Miranda Patrucic, OCCRP

Jurisdiction
Cayman
Bahamas
Nauru
Luxembourg
Hong Kong
Panama 34
British Virgin Islands 13
Offshore Banks IBCs/Exempt and/or
Restricted Companies
570 50,951
100,000 413
400
200 68,000
474,500
372,667
360,000

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Bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages:
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Greater privacy
Low or no taxation
Easy access to deposits
 Protection against local, political, or financial instability
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Offshore banks are exempt from a wide range of regulations normally imposed on “onshore” institutions:
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Their transactions are tax-exempt
Not encumbered by reserve requirements
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Free of interest-rate restrictions
Often exempt from regulatory scrutiny with respect to liquidity or capital adequacy

System Tailor Made for Criminal
Purposes
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While mother banks accept the appropriate set of standards in their home base, in heaven jurisdiction they act in a less scrupulous manner
Banks can be set up with relative speed and ease and a minimum of due diligence investigation – as long as they meet a basic level of funds
Ease of establishing an offshore company:
Typical add: “offshore companies are beyond the control of one’s own government, are protected from government rules, regulations, and taxes, facilitate business under less stringent regulations, and offer a high level of confidentiality”

System Tailor Made for Criminal
Purposes
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Existence of unregulated financial players (i.e. trust companies, brokerage houses, money exchange houses) that can move money with ease, speed and no oversight
Trust schemes which allow the person who sets up the trust to also be beneficiary
Lack of cooperation with law enforcement (opportunity for money to be moved to another jurisdiction)
Mobile accounts (criminals will open an account in one jurisdiction, but with instruction for any incoming funds to be transferred immediately to another location, in case of any inquiries, bank in the second location must be informed)

System Tailor Made for Criminal
Purposes
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The availability of casinos (criminal takes a big pile of money, buys some chips, play a bit, than take the chips back, casino gives him bearer check which amount of money that is called casino winnings)
The availability of free trade zones (laundering operations are located within legitimate business, money can be used to buy legitimate goods and resell them in the home country)
Facilitating role of agents (financial consultants, lawyers, accountants, professional money laundering specialists)

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Every year $1 trillion flows out of developing countries into offshore accounts
Shielded behind a veil of secrecy and high-paid lawyers and proxies criminals are using offshore heavens as fronts for drug, and weapon smuggling, privatization frauds and white collar crime
Tax evasion
Hiding assets
Money laundering

Muslim militant group Hezbollah
Sinaloa drug cartel
Russian crime networks

Offshore company
Company’s proxies
Agent
Accountants
Lawyers
Company formation agents Shareholder’s proxy

Proxy: a person who knowingly or unknowingly acts on behalf of someone else hiding their real identity.

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Shareholder’s proxies receive shares in the company in their name and they appear in all the paperwork.
However, they sign an undated document that transfers their shares to the real owners.
Simply by adding the date, (the real owners) can become the company shareholder at any time.

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Real director of the company can request a general power of attorney from the designated director, which would give him full power. Thus, he will act as the company director, without being mentioned as such in the offshore company documents. or
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Real director of the company can pay designated director to do what he tells him to do. An undated, blank resignation letter represents a guarantee against possible abuse. The director can be dismissed and all decisions made after the date written on the resignation letter are rendered null.

Miranda Patrucic, OCCRP

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Money laundering is the criminal practice of processing ill-gotten gains, or
“dirty” money, through a series of transactions; in this way the funds are
“cleaned” so that they appear to be proceeds from legal activities.
Money laundering generally does not involve currency at every stage of the laundering process.

Drug trafficking
Counterfeiting Smuggling Theft
Embezzlement Racketeering Tax evasion
Illegal arms sales
Bribery
Illegal trade of cultural property
Kidnapping
….

Placement
Initial injection of illicit funds into the financial system
Purpose is to separate illicit funds from their illegal origins.
Layering
Multiple layers of transactions that further separate funds from their illegal origins
Purpose is to make it difficult to trace the funds to their illegal origins.
Integration
Reintroduction of illicit funds into legitimate economy.
Purpose is to allow criminals to use the funds without raising any suspicion.

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Depositing cash into an account or into several accounts in different locations
Paying cash for bank drafts, traveler's cheques, and other value instruments
Purchasing items of value for cash (such as works of art, antiques, motor vehicles, and so on) for the purpose of selling them
Commingling criminal cash with legitimate cash in a business account
Converting cash in one currency into another currency

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Wiring payments to and from various accounts (personal and corporate) in different jurisdictions
Buying, then selling, an investment product
Buying and then surrendering a single-premium insurance contract
Engaging in international trade transactions
Making other types of payment where funds move from one account to another

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Purchase of property (for personal use or investment)
Purchase of other high-value items, for example, jewelries, antiques, works of art
Purchase of legitimate businesses
Purchase of investments for income
Any purchase for personal use with a cheque, credit card, or other payment method

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Is a global threat
Is fuel to expand criminal enterprise
Helps hide corrupt payments
Uneven playing field for honest business
Risks for financial systems & institutions-erodes integrity
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Economic:
 Deters private investment
 Destroys competition
 Revenue impact
Financial:
 Perpetuates corruption, obstructs good governance
 Erodes confidence
 Destabilizes financial institutions