Anti-money laundering?

Posted: Thu Nov 06, 2008 10:57 am Post Subject:

Even I'm curious to hear some personal experiences. Hope some will soon drop into this thread. Do you have any exciting story in you sack, Mark?

Thanks,
Rupert

Posted: Thu Nov 06, 2008 11:10 am Post Subject:

Does money laundering always have to happen in large scale? I was wondering whether evading taxes at a small scale is money laundering or not?

Posted: Thu Nov 06, 2008 11:34 am Post Subject:

Laundering money, nope probably too complicated for me to know anything about, :wink: stealing and fraud, oh yeah...

Posted: Thu Nov 06, 2008 04:28 pm Post Subject:

Although laundering money with life insurance is certainly a rarity, it can be done. I have worked on only one real-life case that involved four brothers of Middle Eastern descent and an insurance agent from the San Francisco Bay area. It works something like this:

One of the brothers would go back to India and pick up a suitcase full of money. After coming home, he would contact the insurance agent and ask about purchasing life insurance on he and his brothers. In their meeting, the agent is told that all four brothers need a $1 million Equity Index Universal Life policy. The premiums on these policies are between $1200 and $1400 per month and will come out of the brother's Company checking account. As you can imagine, the agent is overjoyed to write such large policies.

The brothers then transfer enough money from their suitcase to their checking account to pay the monthly premium. This is done every month for a year.

In the second year, the agent is again contacted and asked to write $500,000 and $1 Million policies on the brothers' wives. The premiums on these Universal life policies are between $500 and $1000 per month and come out of the same checking account as the first four policies.

Several months later, the agent is again contacted and asked to come out and write life insurance on several of the employees and their wives. As you can imagine, the agent is happy to do so. He writes eight more policies and notes that the premium payments are coming out of the same account as all the previous policies.

After nearly a year, the agent is called out to write policies on the sons (and several of the daughters) of the brothers. The premiums on these five policies are between 250 and $500 per month and come out of the same checking account.

Remember that one of the brothers is always flying back and forth to India "on business."

Approximately two years later, the agent is contacted and told that the brothers want to take full value loans against the original four policies, and reduce the premiums on those policies to the absolute minimum.
The agent is careful to explain the ramifications of doing so, how the policies might be affected, the associated interest rates, etc. Nevertheless,
the loans are processed in money withdrawn.

Three months later, full value loans are taken against the policies belonging to the wives and several of the employees. Again, the agent covers all the details and has them sign a disclaimer.

Approximately a year later, the agent is contacted by the brothers and asked to write new policies (not with the same company) on them. The agent shows up and first asks why they don't just continue paying the target premium on the first policies. He doesn't understand why they need new policies. He is told that if he doesn't want to write the policies, they'll find someone else who will - so he writes four brand-new $1 million policies with a different company. Sometime after that he does the same thing with the other policies on the wives and others.

At this point, the agent suspect something isn't quite right but is making a huge amount of money from this family. Why take the chance on saying something to someone and "shooting himself in the foot."

The premiums, it seems, paid into life insurance policies, are not monitored nearly as closely by the IRS and SEC (if at all) as with other types of investments. Furthermore, loans taken out of life insurance policies are done so on tax-advantaged basis and the money is essentially clean because it came from an unmonitored vehicle.

It is a given that purchasing life insurance policies, making huge premium payments on them, then taking out loans against them, is not in the policy owner's best interest. Understand that the life insurance was not the most important detail in this scheme and any surrender penalties were merely a byproduct or "expense."

It is my understanding that the government now has a new system in place to monitor the rate of premium payments. I, personally, seriously doubt it.

By the way, the agent was the one who eventually blew the whistle and it cost him dearly.

Posted: Sun Apr 12, 2009 12:05 pm Post Subject: hi

anti money laundering is a n act which prevents the customer being fraud by agents.
ie. an agent provides some wrong information regarding the policy and if he caught according to insurance regulatory development act he have to pay money or/and sentenced for that.

Posted: Sun Apr 12, 2009 01:36 pm Post Subject:

akhi,
You are so wrong about what AML is! You should google it and learn. From what you stated above, you must not be an agent, right?

Posted: Mon Apr 13, 2009 02:45 pm Post Subject:

Hi TRK3031962..

Money laundering has 3 steps-

i) Physically transferring cash in bulk.
ii) Trying to show parts of proceeds concerning illegal transactions as legal.
iii) Trying to support illicit proceeds with legitimate explanations.

I guess it's more about defining the operational norms for financial as well as legal institutions towards controlling financial malpractices. What do you say?

Steven

Posted: Mon Apr 13, 2009 02:50 pm Post Subject:

Steven,
Sounds good to me. Akhi was trying to tell us what AML was and was actually describing about E&O coverage.

Posted: Tue Apr 14, 2009 04:14 am Post Subject:

You are right, Todd....he must have mixed up between the two. Money laundering happens in greater magnitude than an agent giving wrong information to the customer. IMO money laundering occurs when a great deal of money is involved and to cater to severe purposes, like- terrorism financing.

~Jeremy

Posted: Tue Apr 14, 2009 09:06 am Post Subject:

Money laundering doesn't have to involve a great deal of money, nor does it have to cater to severe purposes. Money laundering is nothing more than making illegally gained money appear to be legally gained (making dirty money appear to be clean money). Unfortunately, this board is filled with people like akhi who answer questions when they should be asking them.