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The Basel Institute - Money Dirtying: From Clean Funds to Illicit Payments

28/11/2024

The Basel Institute on Governance has explored “money dirtying” in their recent work, “Money Dirtying: From Clean Funds to Illicit Payments.” This term refers to the process by which clean, legitimate resources are turned into illicit payments used for corruption, financing terrorism, and other illegal activities

WHAT IS MONEY DIRTYING?

Unlike money laundering, which aims to clean illegal money and reintegrate it into the legal financial system, money dirtying works in the opposite direction. It takes clean, legitimate funds and transfers them, often undetected, to corrupt recipients. The flow of funds in money dirtying is linear rather than circular:

  • Money laundering cleans “dirty” money by disguising its illicit origins.
  • Money dirtying dirties “clean” money by disguising its intended illicit use.

While money dirtying shares some traits with money laundering, such as complex financial structures, fake contracts, and transnational operations, it has unique features:

  • Purpose: The aim is to fund corruption, terrorism, or other illegal activities.
  • Techniques: It uses informal actors (e.g., halawadars or doleiros) and specialised professionals to avoid regulatory scrutiny.
  • Networks: Transnational and multi-layered, involving cross-border cooperation among individuals and entities.

THE REPORTS KEY POINTS:

  1. Definition and Origin: Originally coined to describe mechanisms of terrorism financing, “money dirtying” involves converting legally obtained funds into illegal payments. This contrasts with money laundering, which aims to reintegrate illicit funds into the legal financial system
  2. Characteristics: Money dirtying schemes often involve complex, multi-layered transactions using redundant payments and fake contracts to obscure the money trail. These schemes frequently employ specialised professionals and informal actors to evade detection
  3. Case Study - Lava Jato (Operation Car Wash): The Basel Institute’s research includes an in-depth analysis of the Lava Jato case, where the Odebrecht Group used sophisticated financial structures to channel millions in legitimate funds into bribes for politicians and bureaucrats across Latin America -
  4. Differences from Money Laundering: While money laundering is circular, aiming to clean dirty money, money dirtying is linear, focusing on transferring clean money into illicit payments without detection
  5. Implications for Anti-Corruption Efforts: Understanding money dirtying can help practitioners develop more effective strategies to prevent, detect, and intercept illicit financial flows. It highlights the need for robust internal controls and compliance systems to combat sophisticated corruption schemes

SOURCE:  

(1) Money dirtying: shining a light on how clean money turns into bribes. https://baselgovernance.org/news/money-dirtying-shining-light-how-clean-money-turns-bribes.

MONEY LAUNDERING

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As well as owning and publishing Comsure's copyrighted works, Comsure wishes to use the copyright-protected works of others. To do so, Comsure is applying for exemptions in the UK copyright law. There are certain very specific situations where Comsure is permitted to do so without seeking permission from the owner. These exemptions are in the copyright sections of the Copyright, Designs and Patents Act 1988 (as amended)[www.gov.UK/government/publications/copyright-acts-and-related-laws]. Many situations allow for Comsure to apply for exemptions. These include 1] Non-commercial research and private study, 2] Criticism, review and reporting of current events, 3] the copying of works in any medium as long as the use is to illustrate a point. 4] no posting is for commercial purposes [payment]. (for a full list of exemptions, please read here www.gov.uk/guidance/exceptions-to-copyright]. Concerning the exceptions, Comsure will acknowledge the work of the source author by providing a link to the source material. Comsure claims no ownership of non-Comsure content. The non-Comsure articles posted on the Comsure website are deemed important, relevant, and newsworthy to a Comsure audience (e.g. regulated financial services and professional firms [DNFSBs]). Comsure does not wish to take any credit for the publication, and the publication can be read in full in its original form if you click the articles link that always accompanies the news item. Also, Comsure does not seek any payment for highlighting these important articles. If you want any article removed, Comsure will automatically do so on a reasonable request if you email info@comsuregroup.com.  

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As well as owning and publishing Comsure's copyrighted works, Comsure wishes to use the copyright-protected works of others. To do so, Comsure is applying for exemptions in the UK copyright law. There are certain very specific situations where Comsure is permitted to do so without seeking permission from the owner. These exemptions are in the copyright sections of the Copyright, Designs and Patents Act 1988 (as amended)[www.gov.UK/government/publications/copyright-acts-and-related-laws]. Many situations allow for Comsure to apply for exemptions. These include 1] Non-commercial research and private study, 2] Criticism, review and reporting of current events, 3] the copying of works in any medium as long as the use is to illustrate a point. 4] no posting is for commercial purposes [payment]. (for a full list of exemptions, please read here www.gov.uk/guidance/exceptions-to-copyright]. Concerning the exceptions, Comsure will acknowledge the work of the source author by providing a link to the source material. Comsure claims no ownership of non-Comsure content. The non-Comsure articles posted on the Comsure website are deemed important, relevant, and newsworthy to a Comsure audience (e.g. regulated financial services and professional firms [DNFSBs]). Comsure does not wish to take any credit for the publication, and the publication can be read in full in its original form if you click the articles link that always accompanies the news item. Also, Comsure does not seek any payment for highlighting these important articles. If you want any article removed, Comsure will automatically do so on a reasonable request if you email info@comsuregroup.com.