Follow the money: Here’s how money laundering works

, USA TODAY

Special counsel Robert Mueller followed the money to file a criminal conspiracy and money laundering indictment against President Trump’s former campaign manager Paul Manafort and his associate Richard Gates for activities predating their joining the campaign.

Simply put, money laundering is a common technique used by financial criminals and others to hide illegal gains.

“You’re taking ill-gotten gains and ‘washing’ them by transforming them into funds that can’t easily be connected to the original source,” said John Byrne, the former executive vice president of the Association of Anti-Money Laundering Specialists, a crime prevention group.

More than 200 federal crimes can be legal predicates for money laundering Byrne added in a Monday interview.

Placement

After amassing illegal gains, financial criminals typically place the money into the financial system in ways designed to avoid drawing the attention of banks, financial institutions or law enforcement agencies. This is the stage of the washing process most vulnerable to detection, according to a 2014 federal inter-agency manual compiled by the Federal Reserve, Office of the Comptroller of the Currency and other agencies.

Placement techniques include structuring currency deposits in amounts below the $10,000 reporting requirement for banks, or commingling the illicit funds with money from legal activities.

The indictment filed by Mueller’s team alleges that Manafort laundered more than $18 million he received for acting as an agent of a pro-Russia political party in Ukraine and failed to report the work and income as federal laws require. Gates allegedly transferred more than $3 million from offshore accounts to other accounts he owned.

Layering

After the funds enter the financial system, the money is layered, or shifted through a series of transactions designed to create confusion and complicate the paper trail for investigators.

Examples include exchanging monetary instruments for larger or smaller amounts, or wiring or transferring funds through numerous accounts in one or more U.S. or foreign financial institutions.

Some foreign accounts may be so-called “shell companies” — entities that have no physical presence apart from a mailing address and generate no independent economic value, according to advisories from the Financial Crimes Enforcement Network, part of the U.S. Department of the Treasury.

The indictment filed by Mueller’s investment team lists 17 domestic businesses or limited liability companies allegedly owned or controlled by Manafort and Gates. The indictment also identifies 12 entities in Cyprus, and three others in the United Kingdom or the Caribbean islands of the Grenadines.

The indictment also identifies scores of transactions from 2008-2014 in which Manafort allegedly wired more than $12 million from the foreign accounts to vendors for personal expenses without paying taxes on the income.

Integration

This final stage is used to help shield financial criminals by providing a plausible explanation for where the money came from. Examples of integration include purchasing and reselling real estate, investment securities, or other financial assets with money from illicit activity.

The indictment lists four Manafort real estate properties and a life insurance policy that collectively are subject to forfeiture because investigators linked them to his alleged illegal activity and money laundering.

The properties include a luxury home in Water Mill, N.Y., part of the Hamptons area on Long Island’s East End, as well as residences in Brooklyn, Manhattan and Arlington, Va.

Trying to crack down on money laundering through real estate transactions, the Financial Crimes Enforcement Network in February renewed requirements for title agents to identify all people behind shell companies involved in all-cash deals for expensive properties in New York City, the Miami, Fla., San Francisco, and San Diego area, along with San Antonio, Texas.

https://www.usatoday.com/story/money/2017/10/30/follow-money-heres-how-money-laundering-works/813379001/