A bank noticed that a business account that had been dormant for some years suddenly became active with large-scale fund transfers.

The bank account was originally registered to a company registered in an offshore jurisdiction. After USD150,000 was credited into the account, the firm used the funds to buy shares of a recently privatised Eastern-European company - ‘ABC Corp’.

Three months later Brian, the representative who originally opened the account, deposited a total amount of USD250,000 in cash into the company account. Immediately after depositing the money, he wanted to transfer USD100,000 into a personal account at another bank.

He claimed that the money came from his personal funds. When the bank asked him about the origin of these personal funds, he submitted commercial documentation showing that he had sold shares of ABC Corp - worth USD150,000 - for USD250,000 to another Eastern-European company ‘DEF Corp’.

The difference of US$100,000 Brian explained as risk compensation, in the event the initial USD150,000 worth of shares invested in company ABC had been devalued. This would have been fairly high return on capital, when one takes into account that a return of US$100,000 over just three months would have equalled an annual interest rate of over 200 percent.

The bank disclosed the transactions to the national FIU. By checking the records of its own intelligence and financial data bases and liaising with other Egmont members, the FIU developed information that indicated Brian was the real owner of the offshore company. Also, it discovered that Brian was a member of the board of directors of company ABC.

This suggested that the shares in company ABC might well have been knowingly sold at a low value to the offshore company before being sold onwards for a higher price to a third party. In effect, Brian siphoned off USD100,000 profit by using his own offshore company as a ‘hidden’ stage in the share transfer.

The FIU notified the corresponding law enforcement authorities that Brian was suspected of money laundering and fraud. As a result of the police investigation, Brian was arrested and prosecuted, with the court also confiscating the USD100,000 involved.

Indicators :
Unusually high rates of return for a low risk business activity
Unrealistic explanation given by customer for account activity
Re-activation of dormant account