Is it Money Laundering or an Honest Mistake? You Might Be Surprised to Find Out

April 1, 2019

Money laundering is simply the ‘cleaning’ or disguising of the origins of the proceeds of crime. It can be committed by someone with their own proceeds (self laundering) or by someone handling someone else’s proceeds. Money laundering schemes range from the simple through to the sophisticated and may involve chains of companies and offshore accounts.

There are three types of Money Laundering:

Placement – the process of getting criminal money into the financial system.

Layering – moving money in the financial system through complex webs of transactions, often via offshore companies.

Integration – the process by which criminal money is absorbed into the economy through activities such as investment in real estate.

The four cases below show just how easy it is for “innocent” people to assist in money laundering.

In my defense, I have always told friends when they are inadvertently assisting money launderers – at least as strongly as you can tell a friend. But their stories show why the war on money laundering is far more nuanced than regulators would have us believe.

The elderly lady

A woman was recently widowed and decided to sell her husband’s Bentley. The first prospective buyer offered her the full asking price which she accepted. He paid cash. She was relieved that the buyer didn’t haggle and all seemed good, then she went to her local bank.

The teller was shocked to see so much cash and asked where the money came from. When she explained her bereavement and the car sale the teller helpfully told her the single transaction and cumulative limits to prevent an “investigation”.

It is surprisingly easy to launder dirty money by mistake

Knowing the trigger amounts, the lady began slowly paying in the money and even opened an account with another bank, keeping the cash deposits under the limits.

According to investigators, the widow was was aiding and abetting money laundering but she had no idea until I told her, and even now she can’t comprehend what she did as money laundering. She doesn’t wear dark sunglasses, wear a shiny suit and have a numbered Swiss bank account. In short, she just looks like any other honest elderly person.

A secondary point is that the bank teller shouldn’t have “helped” the customer by telling them the transaction limits for triggering investigations.

The private banker

A private banker was so proud when he helped his firm avoid laundering money for a client. The bank’s client received a transfer of US$ 20m in his account and the compliance department correctly flagged it and enquired as to the source of the funds. So far, so good.

The client said they had sold a piece of art. The private bank realized that a US $20m piece of art would be well documented so asked for the sales invoice, purchase invoice, a professional valuation and insurance records. The client responded that the art was around 20 pieces of “low value” which were not individually documented.

Private bankers make mistakes

The bank realized that they were being played for fools and persisted in asking for more details. The client then transferred the money to another private bank.

My private banking buddy and the compliance department were delighted and very proud that they had not accepted the hot money. Kudos to them!

Unfortunately, they had tipped off their client and had failed to freeze the account. They had aided and abetted the client’s money laundering and hadn’t even realized it The client just found a bank which asked fewer questions and the hot money was successfully integrated into the banking system.

The retired businessman

A successful businessman retired a decade ago to play golf. He recently sold some development land to a New Yorker and was given $250,000 + an extra $50,000 in cash (he still has the money “under the bed”). The $50,000 was from a “cash business” back in New York.

The land buyer got an added bonus, they pay property tax on $250,000 and not the full value.

There are a lot of people who view cash payments as an innocent way to reduce their tax costs but evading tax is a crime, even if you don’t get caught.

Each case above shows how easy it is for good people to get into complicated money laundering situations.

If you have been accused of Money Laundering or other financial crimes, your best defense is a good defense. Contact Adams & Associates today for a case analysis.