An East-European financial institution observed some unusual activity on a foreign company’s non-residential account.

The foreign company had just received USD500,000 from a sport-shoe selling company situated in a neighbouring country. Jerry, the foreign company’s authorised representative in the Eastern European country, withdrew USD50,000 in cash and immediately deposited the currency in his private account at the same institution. The following day, Jerry collected the remaining USD450,000 and handed it over to Fritz, the owner of the sport-shoe selling company in the neighbouring country. Fritz deposited his share at his private account, also at the same financial institution. The financial institution decided to disclose their suspicions to the national FIU. Inquiries with law enforcement contacts overseas determined that Jerry, who opened the non-residential account some years ago, was the sole owner of the foreign company. The establishing capital for the company had been only USD1,000, in accordance with the company formation requirements of that jurisdiction. When the FIU examined the fund movements of the account over the past several years, it became apparent that the sport-shoe selling company had transferred significant amounts of money several times before. The modus operandi was the same every time: Jerry removed his 10 percent of the total amount, and Fritz got the rest. Although the latest transaction was by far the largest, in total some USD1,000,000 had been transferred over the years.

The financial investigation also determined that the account at the disclosing financial institution was not the only account Jerry had authorisation over. Jerry also opened an account in his company’s name with another bank some years previously. The sport-shoe selling company made a single deposit of nearly USD60,000 into this account, as a ‘payment of agency commission’. Then Jerry transferred most of it to a company named ‘Sport Florida’. The FIU checked the name and address in a number of professional company databases but no data was recorded on such a company.

The FIU made inquiries in Fritz’ home country by contacting the national FIU of that jurisdiction through the Egmont Group. Jerry seemed to be a well known ‘tax-expert’, notorious with the police in that jurisdiction for tax-fraud. The police had already searched the premises of the sport-shoe selling company and apartments of Jerry and Fritz, because they were suspected of money laundering and tax-fraud. seized documents showed that the sport-shoe selling company also transferred money to one of Jerry’s accounts in another European country.

Because of all this information the FIU hypothesized that there was, in fact, no actual business whatsoever between Fritz’ and Jerry’s companies, and especially nothing like the sort of levels of business which would require the large-scale transfers of funds observed by the banks. For that matter, according to company databases, Jerry’s foreign company wasn’t even in business anymore. This suggested that at the very least Jerry wasn’t paying taxes to his homeland authorities.

Jerry and Fritz ended up facing money-laundering charges in one country, and tax-evasion / false business documentation charges in the other. Approximately USD1,000,000 had been seized at time of writing.

Indicators:
Large-scale cash transactions
Large and/or rapid movement of funds
Atypical or uneconomical fund movements within accounts