Interlocking Global Business Systems: The Restructuring of Industries, Economies and Capital Markets

By Edward B. Flowers; Thomas P. Chen et al. | Go to book overview

often protected by traditions such as banking secrecy. It's nobody's business how you make your money as long as you do it legally. Unfortunately, money- laundering, although it derives its criminality from another criminal act, is very harmful, not only because it hides crime, but because it implicates the personnel and institutions of legitimate business in criminal activity.


BRIEF EXAMPLES TO ILLUSTRATE THE TECHNIQUES OF MONEY-LAUNDERING

Loans

In New York City, a criminal pays $20,000 to purchase $1,000 of sweaters for a small legitimate boutique. It is hard for the boutique owner to turn down the criminal's offer to pay for the sweaters, because boutiques have low profit margins and poor credit. The sweater company, located in New York City's garment district does not object to the overpayment on account, because the sweater manufacturer is also strapped for cash and needs the extra $19,000 to maintain its liquidity. In six months, the boutique might purchase another $1,000 of sweaters and then ask for the $18,000 balance to be returned. If the original $20,000 is indeed the proceeds of illegal drug sales, the facts of this transaction might later be explained away as being a purchase on account and a small business loan. The drug dealer has attempted to launder his funds for a cost of $2,000, or ten percent of his net proceeds and has implicated two previously legitimate businesses in criminal activity.


Brokerage Accounts

Brokerage accounts many be used in many ways to make it appear that the proceeds of the account have accrued from the capital gains involved in securities trading rather than from the actual criminal activity that produced the funds. Names can be changed on accounts, securities can be transferred from account to account without compensation being paid and account balances can be built up to the large amount represented by the criminal proceeds from many small deposits. This possibility of money-laundering makes the broker's investigation of the background, practices and identity of its clients particularly important.


Political Money Laundering

Political Smurfing

A variation of a bank money-laundering scheme called "smurfing" may have occurred recently when Yah Lin Trie dumped a manila folder full of small campaign contributions from the members of an American Buddhist society on the desk of the Democratic National Committee (DNC) ( Palka, 1997). This opened up the possibility that a foreign government, the People's Republic of

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