Part 1 - AL-Tax

Chapter 13●●●Private banking services. Money launderers have, in the past, made use of theprivate banking services offered by reputable financial institutions to concealtheir dealings (FATF, 2002). This practice has, however, become less appealingto launderers, since many jurisdictions have introduced policies requiringaccounts suspected of being used for money laundering to be disclosed to theanti-money-laundering agencies.Fictitious loans. The launderer, after transferring the proceeds to a foreignaccount in the name of a foreign corporation or trust established by the launderer,may remit the proceeds back to the launderer’s jurisdiction falselyrepresented as a legitimate loan from that account holder (Kennedy, 2005).Brokers. The liquidity and high turnover in the financial markets, coupledwith the returns that can be earned from financial instruments, have madethe purchase of shares, bonds, and other market-traded financial instrumentsan important component of many money-laundering schemes (FATF, 2003;Trehan, 2004; Kennedy, 2005). For obvious reasons, many launderers preferto purchase bearer securities and bearer negotiable instruments (FATF,2002).More recently, it appears that launderers have begun to resort increasingly to theinsurance and trade sectors to sanitize proceeds. These proceeds may be used topurchase insurance products, thus converting the proceeds into legitimate paymentsby the insurance company (FATF, 2005). Also, the returns on insurance maybe more certain than those of market-traded instruments where, in addition, thecapital component of the launderer’s investment may be at risk.Anti-money-laundering measures have typically focused on the movement oflaundered proceeds through the financial system and the physical transportationof cash (FATF, 2006b). Unsurprisingly, this has seen a migration of money launderingto the international trade sector. Proceeds are now increasingly being launderedusing methods such as over- and under-invoicing of exported/importedgoods, multiple invoicing of such goods, over- and under-shipments of goods, andfalse declarations of traded goods (Trehan, 2004; FATF, 2006b).13.5 Eyes wide openMoney laundering exists because certain individuals do not want the authoritiesto be aware of their illicit activities and the financial gains from those activities,or because they wish to shelter legitimate financial gains from taxation liability.However, whatever the means that are used to launder money, the launderers319