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The Kessler Report
The Kessler Report
A Publication of Michael G. Kessler and Associates, Ltd.
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FraudBusters®
Edition
Volume 2

Question Mark Logo Number 1

Money Laundering: Don't Get Cleaned Out
     When was the last time you heard of a drug dealer who accepts payment by credit card? Or an arms smuggler who delivers a shipment of guns in return for a duffel bag containing...a personal check? The fact is, most illegal activity is fueled by cash. The bosses who run these businesses make millions each year, almost all of it in the form of cash.

The Dirty Secret.
Too much cash??!! It's a problem we'd all like to have. But think about it. If you're a criminal with roomfuls of ill-gotten cash, how do you spend it all without raising suspicions about where it came from? There's only so much cash one can throw around before others get curious, jealous or both. One careless comment from a bored bank teller or an inquisitive neighbor, and you might have folks from the IRS or the Financial Crimes Enforcement Network (FinCEN) snooping around. So you find ways to introduce these illegal gains into the legitimate money system, covering your tracks, so the money's original source cannot be traced.
That is the goal of money laundering.

Time to Do the Wash
     Money laundering takes dirty money and makes it seem clean. It is the process of structuring deposits so they don't attract attention, creating layers and counter layers of transactions to hide their source. Although there is no exact way of knowing, the federal government estimates that more than $300 billion gets laundered worldwide on an annual basis.
     While many people think money laundering is only the problem of drug lords or mobsters, the truth is, it affects us all. Besides allowing criminal activities to flourish, money laundering forces the government to tighten bank disclosure requirements, which threatens everyone's right to privacy and our ability to conduct quick, convenient financial transactions.

How Clean Hands Get Soiled
Your business can become involved in money laundering activities simply through the actions of a low-level clerk
who has the ability to handle cash. Even if it occurs only at a low level, the taint of money laundering could ruin your firm's reputation and open you up to all sorts of liability. It's important to know who is most vulnerable to money laundering activity, to recognize how it is carried out and what can be done to prevent it.
     The businesses most at risk for becoming unwittingly involved in money laundering are obviously those that transact business in cash. Both traditional and non-traditional financial institutions contribute to the daily flow of money. Dealers and agents of big-ticket items such as cars and real estate are also susceptible to becoming unwitting participants in such schemes. Numerous retailers have been indicted over the years for allowing drug money to be used to purchase high-priced assets. Below are some businesses commonly used by criminals to launder their cash:

Banks
Brokerage firms
Insurance Companies
Gambling establishments

(continued on page 5)

Diary of an
"Innocent"

     Think money laundering is just some other guy's problem? Think it could never happen to you? Take a look at this true story of how an otherwise honest businessman got caught in a money laundering sting. If he'd kept a diary of the experience, here's how his side of the story might read:
     10/17/91 - Rcv'd call from GH at Primecor Properties. Heard I was seeking financing for restaurant. Seemed very interested. Liked my reputation as a hard worker. Will come to inspect the site next month. Last piece I need to seal deal. Start lining up contractors.
     11/21/91 - Met GM and GH of Primecor. Showed them property, seemed enthusiastic. "Good location." Problem with financing, though. Another business they invested in had assets temporarily frozen. They say not to worry, they're working on it.
     1/15/92 - GM called. Worked out settlement with other company. They will take a loss but able to get most money back.

(continued on page 2)


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