David was the owner of an exchange office in an Eastern European country, and a frequent customer of the local bank. Every time he deposited cash into the company account, he told the bank employee that the money originated from customers repaying short-term loans back to the business. Because of the high level of cash deposits - over USD65,000 – made in a short period, the bank employee became suspicious. After examining the account activities of similar types of business in the locality to determine whether the amounts were typical for a currency exchange firm, the bank informed the national FIU.

By checking the company details against law enforcement databases, the FIU discovered that the exchange office was not registered for taxes, which were estimated to be some USD400,000 per annum on the information available. The exchange office had also fictitiously ordered services from foreign companies situated in a neighbouring country providing consultation, marketing and engineering services. The invoices were properly drawn up but the services were never actually delivered. Based on these fictitious contracts, the exchange office had transferred funds to the neighbouring country. The FIU forwarded the disclosure and associated financial analysis to the public prosecutor’s office, highlighting a suspicion of tax evasion and fraudulent activities.

The financial police ascertained the amount of taxes the exchange office should have paid, and applied to have all funds frozen prior to confiscation. But David had already transferred almost all company funds to the neighbouring country and filed a request for bankruptcy in the first country. The financial police asked the FIU to trace the money. The FIU sent an intelligence request to the FIU in the neighbouring country. It not only became clear where the money was, but also that David owned all the foreign companies that had been submitting the fictitious invoices. One of these companies had received the bulk of the money transferred into the country. David had taken out half of the amount in cash, and transferred the other half back to accounts in the first country. He had believed that by using cash, the chances of the authorities tracing the funds back to the source activity were minimised.

At the time of reporting prosecutors in both countries were arranging for David’s prosecution for a range of offences including fraud, tax evasion, counterfeit documents, abuse of office and authority, and breach of bankruptcy regulations.

Indicators:
Unrealistic business turnover
Large-scale cash transactions
Use of ‘unofficial loan repayments’ as a cover story for funds
Atypical or uneconomical fund transfer to or from foreign jurisdiction