Physical transportation of Cash or Combating Bulk Cash Smuggling
26th July 2018, Bachir El Nakib (CAMS)
Beneficial owner refers to the natural person(s) who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. It also includes those persons who exercise ultimate effective control over a legal person or arrangement. Glossary of the FATF Recommendations, Web. July 10, 2017.
Bulk cash smuggling along the United States-Mexico border has dogged financial institutions and law enforcement professionals alike dating back to the opening salvo of the war on drugs. Today, the problem has exploded as cartels with expansive resources have found innovative methods to transfer wealth not just between those two countries but also around the world.
These were just a few takeaways from our Oct. 4 Webinar, Bulk Cash Smuggling Along the Border: A High Stakes Game of Hide and Seek, featuring former IRS-Criminal Investigation Special Agent in Charge Christopher M. Sigerson, who spent a career supervising and training agents on anti-money laundering and financial crime techniques.
According to Sigerson, the nearly 2,000-mile border represents “some of the most expensive real estate in the world” when the cost of monitoring and policing it are considered along with the human cost of life and the billions in opportunities it holds for narco-traffickers.
The United Nations estimates that nearly $2.1 trillion of the global gross domestic product is illicit revenue, and $1.6 trillion is laundered. However, as Sigerson explained, only about 0.2 percent is interdicted.
From shrink-wrapped packages to the use of “mules” to elaborate tunnels built below the border, smugglers have perfected the art of transferring cash – and law enforcement seems to be perpetually trailing the play. Some 140 tunnels have been found along the California and Arizona borders with Mexico, but there is no telling how many exist.
Beyond the on-the-ground fieldwork of bulk cash smugglers, there is a vast AML component involving financial institutions in the bulk cash world.
“That is simply because when you follow the money in any kind of financial crime it is easier to follow the money trail than it is to identify the ultimate destination of that wealth,” said Sigerson, who pointed out that far more cash is forfeited from financial institutions than from drug traffickers themselves.
Mexican drug-trafficking organizations, terrorist organizations, and other groups with malevolent intent finance their operations by moving funds into or out of the United States. For example, a common technique used for taking proceeds from drug sales in the United States to Mexico is a method known as bulk cash smuggling.1 The National Drug Intelligence Center (NDIC) has stated that proceeds from drug trafficking generated in this country are smuggled across the southwest border and it estimates that the proceeds total from $18 billion to $39 billion a year. NDIC also estimates that Canadian drug-trafficking organizations smuggle significant amounts of cash across the northern border from proceeds of drugs sold in the United States."
Bulk Cash Smuggling is a reporting offense under the Bank Secrecy Act, and is part of the United States Code (U.S.C.). The code stipulates:
Whoever, with the intent to evade a currency reporting requirement, knowingly conceals more than $10,000 in currency or other monetary instruments on the person of such individual or in any conveyance, article of luggage, merchandise, or other container, and transports or transfers or attempts to transport or transfer such currency or monetary instruments from a place within the United States to a place outside of the United States, or from a place outside the United States to a place within the United States, shall be guilty of a currency smuggling offense.
This joint FATF / Middle East & North Africa Financial Action Task Force (MENAFATF) report highlights that cash remains an important means of payment across the globe, with an estimated USD 4 trillion in various currencies in circulation. This, despite the availability of a range of non-cash payment methods and the continuous development of new and innovate alternatives for cashless payments.
Cash is also still widely used in the criminal economy. The physical transportation of cash across an international border is one of the oldest forms of money laundering and still widely used today. Criminals often choose to remove their illicit assets from their bank account in order to break the audit trail by transporting it to another country to spend it or reintroduce it into the banking system.
This report analysed input provided by over 60 countries to identify methods and techniques that criminals use to transport funds across the border. The report contains a number of real case studies to illustrate these techniques, ranging from the transportation of large quantities in low denominations by cargo or mail, to the transportation of smaller quantities of cash, but often in high-denomination notes in or on a person.
The report identifies the main challenges that law enforcement, customs and other agencies face to detect and disrupt the physical transportation of cash.
It provides red flags indicators and other information for use by all agencies, who need to work together and exchange information to control their borders. These indicators can indicate possible cases of cash transportation and contribute to profiling and further investigation.
A divorcing spouse; judgment debtor; tax cheat; etc. may use several methods to conceal assets. “Red Flags For An Asset Search” listed 18 of these methods. The methods for hiding assets included: bulk-cash smuggling; shell companies; multiple jurisdictions; foreign bank accounts; & nominees.
These methods might have been combined by Mr. Victor Lipukhin to conceal more than $10 million dollars in secret Swiss bank accounts. The press release “Former President of Russian Steel Producer’s U.S. Subsidiary Indicted for Hiding Assets in Secret Swiss Bank Accounts,” talked about Mr. Lipukhin’s alleged scheme to hide assets from the IRS.
Mr. Lipukhin was indicted on 3/20/2014 because of the suspected scheme. The indictment suggests Mr. Lipukhin may have employed bulk-cash smuggling; multiple jurisdictions; shell companies; & other methods to conceal his alleged beneficial ownership of Swiss bank accounts. Mr. Lipukhin is thought to have initially formed shell companies in the Bahamas which he allegedly used to open the Swiss bank accounts. Mr. Lipukhin might have hired a nominee director for the shell companies, who could have acted as a bank signatory on the Swiss bank accounts.
If Mr. Lipukhin used a nominee director, it would have helped hide his suspected beneficial ownership of the Swiss accounts. According to the indictment, Mr. Lipukhin supposedly relied on real estate transactions; mortgages & a Canadian lawyer to hide assets. Mr. Lipukhin also reportedly bought an automobile by paying approximately $24,539 in cash. Although the seller of the automobile was required to notify the IRS by filing a Form 8300, Mr. Lipukhin allegedly tried to persuade the seller to keep quiet about the sale. If this actually happened, it would have been a red flag that Mr. Lipukhin might have engaged in bulk-cash smuggling or money laundering. The criminal case against Mr. Lipukhin is still pending at the prosecutor’s office, as the Court’s docket report reveals.
Not necessarily. The statute that governs bulk cash smuggling does require proof that a suspect intended to cross the border. However, criminal organizations rely on complex transportation and smuggling networks to move and launder their illicit proceeds.
For example, bulk cash intended for a drug trafficking organization in Colombia may begin its journey in Philadelphia, Pa., and travel through many locations, along several routes, before arriving at the border. Those same proceeds may then move through Mexico, Panama or other countries before arriving at their destination.
ICE HSI has broad authority to investigate these criminal networks, and may rely on other financial and criminal statutes, to prosecute violators and seize assets at the border, within the United States and internationally.
According to Title 31 U.S.C. § 5332, the penalties for bulk cash smuggling could include:
· Imprisonment for a period of time up to 5 years.
· Forfeiture of any property, real or personal, involved in the offense, and any property traceable to such property.
On Declaring the Cross-Border Transportation of Money. Article 1: ... Banknotes and coins in circulation, whether in Lebanese pound or any other currency.