Money Laundering Typologies (O.S.F.I.)

1. Money Laundering Typologies (O.S.F.I.) Sgt Gene HANN RCMP Toronto IPOC Section (905)953-7577

2. Money Laundering Stages • STAGES: • Placement • Layering • Integration • Laundering is FRAUD based activity • Deception as to the parties involved, the source (and sometimes the use) of funds, the value & details related to the transaction, documents legitimizing the transaction (including identification)

3. What institutions or transactions are prone to laundering? • Any transaction in which value is received and eventually paid out can be utilized as a laundering mechanism • Any individual or institution that handles these transactions can be wittingly or unwittingly used to launder the funds

4. Principals of Legitimate Funds Transfers • Speed • Cost • Security • Formal institutions require a paper trail. The documents that are produced prove funds have been sent and or received.

5. Money Laundering Violates the principals • Willing to take more time (indirect routing, additional steps in layering process) • Willing to pay higher fees (exchange rates, commissions, bribes) • Willing to put the funds at risk • Profits from crime covers the additional costs MOTIVATION: prevent confiscation

10. BULK CASH SMUGGLING • Transport across borders/jurisdictions • Form of funds not traceable • Borders create jurisdiction problems for the authorities • International bulk cash smuggling • Preferred note is the $100 USD • Domestic bulk cash smuggling • Preferred note is the $100 CDN • Street level drug trafficking • $20 bill is the predominant note

11. Cash smuggled in gas tank

13. Explanations to legitimize cash • Sale/purchase of real estate • Casino/gambling winnings • Inheritance • Profits or sales revenue from domestic business or from international trade • Cultural/personal aversion to financial institutions • Lack of financial institutions or capacity to send/receive in the other foreign country

15. Aunt Matilda

16. Aunt Matilda

17. Aunt Matilda (Cont’d)

18. Gambling • Subject enters casino with large sum of cash • Purchases chips with cash & plays • THEN • Cashes out chips for a draft

19. Bearer Instruments • These instruments lose the security of having a named party, prone to laundering • Possible exceptions based on circumstances: • Travelers cheques • Securities

20. Smart Cards • Provides the anonymity of cash but eliminates the chance of detection based on the amount of bulk and weight of the comparable value of cash • Police and Customs officials not likely to have the means to read the value stored on the card

21. Credit Cards • Value can be loaded onto the card, transported to another country and then redeemed as cash • Cash applied to paying off the credit card balance is not as likely to generate the same concern by branch personnel as an attempt to deposit the funds into an account

22. Avoiding Reporting Requirements • SMURFING • Use other individuals that will not draw suspicion to load the cash into the financial institutions • STRUCTURING • Break large value transactions down into smaller amounts so as to go below reporting/suspicion thresholds. Can be done by others or by self

23. White Label ATMs • Operator/operator receives the cash from criminal organization & loads same into the ATM

24. Commingling funds with legitimate business • Criminal launders the funds by providing cash to a business that generates cash sales • The legitimate business/employee may be given a commission for laundering the funds • Money order agent acquires the cash at discount by issuing financial instruments • Criminal launders the monies through a lawyer using his/her trust account

25. Electronic Funds Transfers • Funds move through accounts without any apparent connection to business activity (quick in and outs) • The beneficiary and the recipient are in reality the same

26. NOMINEES Transactions conducted by others on the criminals behalf Title held in the name of another party to prevent forfeiture Use friends, family or individuals that they can trust Lawyers have been utilized in this capacity

27. Loan back • Creditor and debtor are the same individual/entity but relationship is disguised (private corporation, off shore entity, private loan through family etc). • Creates an justification for sending large sums or regular sums off shore

28. Large value asset purchase • Subject buys large value asset. • Examples: • Placement: cash to buy car • Layering/Integration: money orders into law office to purchase real estate

29. Multiple Safety Deposit Boxes Criminals prefer to receive and pay with cash • Proceeds of crime retained in stash houses or safety deposit boxes to fund future criminal ventures • Afford secure storage, institutions does not know contents, liquid cash readily available CLUE: number of boxes and locations

30. MONEY LAUNDERING ALERT / JANUARY 1992 International money laundering possibilities in various commodities

31. MONEY LAUNDERING ALERT / JANUARY 1992 International money laundering possibilities in various commodities

34. POC Entry into Institutions Unwittingly compromised: Employee (corrupted, compromised or not sufficiently trained) Trusted established relationship (especially vouching by a professional) trumped red flag money laundering indicators Willful blindness Desire to acquire business over rides ML indicators