Money Laundering Case Studies – Case study 19 to 24

Intermediaries – case study 19

A person (later arrested for drug trafficking) made a financial investment (life insurance) of USD 250,000 by means of an insurance broker. He acted as follows. He contacted an insurance broker and delivered a total amount of USD 250,000 in three cash instalments. The insurance broker did not report the delivery of that amount and deposited the three instalments in the bank. These actions raised no suspicion at the bank, since the insurance broker was known to them as being connected to the insurance branch. The insurance broker delivered, afterwards, to the insurance company responsible for making the financial investment, three cheques from a bank account under his name, totalling USD 250,000, thus avoiding raising suspicions with the insurance company.

Intermediaries – case study 20

Clients in several countries used the services of an intermediary to purchase insurance policies. Identification was taken from the client by way of an ID card, but these details were unable to be clarified by the providing institution locally, which was reliant on the intermediary doing due diligence checks. The policy was put in place and the relevant payments were made by the intermediary to the local institution. Then, after a couple of months had elapsed, the institution would receive notification from the client stating that there was now a change in circumstances, and they would have to close the policy suffering the losses but coming away with a clean cheque from the institution. On other occasions the policy would be left to run for a couple of years before being closed with the request that the payment be made to a third party. This was often paid with the receiving institution, if local, not querying the payment as it had come from another reputable local institution.

Collusion – case study 21

An insurer in collusion with an insured person attempted to launder money through insurance transactions. The manager of an insurance company sold health and personal injury insurance policies insuring against the liability from accidents to dummy persons, normally in the names of friends and relatives. These persons paid a low premium rate. Subsequently claims were received, supported by false documentation and medical certificates to substantiate the losses and the insurer paid the claims promptly. The claims for damages were considerable. The manager then sought to legalise this scheme and recover the damages paid out. Under subrogation rights, the insurance company took legal action against all businesses where the alleged accidents had occurred. The businesses involved (restaurants, clubs etc.) responded that they had not been aware of the alleged accidents and that no such accidents had occurred at the times stated.

Collusion – case study 22

A drug trafficker purchased a life insurance policy with a value of USD 80,000. The policy was purchased through an agent of a large life insurance company using a cashier’s cheque. The investigation showed that the client had made it known that the funds used to finance the policy were the proceeds of drug trafficking. In light of this fact, the agent charged significantly higher commission. Three months following this transaction, the investigation showed that the drug dealer cashed in his policy.

Reinsurance – case study 23

An insurer in Country A sought reinsurance with a reputable reinsurance company in Country B for its directors and officers cover of an investment firm in Country A. The insurer was prepared to pay four times the market rate for this reinsurance cover. This raised the suspicion of the reinsurer which contacted law enforcement agencies. Investigation made clear that the investment firm was bogus and controlled by criminals with a drug background. The insurer had ownership links with the investment firm. The impression is that – although drug money would be laundered by a payment received from the reinsurer – the main purpose was to create the appearance of legitimacy by using the name of a reputable reinsurer. By offering to pay above market rate the insurer probably intended to assure continuation of the reinsurance arrangement.

Reinsurance – case study 24

A group of persons with interests in home construction effected a payment in favour of construction company A under contracts connected with their participation in investment construction (at cost price). Insurance company P accepted possible financial risks to these contracts under a contract of financial risks insurance and received an insurance premium. At the same time the insurance company P concluded with the construction company A a secret agreement providing that the difference between the market cost of housing and the cost price was transferred in favour of the insurance company as a premium under the contract of financial risks insurance. When the funds were received by the insurance company P they were transferred as insurance premium under the general reinsurance contract in favour of insurance company X. By way of fictitious service contracts and commission payments made under an agency contract, insurance company X channelled the funds to several off-shore shell firms. Beneficiaries of the actual profit, being withdrawn abroad, were owners and directors of the construction company A.

Copies of the paper are available. http://www.iaisweb.org/view/element_href.cfm?src=1/2014