange them, exchange for Hong Kong or US dollars and then spend them as you like or make a deposit at the Hong Kong bank branch. You can take them to a specialist lawyer with offshore laundering for extra security. The casino will blend your winnings with those of genuine gamblers, and its accountants will record your $1 million as pay-out winnings.

A Whirlwind Tour

Your lawyer or bank must transfer the funds electronically so that the money can cross multiple border lines, thereby avoiding any confiscation or detection. For instance, the funds could be deposited in a US trust that is managed by a shell corporation located in Grand Cayman, owned by another trust located in Guernsey having an account in Luxembourg which is managed by a Swiss or Singaporean or Caribbean banker who isn’t sure who the account’s owner is.

LESSON 2. LITTLE BLUE MEN

Do you remember the Smurfs, the adorable blue creatures? In the world of finance, “smurfs” aren’t so innocent. They’re ordinary people who help the big players to launder their money through a myriad of small transfers and bank deposits to transfer funds without being noticed.

Make Yourself A Smurf

When you’ve arranged a deal with a smurf through email or telephone, you’ll be asked to send the money to the smurf’s home (probably not an animal in the forest; however, you’ll don’t would). The smurf then deposits tiny amounts of your cash in a daily account for weeks, months, or even years and avoids watching observers by keeping the small sum.

Retire

In the meantime, you can also request your smurf to withdraw some money which is now inaccessible for a shopping spree. But don’t go crazy. Better to get a bank to wire transfer the funds to your offshore partners or your shell companies.

Beware of Cocky Smurfs

Smurfs are meant to remain in the shadows. This is why they’re called smurfs. However, the growth of internet banking made smurfing more profitable, and some of the best players became so famous that they started to attract attention. In the past, Hong Kong’s most prolific money laundering ring

was run by a young man known as Luo Juncheng. He first created an account at the Bank of China account with $500. Over the next eight months, the smurf made more than 5000 deposits, as well as more than 3,500 electronic withdrawals, and transferred $1.67 billion overseas before receiving notice. The judge sentenced him to 10 years of prison in 2013, which was not a good thing for the smurf and his customers.

Other smurfs attract the attention of authorities due to their extravagant lifestyles. In March, yet another Hong Kong resident, Carson Yeung, was sentenced to six years in prison for stealing $91.27 million from his accounts from 2001 to 2007. A former hairdresser who’d later bought the United Kingdom’s Birmingham City football team, the man claimed to have made hundreds of millions of dollars of profits from stock exchanges as well as a hair salon and also from gambling.

LESSON 3 3. Going Corporate

The most potent players don’t need casinos, corrupt bank managers, junkets, smurfs, etc. They can transfer billions or millions of dollars without dealing with cash or even involving banks or banks at all, instead funneling their funds through corporate transactions (bribes or kickbacks or embezzlement plans), which are not subject to currency control.

How to Over-Invoice

Imagine you’re a government employee or corporate manager, and you’d like to get one million dollars in bribes or kickback in exchange for granting the most lucrative and costly contract to a local or foreign company. You accept the agreement and the payment and then increase the price by a few million dollars, including one million dollars for yourself.

The client transfers your $1 million excess into a shell company located in an offshore location, where the owner’s name is not revealed. The client is then free to invest or use the funds. The company wrote the expense off and transferred the money to an outside consultant.

Perhaps you’d rather the $1 million you have saved be used to purchase an offshore asset for you, or it is paid out gradually through fees or salary to your family members. Whatever the case, you’re ready to go.

How to Under-Invoice

It’s the same in reverse. You simply sell your product and services to a company for a price lower than what the products or services are worth. After that, you receive 1 million from the business purchased from the embezzled funds. The money can be put directly into an offshore account with no identifying information or into any asset you choose.

LESSON 4: SPEAK it with DIAMONDS

They’re a girl’s best friend and a regulator’s nightmare.

Tartar Control

Let’s suppose you want to transfer $1.5 million to the US without detecting tax officials. One UBS whistleblower revealed that customers were encouraged to purchase diamonds in cash and share them with the US inside toothpaste tubes to deceive authorities. The gems are then transferred to private dealers after washing out the Colgate.

Stamps And Plastic

Another option is to move your money to an anonymous debit card. If you’d prefer to keep old-fashioned stamps, collectible ones still have fans.

This past May, Credit Suisse admitted guilt to these and other activities like shredding documents and limiting transactions to the US $10,000 limit on reportable transactions to help American clients avoid tax and pay the fine that was $2.6 billion. It’s not like they’re the only ones guilty.

LESSON 5. TROUBLE Ahead?

Anyone who wants to launder money should keep in mind that crime is a significant source of income; however, the costs are rising. A massive clampdown in the West and a comparable one to combat corruption in China will curb illicit flows of money in the long term. However, both campaigns are likely to have increased the flurry of cash in a short time.

As per the UN, the biggest recipient in terms of FDI (Foreign Direct Investment) in 2013 was the British Virgin Islands, an archipelago with 23,000 inhabitants. Around $92 billion of foreign currency was deposited there, more than India and Brazil altogether. Other havens that we can receive huge “investments” comprised those of the Cayman Islands, Liechtenstein, Monaco, Andorra, and Vanuatu.

But the money may not stay in New York. In 2014 the Chinese beat out their counterparts, the Russians, as the biggest purchasers of New York City condos. Another way to use money laundered is to buy London Mansions, boat art, securities, and luxury estates worldwide.

They also control stock or bond markets. Tax havens in 2012 were responsible for around 29% of total foreign investment (corporate bonds, stocks) within the US. Comparatively, China held only 7 percent of the assets.

However, the reality for those who work in the field of laundering is that “good” banking institutions are difficult to come across every day, so there are fewer ones that provide absolute security. In the end, large fish are beginning to be taken by the dragnet. One of the most prominent cases is currently underway in Spain. The most excellent soccer star in the world, Lionel Messi, and his father are being accused of having smuggled $5.56 Million (4.2 million euros) worth of sponsorship money. They deny all accusations.

In the meantime, the third Smurfs film, which is said to be a complete remake — is currently being made ready for release in 2016 following the two previous films that made a total profit of almost $1 billion globally. It could be a good investment opportunity.

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