MONEY LAUNDERING.
Suppose a Property Owner owns outright a property worth £2,000,000 and he has £500,000 of dodgy money, the origins of which he does not want to make known. If he wants to incorporate the dodgy money into his personal finances, he could proceed as follows.
He could go to a Respectable Mortgage Institution and take out a mortgage for £500,000. He could then go to a Respectable Investment Institution and say that he wanted to invest £500,000. As part of measures to counter money laundering, the Property Owner would be asked where he got the money.
He would reply that the money came from a mortgage on a property wholly owned by himself. Or he might say that the money came from a mortgage on a property wholly owned by himself and his wife. Whatever. He would probably provide copies of documentation to prove what he had said. The investment would then be accepted by the Respectable Investment Institution.
The Property Owner would then go back to the Respectable Mortgage Institution and say that he had wanted the money for an investment, but that after further consideration he had decided that he did not want to make the investment. The Property Owner would tell the Respectable Mortgage Institution people that, for this reason, he wanted to cancel the mortgage. And that he wanted to pay back the mortgage money, although the transaction would cost him administration fees.
Privately the Respectable Mortgage Institution people would just think to themselves, there is a mug born every minute. Their own financial self interest would prevent them more or less subconsciously, from assuming that such a surprising transaction might require investigation. They would simply have a don't ask attitude.
Assuming that there was no investigation into what he had been up to, the Property Owner would apparently have spent a respectable £500,000 twice, of course an impossibility. He would effectively have absorbed £500,000 into his respectable personal finances.
Sorting the matter out with the tax authorities would present various problems, problems which would nevertheless be fairly easily manageable. After all, the tax authorities could apparently rely on it, that the two Respectable Financial Institutions would have checked the bona fide origins of the two sets of £500,000.
The Property Owner would then have incorporated a dodgy £500,000 into his personal finances. Doing so would have cost him two sets of administration fees, but the £500,000 would be into the tax system. All this would be a small price to pay, and an inevitable part of dealing with this sort of money as it sloshes around.
If, for the sake of argument, hypothetically speaking, the Property Owner was married to a prominent politician, he might think that his wife should share some of the apparently slight risks involved with the transactions. and of course her association with the transactions would tend to add respectability to the whole matter.
These sorts of transactions, white collar money laundering if you like, would be every bit as criminal as flying in a light aircraft to small Caribbean islands with suitcases full of used low denomination banknotes.
Tom Smith, Wednesday 15th March 2006.
2010 COMMENT: I have a lot more to say about this, based on three or four essays I have already written, and based on a bundle of newspaper articles from 2006. I can hardly believe that this matter is being allowed to drift out of the public consciousness. Talk about institutional corruption! Closing ranks and so on.
And we all know now in 2010, that there is no such thing as a 'respectable financial institution'. At least not at the moment.
Suppose a Property Owner owns outright a property worth £2,000,000 and he has £500,000 of dodgy money, the origins of which he does not want to make known. If he wants to incorporate the dodgy money into his personal finances, he could proceed as follows.
He could go to a Respectable Mortgage Institution and take out a mortgage for £500,000. He could then go to a Respectable Investment Institution and say that he wanted to invest £500,000. As part of measures to counter money laundering, the Property Owner would be asked where he got the money.
He would reply that the money came from a mortgage on a property wholly owned by himself. Or he might say that the money came from a mortgage on a property wholly owned by himself and his wife. Whatever. He would probably provide copies of documentation to prove what he had said. The investment would then be accepted by the Respectable Investment Institution.
The Property Owner would then go back to the Respectable Mortgage Institution and say that he had wanted the money for an investment, but that after further consideration he had decided that he did not want to make the investment. The Property Owner would tell the Respectable Mortgage Institution people that, for this reason, he wanted to cancel the mortgage. And that he wanted to pay back the mortgage money, although the transaction would cost him administration fees.
Privately the Respectable Mortgage Institution people would just think to themselves, there is a mug born every minute. Their own financial self interest would prevent them more or less subconsciously, from assuming that such a surprising transaction might require investigation. They would simply have a don't ask attitude.
Assuming that there was no investigation into what he had been up to, the Property Owner would apparently have spent a respectable £500,000 twice, of course an impossibility. He would effectively have absorbed £500,000 into his respectable personal finances.
Sorting the matter out with the tax authorities would present various problems, problems which would nevertheless be fairly easily manageable. After all, the tax authorities could apparently rely on it, that the two Respectable Financial Institutions would have checked the bona fide origins of the two sets of £500,000.
The Property Owner would then have incorporated a dodgy £500,000 into his personal finances. Doing so would have cost him two sets of administration fees, but the £500,000 would be into the tax system. All this would be a small price to pay, and an inevitable part of dealing with this sort of money as it sloshes around.
If, for the sake of argument, hypothetically speaking, the Property Owner was married to a prominent politician, he might think that his wife should share some of the apparently slight risks involved with the transactions. and of course her association with the transactions would tend to add respectability to the whole matter.
These sorts of transactions, white collar money laundering if you like, would be every bit as criminal as flying in a light aircraft to small Caribbean islands with suitcases full of used low denomination banknotes.
Tom Smith, Wednesday 15th March 2006.
2010 COMMENT: I have a lot more to say about this, based on three or four essays I have already written, and based on a bundle of newspaper articles from 2006. I can hardly believe that this matter is being allowed to drift out of the public consciousness. Talk about institutional corruption! Closing ranks and so on.
And we all know now in 2010, that there is no such thing as a 'respectable financial institution'. At least not at the moment.
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