5 Money Laundering Schemes of Which to Be Aware

5 Funds Laundering Schemes

  • Casinos
  • Real Estate
  • Securities
  • Life Insurance Policies
  • Currency Exchange Bureaus

Money laundering is a major problem in the United States. Annually, approximately 1,000 federal indictments are handed down charging people with laundering, according to the Internal Revenue Service. Over 80 percent of people indicted end up convicted and incarcerated for this crime, with the assistance of assistance by individuals who have a forensic accounting degree. There are five common funds laundering schemes used with shocking regularity.

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1. Casinos

Casinos represent a widely utilized resource to pursue a laundering scheme. The process of using a casino is relatively simple. A person desiring to launder funds uses the ill-gained cash to purchase chips. The individual then holds on to the chips for a period of time. The person may or may not gamble in the interim. After some time passes, the individual returns to the casino and cashes the chips in and receives a check or cash, the money being laundered. Las Vegas is an obvious example of a location where this type of laundering occurs in the United States.

Gambling is an effective way to clean illicit funds. In a simple operation, a launderer or accomplice might use illicit funds to purchase casino chips, hold onto the pile for a period of days during which they may or may not actually gamble, and then cash the chips in for a check made out to the chip-holder or a third party.

2. Real Estate

The U.S. real estate industry is considered to be lightly regulated. Thus, it is something of a target for people involved in the laundering of money. When real estate is involved as the laundering mechanism, shell companies are set up to purchase real estate using the funds in question, according to the Washington Post. A shell company is designed to conceal the identities involved in the process. In the United States, money laundering involving real estate as a scheme is particularly in New York City, San Francisco, and Miami.

3. Securities

Laundering is a problem in the securities industry. The regulation of the securities industry remains rather spotty in the United States. A common scheme involves the use of stock option transactions. Specifically, the scheme involves the use of simultaneous puts and calls. This permits a launderer the ability to wash funds by selling a profitable contract and canceling a loss-making one in advance of their expiration dates. In the securities industry, this process is called making a mirror image bet.

4. Life Insurance Policies

Life insurance policies are also utilized as laundering vehicles. Specifically, a person who desires to wash cash purchases a single-premium life insurance policy. The person holds onto the policy for a period of time. In the end, the launderer cashes out the policy. By doing so, the launderer receives a clean check from the insurance company. An alternate course involves a person purchasing this type of policy. The individual using this scheme then uses the policy as collateral for a loan.

5. Currency Exchange Bureaus

A final type of scheme of this nature involves the use of currency exchange bureaus. Currency exchange bureaus are not heavily regulated. These businesses also deal in significant amounts of cash. A great deal of money goes in and out of an exchange on a daily basis. They are necessarily involved in international monetary exchanges. These exchanges are used to change large amounts of criminal proceeds into another currency, oftentimes a European currency and in small denominations. The money is then typically smuggled out of the country, requiring dealing with customs officials in destination countries. Nonetheless, the money is “cleaned” by this process.

State and federal law enforcement officials continue to strive to contain laundering. Law enforcement oftentimes involves individuals with a forensic accounting degree to work to curb money laundering.