Walking Accounts
One popular ruse used by criminals is to open an account in a given jurisdiction with standing instructions for incoming funds to be immediately transferred to another location. This was popular during a certain epoch with Panamanian banks. In this scenario, the fronting bank is instructed that in case of any inquiries, officials at the bank to which funds are forwarded must be informed. Of course the second bank has standing instructions to transfer the funds elsewhere in the case of such notice.
Law enforcement refers to these arrangements as “walking accounts”, and the software in use by most banks automatically flags for scrutiny this sort of activity. Banks which permit these kinds of accounts complicate severely law enforcement efforts aimed at seizing dirty money.
Banks located in loosely regulated jurisdictions have fee structures tailored to profit from this kind of account. Deposits come in, and the money immediately moves back out. This kind of account can also act as a warning mechanism when inquiries by law enforcement occur, allowing countermeasures to protect the money.
Opening your own Bank
A more sophisticated layering tool is to open your own bank. Money trails are more difficult to follow if the launderer owns his own bank, particularly in one of the jurisdictions of loose regulation. Obviously, one has much better control of a bank’s procedures and compliance and record keeping if one owns the bank. It doesn’t cost that much to open your own bank. It can be done for less than $50,000 and in some jurisdictions less than half that will do. If things get hot, the launderer closes the bank and destroys any records.
Using Intermediaries
Money launderers usually use lawyers all along the way because that way you are protected by attorney-client confidentiality. Offshore centers are nearly always used, their brokers and agents generating customers, acting as account intermediaries, and providing key insulation.
Laundering is a serious profession and requires a thorough knowledge of accounting and fiduciary practices, banking regulations in different jurisdictions, and law enforcement practices. Professional launderers obviously therefore include accountants, lawyers and private bankers.
Among the panoply of services offered by numerous offshore financial institutions are the generation of false invoices, bills of lading, end-user certificates and other forms of documentation.
A variety of AML software currently in use in 2007, is equipped with mechanisms to flag a wide variety of suspicious activity for further scrutiny.
