Shells, Trusts and similar entitiesIn International Money Laundering

SSA Deborah Morrisey

Financial Investigations

ICE, Miami, Fl

To Be Covered Today:

Why utilize off-shore entities?

How easy are they to establish?

What are the typical offshore entities utilized in money laundering?

How are they structured?

How do you get to the beneficial owner?

Some case examples.

Why utilize Off-Shore Entities?

Perception of Bank Secrecy.

Criminal Organizations recognize the difficulties law enforcement encounters when international borders are crossed.

Opens the door to the utilization of a wide variety of financial products and/or services. Banking and Brokerage services

Tax shelters

International Investments

Why utilize Off-Shore Entities?

Range of service providers and types of non-financial services offered. Mail drops

Answering services

Legal representation

Multi-jurisdictional citizenship

Ease of establishing complex web.

How do they service the Criminal?

Hide the source of funds used to buy property.

Conceal the true ownership of real property.

Maintain control over criminal proceeds and assets.

Break link between illegal activity and assets.

Provide some security from detection. Fluctuation of balances or international wire traffic attract

less attention in corporate accounts than in personal ones.

Perpetuate or support a fraud.

How easy is it to go offshore?

In Short – VERY! Utilization of law firms – both domestic and

international

Utilization of various nominee incorporation services

The Internet

What are the typical off-shore entities used for money laundering?

Shell Companies

Shelf Companies

Trusts

Shell Companies

Have no physical presence, employees or product.

Operate from a mail drop, mail center, office service business or the Internet.

Set up through intermediaries or attorneys.

Laws vary as to what information the establishing service must provide to the incorporating jurisdiction.

May be owned by other corporations, nominee owners.

Shell Companies

No capitol and minimal fees are required to establish.

Are often owned by nominee shareholders, nominee directors, bearer shares or other corporate entities.

Can be registered in remote geographical locations.

Once established, shell companies can hold bank accounts, own property and maintain assets without reporting such to the licensing jurisdiction.

Beneficial ownership need not be disclosed or part of the public record.

Types of Shell Companies

Shelf Companies

Holding Companies

LLC

Representative Agencies

IBC

Basic Shell Company Structure

Nominee

Incorporation

Service

Establishes Company A

Nominee Directors

Opens BankAccounts

EstablishesMail Drop

Shelf Companies

Similar to a Shell company in that they offer no real “brick and mortar” company.

Difference between the two is age since incorporation.

Shelf companies are: Established to provide a cadre of available entities to be sold at a later

date.

A defunct corporation that was purchased for its history and later sold to a client.

A company that is passed along between clients but is kept alive and available for re-sale.

Shelf company value is based upon its age, history and banking relationships.

Law Firmin Ireland

XYZ CorporationSold

Director is Nominee Attorney

2000

Nominee Directors

Property

Bank Account Opened

Bank Account

PropertyBank

Account Brokerage

Account

Shell Holding Company

19901980

XYZ CorporationFormed in Ireland

XYZ CorporationSold Again

Trusts

A trust is a binding obligation, requiring a person (the trustee) to manage the property or assets over which he/she has control (the trust property) for the benefit of persons or entities specified (the beneficiaries) as described under the terms of the trust (trust deed and letter of wishes).

The trust arrangement can be set up for a determinate or indeterminate period of time.

The trust owns the assets assigned to it.

Trusts separate legal ownership of property from beneficial ownership.

SETTLORThe person who

transfers property or

assetsto the trustee.

TRUSTEEThe person obliged to

manage the property and/or

assets.

BENEFICIARIESThe person(s) onwhose behalf theproperty and/or assets are held.

TRUST

Trusts

Trusts are granted a greater level of privacy than corporate entities and are not required to be centrally registered.

Most services establishing trusts or other trustee services are not regulated.

Many utilize attorney escrow or operating accounts as an entry point for funds transferred to the trust.

Trusts

Trusts have many legitimate uses: Estate Planning

Tax Planning

Asset Protection

Confidentiality

Trusts and the Criminal

Legitimate use of trusts can easily be adapted to the criminal.

Although giving up the legal ownership of the property, the criminal maintains distant control over his assets.

The distant control allows him/her to shelter his/her assets from his/her criminal conduct or his/her personal connection to it.

Layering trusts with shell companies creates a complicated and confusing trail between the criminal activity and its proceeds.

Types of Trusts

Charitable Trusts

Blind Trusts

Discretionary Trusts

Life Interest Trusts

Dummy Settlor Trusts

Insurance Trusts

Settlor Directed Trusts

Limited Term Trusts

Settlor Trustees in BVI

Trust in Cook Islands

Money/Property held by the Trust through…

Delaware Company

Liberia Company

Bearer SharesNominee

ShareholdersNominee

Shareholders

Bank AccountLatvia

Bank AccountLiechtenstein

PropertyBank Account

CyprusYacht

Bahamas

Panama Company

Luxury Cars

Unraveling Beneficial Ownership:

The most desirable and dangerous act for a criminal is to use his/her ill gotten gains.

One piece of information can begin the process of piercing the veil of secrecy.

There are various investigative techniques that should be used to begin this process.

However, there is no one formula except to be as creative as the criminal!

Unraveling Beneficial Ownership:

Know how to obtain, follow and analyze information received from various jurisdictions. Make use of MLATS, Letters Rogatory, Mutual Assistance Agreements,

etc.

Know what you can share – investigator to investigator – on an informal basis to begin the process.

Understand what is available in different jurisdictions and how to obtain the information.

Unraveling Beneficial Ownership:

Utilize a complete cadre of law enforcement and investigative tools at your disposal. Informants Subpoenas Interviews International Treaties Border searches Search warrants

Cooperative efforts between jurisdictions are essential to a successful conclusion.

Explore both criminal and civil proceedings.

Unraveling Beneficial Ownership:

Focus on and obtain all possible information from the nominee incorporation service or trust provider.

This is to include, for Corporations: Articles of Incorporation

Details of the mailing address

Obtain any correspondence, powers of attorney, emails or instructions.

For Trusts: Be sure to request the Trust Deed, Letter of Wishes and Trustee

minutes.

Fully identify the settlor and the trustee.

Obtain any correspondence, powers of attorney, emails or instructions.

Unraveling Beneficial Ownership:

Obtain a complete set of financial records from the Banks involved: Request all memos, correspondence or emails associated with the

account.

Carefully review and analyze the checks, wire transfers, debit/credit memos and account activity.

Understand all of the options for obtaining hard to get banking records.

Understand where the funds are actually held for the various types of accounts.

Examine checks for differences in handwriting, endorsements or notes.

Unraveling Beneficial Ownership:

For property purchases: Obtain a complete set of closing/settlement records, including all notes,

file memos and emails.

Obtain all back up documents for payments made toward any mortgage.

Determine, through the mail system, who is receiving and sending mail at the property.

Obtain any available escrow records for source of funds.

For high value items, determine where the item was delivered and who signed for the delivery.

For high value items, obtain any sales records, including any informal correspondence or notes that may be in the file.

Case Study 1:

South Florida Attorney establishes over 40 Charitable Trusts in the BVI. Alleges to be doing this for his clients as asset protection

Comes to the attention of law enforcement due to some structured deposits of cash into his bank accounts.

Initial analysis of business and bank records identified trusts, but little else.

Further investigation unveiled a victim of a financial fraud who had sent money to one of the trusts.

Case Study 1:

Surveillance of subject revealed that he was receiving bags of cash from New York, in addition to victim’s wire transfers.

Investigation lead to the initiation of wire tap, search warrants and seizure warrants.

All of the Charitable Trusts established by attorney were utilized to open bank/brokerage accounts, buy property and launder the proceeds of both fraud and narcotics trafficking.

Case Study 2:

Information received indicated suspicious activity into a corporate brokerage account in New York.

Account opened through a representative agency in Las Vegas, NV.

$18 million funneled through account in 16 months.

Other Accounts at firm linked to main account.

Funds sent to shell bank in Denmark, shell companies in Bahamas and Trusts in Lichtenstein.

Case Study 2:

Seizing the prize: Main defendant purchases, amongst other items, a Mercedes SL 600

Sport Sedan. Car purchased through representative agent in Las Vegas from

dealership in California. Car titled and registered to Trust Company with mailing address of a PO

Box in Oregon. Initially, thought it was a dead end, but…

Car delivered to a parking lot in Las Vegas. Receipt signed by defendant (almost illegible). Pictures of car delivery found in search of residence. Vehicle seized and forfeited.

The car…

Case Study 3: Investigation initiated by report of suspicious brokerage account activity.

Construction company and consulting firm in South Florida identified as being involved in building airports for various countries, including Trinidad & Tobago.

Determined that a criminal bid rigging and over-valuation of goods scheme was committed in connection to the building of Piarco International Airport.

Cooperative effort between jurisdictions helped to unravel a multifaceted criminal enterprise. Bid rigging

Contract Fraud

Kickbacks

Bank Fraud

Money Laundering

Case Study 3:

Organization established a complex network of shell companies, holding companies and trusts in the US, Bahamas, Lichtenstein, Panama and elsewhere to secrete and move their stolen funds.

Bank accounts and assets were held in a wide array of corporate entities.

How did it unravel? International Cooperation and sharing of records

Border search

Search Warrants

Cooperating members of the criminal organization

Case Study 3:

Obtaining all bank records, including memos and correspondence, was critical to unraveling the web.

Banking officers were an integral part of setting up off-shore shell companies, where mail and contact information came back to the bank.

Only way to get behind this was the handwritten notes and memoranda in the bank account files.

Case Study 3:

Property, purchased by conspirators, was held solely in the names of off-shore shell companies and paid for through trusts.

Unraveling true property ownership occurred by examining who resided in the houses and who utilized or benefited from the other assets. Boats

Art Work

High Value Items