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Money Laundering --> Boiler Rooms

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Meges Ahmed

on 23 February 2015

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Transcript of Money Laundering --> Boiler Rooms

Money Laundering Schemes:
Boiler Rooms

Money Laundering
How it Works
Placement:
Placement is the first step of laundering money. It involves placing the money in the bank. Obviously, you can't walk into a bank and ask to deposit a large amount of money, for example $1 million, so you would divide the money and install it into serveral different accounts within several different banks.
Layering:
The next step is layering, which is transfering the funds in and out of companies and wiring it around from bank to bank. This step makes the money untraceable and out of authority sights. Also, the money is usually wired to offshore foreign accounts, which means federal agencies such as the FBI or IRS, don't have the authority and jurisdiction to track it down, and seize it.
Integration:
Integration is the last step. In this final step, you convert your dirty money into revenue. Integration is investing the money into solid businesses, or turning it into assets such as expensive cars, jets, helicopters, yachts, or in real estate. When the money from your investments and assets comes back, your fortune looks as though it has been legitimately earned, turning your dirty money clean.
Money Laundering ................................................................................................................. 3
The Process ............................................................................................................................. 4
How it works ............................................................................................................................ 5
Just ask Saul ............................................................................................................................ 6
Boiler Rooms ........................................................................................................................... 7
Boiler Rooms/Laundering Money ...................................................................................... 8
Our Atricle ................................................................................................................................ 9
How were they getting away with it?
Corruption
.............................................................. 10
Stay out of Sight ..................................................................................................................... 11
Tricking the Investors .............................................................................................................. 12
Tricking the Investors
pt 2
...................................................................................................... 13
Tricking the Investors
pt 3
...................................................................................................... 14
Famous Money Launderers:
Amada Carrillo Fuentes
...................................................... 15
Famous Money Launderers:
Al Capone
.............................................................................. 16
Famous Money Launderers:
Pablo Escobar
...................................................................... 17
HSBC:
Target for Money Launderers .................................................................................. 18
Questions ................................................................................................................................. 19
Citations .................................................................................................................................. 20
Agenda:
Boiler Rooms
A 'boiler room' is the where investors are tricked into investing in worthless, inexisting or over-priced shares, where the "broker" pockets the invested money.
The Process
Money Laundering is a process used to turn "Dirty Money" clean. By following and completing the process , you will succeed in laundering your money, and keep it out of government hands. The three steps of the process are...
Boiler Room - Money Laundering
You might be wondering what money laundering has to do with a boiler room scandal. Our article talks on boiler room schemes being used to trick investors around the world into investing into non-existing companies, and losing large amounts of money. The callers posing as brokers are using the money laundering process explained earlier to avoid detection of the fraud.
Our Article
Our article titled " Hong Kong banks caught up in 'boiler room' money laundering schemes" is about boiler rooms located in the Philippines and Thailand being used to steal invested money from 4,000 - 10,000 European and American investors. The money they laundered is worth hundreds of millions of dollars, and now the investors are looking for a financial settlement as the scheme has been exposed. The money was being laundered into the Hong Kong banking system, which is the step of layering, keep the money offshore. Banks such as HSBC, Bank of Asia, Cathay United Bank, and over 6 other local banks were affiliated with the scheme. It is said that the banks violated money laundering regulations, which are paying very close attention to large deposits and other other transaction patterns, which they failed to do, if they weren't in on the scheme themselves.
Tricking the Investors
pt 2
Staying out of sight
Definition:
Money Laundering is the process of making dirty (illegally obtained money) look legitimatley earned from an authentic source.
Placement
Layering
Integration
Just ask Saul
How were they getting away with it?
Corruption
"Several boiler room heads worked with Thai law firms to launder money in Bangkok real estate and food & drink operation"
The quotes show that the boiler rooms were known to be in operations, in this case, by Thai law firms, military officials, and corrupt police. It goes to show anyone/anything is able to be bribed for the right amount of money.
"Documents also detail the tenuous relationship between boiler room operators and corrupt police and military officials who take massive bribes in return for protection."
"Last month, high-ranking Thai officials arrested in an anti-corruption probe included officers known to have taken kickbacks from boiler rooms"
Due to the power the boiler rooms had, police officials preferred not to investigate the issue.
"Some observers are not optimistic the investigations will lead anywhere. "Thai police will simply not investigate international fraud - even if they were capable of doing so. The rewards for not doing so are higher," said Andrew Drummond, a Bangkok-based journalist who was first to report on the FRG. He is now leaving Thailand out of concern for his family's safety."
"An alleged boiler room front company called McBain Baxter was established by corporate services provider Portcullis Trustnet, and was registered at Portcullis's Wan Chai address."
"Aall & Zyleman, another local corporate services firm, confirmed that alleged boiler room Carver Brooks and Associates was a client and registered at their address. That company is also no longer in operation."
In order to stay discrete, these boiler rooms registered themselves in existing addresses across Hong Kong, using addresses of local corporations to seem legitimate to investors.
"Yet another alleged front company called Baker and White claimed to share an address with the Hong Kong Trade Development Council, though a representative for the government agency said they had never heard of the firm."
The art of Persuasion
Tricking the Investors
pt 3
The art of Persuasion
"Links to Hong Kong and Wall Street financial firms would be played up by boiler room cold callers sweet-talking prospects in Europe and the US, according to a training handbook. Scammers were even told to check Hong Kong weather forecasts for authenticity."

"Sometimes legitimate blue chips were touted at a discount to market price. In other instances, the hot pick would be a craftily concocted story, such as a Chinese mining venture that was about to strike gold. All monies sent to Hong Kong were simply pocketed."
Tricking the Investors
You may be wondering, how were the investors tricked into investing fortunes into these companies without any background information, but it is quite simple to manipulate a person through a telephone call, and you will see how.
Famous Money Launderers:
Al Capone
It is said that the process of money laundering originated from the Italian Mafia and other leaders along the lines such as Al Capone, who used a Laundromat business as his investment, bringing in revenue which was really profit off drug trafficking, prostitution, gun smuggling, gambling, bootlegging, etc. Al Capone allegedly laundered an estimated $100,000,000 but was later arrested for no money laundering charges or mafia related issues, but for tax evasion worth $1,000,000. His imprisonment was the end of his operations in Chicago.
Famous Money Launderers:
Pablo Escobar
Pablo Escobar, leader of the Medellin Cartel, was a drug lord and kingpin in Columbia during the early 1970's. He controlled over 80% of the cocaine that was being smuggled to the U.S. Escobar was the richest druglord to ever operate, with a networth of around $30 billion, and has laundering money to offshore accounts and assets to thank for his ability to avoid U.S agencies, as well as America's lack of jurisdiction in Columbia.
Pablo Escobar reportedly spent $2,500 on elastic bands to tie his money
Escobar was arrested in Columbia, but with his wealth, turned the prison into his own mansion, later escaping
Escobar had so much money, it is said $40 million cash was left in a California basement since he wasn't able to layer it into anymore banks.
Famous Money Launderers:
Amado Carrillo Fuentes
Fuentes was the second richest drug lord to operate. He took the Juarez Cartel after assasinating his boss, to become leader of the cartel and earning an estimated networth of $25 billion. He died in 1997 after extensive plastic surgery to change his appearence.
HSBC:
Target for Money Launderers
By just searching "HSBC Money Laudering", we found plenty of links tied to HSBC and their money laundering regulation violations and lack of caution when it comes to this topic. As there are rumors which state HSBC has moved money around the globe for drug dealers, it was never proven. They were fined $1.9 billion, if it wasn't for laundering money, it was for their failure of monitoring and preventing money laundering schemes occurring within their bank.
Some article headings:

"HSBC branch in geneva searched in money-laundering probe".
"HSBC struggles in battle against money laundering - WSJ".
"HSBC continues to launder money".
"Swiss prosecuters investigating HSBC for money - laundering"

Questions
1. If you were to launder your money, what technique do you find more effective at the integration stage? Savvy Investment or Assets? Why?
2. Did you see any flaws in the scheme the boiler rooms pulled? What would you do to fix that mistake?
Citations
Edmonds, K. (2014, April 25). El Chapo's Arrest: Money Laundering and Mexico's Drug War. Retrieved February 22, 2015, from https://nacla.org/blog/2014/4/25/el-chapos-arrest-money-laundering-and-mexicos-drug-war
Family Tree Juan Cartel. (n.d.). Retrieved February 22, 2015, from http://www.pbs.org/wgbh/pages/frontline/shows/mexico/family/juarezcartel.html
Pablo Escobar: Biography. (n.d.). Retrieved February 22, 2015, from http://www.biography.com/people/pablo-escobar-9542497
Money Laundering. (n.d.). Retrieved February 22, 2015, from http://www.anti-moneylaundering.org/Money_Laundering.aspx
Boiler Room "reco scene" Vin Diesel Closing the Sale. (2009, December 29). Retrieved February 22, 2015, from
(n.d.). Retrieved February 22, 2015, from http://cp91279.biography.com/1000509261001/1000509261001_1904660285001_History-Weeds-Al-Capone-SF.jpg
Google Images. (n.d.). Retrieved February 22, 2015, from http://www.google.ca/imgres?imgurl=http://a5.files.biography.com/image/upload/c_fill,dpr_1.0,g_face,h_300,q_80,w_300/MTIwNjA4NjM0MDU5OTgyMzQ4.jpg&imgrefurl=http://www.biography.com/people/pablo-escobar-9542497&h=225&w=225&tbnid=IeS4PSZc01Ft1M:&zoom=1&tbnh=186&tbnw=186&usg=__tztOEKBYXXSsNhygjg9T2qMKpN0=&docid=3FUNLxSUjlhKtM&itg=1&ved=0CIkBEMo3&ei=v4HpVMOOCPSAsQTHsIKYCQ
Robertson, B. (2015, January 18). Hong Kong banks caught up in 'boiler room' money laundering schemes. Retrieved February 22, 2015, from http://www.scmp.com/business/money/article/1681719/hong-kong-banks-caught-boiler-room-money-laundering-schemes
(n.d.). Retrieved February 22, 2015, from http://upload.wikimedia.org/wikipedia/en/e/e8/Amado_Carrillo_Fuentes.jpg
http://www.fcpablog.com/storage/hsbc-logo.gif?__SQUARESPACE_CACHEVERSION=1360866277912
https://bradscribe.files.wordpress.com/2015/02/question-marks-11.jpg
Saul explains money laundering - subtitle. (n.d.). Retrieved February 22, 2015, from
(n.d.). Retrieved February 22, 2015, from http://www.unodc.org/images/money-laundering/money_laundering_scheme_big.jpg
(n.d.). Retrieved February 22, 2015, from http://www.centralbanking.com/IMG/104/235104/money-laundering.jpg
(n.d.). Retrieved February 22, 2015, from http://d22r54gnmuhwmk.cloudfront.net/photos/9/ch/mm/GvCHMMNXlGBtjRP-556x313-noPad.jpg
Boiler room accounts generally see a high frequency of small deposits coming in from various countries.
Boiler room accounts generally see a high frequency of small deposits coming in from various countries.
Thailand and Philippines-based "boiler rooms" laundered cash worth hundreds of millions of US dollars through Hong Kong's banking system over the past decade, according to incriminating documents released online by aggrieved investors now angling for financial settlements with boiler room kingpins - and the banks that helped them.

"The magnitude and scale of cash moving through the accounts is at a level where banks have highly likely violated money laundering regulations," said John, a senior representative of investor network Fraud Recovery Group (FRG), preferring a pseudonym after several FRG members were physically threatened.

Between 4,000 and 10,000 mostly American and European investors lost several hundred million US dollars since 2004, according to research by FRG and a private investigation firm.

The revelations will once again focus attention on Hong Kong's banking network and its willingness to police dirty money flows. While Hong Kong has historically prospered as a light-touch conduit for international capital, banks are legally required to conduct due diligence on new account holders and monitor accounts for suspicious cash flows, according to Simon Deane, a partner at law firm Deacons.

Boiler room accounts generally see a high frequency of small deposits coming in from various countries. Money is then removed from accounts in cash withdrawals.

Such transaction patterns could indicate a money laundering technique called "smurfing" said Deane. "This is where the customer due diligence comes in. The bank should check what type of business the customer operates before opening the account and continue to monitor the customer's business."

HSBC, Bank of East Asia and Cathay United Bank were the most widely used among half a dozen local banks, according to documents.

The Post sent a list of transactions to each of these three banks. None would comment on specific allegations citing client confidentiality.

Court filings, detailed biographies of alleged British and American expatriate ringleaders, boiler room employee testimonials, among other FRG files, reveal a high-pressure sales environment where violence, drug use, and prostitution are rife. The documents also detail the tenuous relationship between boiler room operators and corrupt police and military officials who take massive bribes in return for protection.

One alleged ringleader, a Thailand-based British expatriate, is worth over US$150 million, according to the FRG and a former boiler room employee-turned-whistleblower named Stephen Sharpe.

By prominently exposing this alleged ringleader and his peers, the FRG hopes to pressure them to settle, before local authorities, who historical turn a blind eye to scamming operations run by foreigners, feel forced to act.

There are signs boiler room bosses are already feeling the heat.

Several boiler room heads worked with Thai law firms to launder money through Bangkok real estate, and food and beverage operations, documents reveal. These deals are reportedly now being unwound.
Last month, high-ranking Thai officials arrested in an anti-corruption probe included officers known to have taken kickbacks from boiler rooms, said John.

However, some observers are not optimistic the investigations will lead anywhere. "Thai police will simply not investigate international fraud - even if they were capable of doing so. The rewards for not doing so are higher," said Andrew Drummond, a Bangkok-based journalist who was first to report on the FRG. He is now leaving Thailand out of concern for his family's safety.

The Post was unable to reach the alleged boiler room bosses for comment.

Links to Hong Kong and Wall Street financial firms would be played up by boiler room cold callers sweet-talking prospects in Europe and the US, according to a training handbook. Scammers were even told to check Hong Kong weather forecasts for authenticity.

Sometimes legitimate blue chips were touted at a discount to market price. In other instances, the hot pick would be a craftily concocted story, such as a Chinese mining venture that was about to strike gold. All monies sent to Hong Kong were simply pocketed.

Documents reveal a network of over 50 Hong Kong registered companies with dozens more in other jurisdictions. Many of these firms now appear on the Securities and Futures Commission alert list.

Companies were often set up using local corporate services companies.

An alleged boiler room front company called McBain Baxter was established by corporate services provider Portcullis Trustnet, and was registered at Portcullis's Wan Chai address.

A receptionist for Portcullis confirmed that McBain was once a client, though she said the company is no longer operational.

Aall & Zyleman, another local corporate services firm, confirmed that alleged boiler room Carver Brooks and Associates was a client and registered at their address. That company is also no longer in operation.

Yet another alleged front company called Baker and White claimed to share an address with the Hong Kong Trade Development Council, though a representative for the government agency said they had never heard of the firm.

Local corporate services companies are not legally required to do background checks on their clients, said Deane, though they may be subject to professional guidelines on anti-money-laundering, such as those issued by the Hong Kong Institute of Chartered Secretaries.

Front companies typically survive between 12 and 18 months before investors wise up to the scam and report it to the authorities. At that point, company names appeared on a SFC warning list, which is monitored by banks, and trading ceased, FRG transaction data shows.

Last month the SFC won a court order freezing US$4.3 million held in Hong Kong bank accounts of six alleged boiler rooms. These were not connected to FRG investors, said John.

However, in many cases, companies blacklisted in Hong Kong simply relocate banking operations to Taiwan or the Philippines, according to FRG transaction data, suggesting that banks and regional authorities could easily do more to combat this trade if they wanted to.
Hong Kong banks caught up in 'boiler room' money laundering schemes
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