Monday, April 11, 2016

Money Laundering 101

Rickards, The Death of Money

A favorite method [for money laundering in China] is to establish a relationship with a corrupt casino operator in Macao, where a high-rolling Chinese gambler can open a line of credit backed by his bank account. The gambler then proceeds deliberately to lose an enormous amount of money in a glamorous game such as baccarat played in an ostentatious VIP room. The gambling debt is promptly paid by debiting the gambler’s bank account in China. This transfer is not counted against the annual ceiling on capital exports because it is viewed as payment of a legitimate debt. The “unlucky” gambler later recovers the cash from the corrupt casino operator, minus a commission for the money-laundering service rendered.

Even larger amounts are moved offshore through the mis-invoicing of exports and imports. For example, a Chinese furniture manufacturer can create a shell distribution company in a tax haven jurisdiction such as Panama. Assuming the normal export price of each piece of furniture is $200, the Chinese manufacturer can underinvoice the Panamanian company and charge only $100 for each piece. The Panamanian company can then resell into normal distribution channels for the usual price of $200 per piece. The $100 “profit” per piece resulting from the underinvoicing is then left to accumulate in Panama. With millions of furniture items shipped, the accumulated phony profit in Panama can reach into the hundreds of millions of dollars. This is money that would have ended up in China but for the invoicing scheme.

Health Apocalypse Now

Link Much of my time for the past year has been spent navigating the medical maze on behalf of my mother, who has dementia. I obser...