Case Study 2 - Using an accountant as an intermediary in the legal structure of a business

Case Study Series:

Over the coming weeks we will bring you a number of case studies. These are a reminder that money launderers will go to extraordinary lengths to make their funds look legitimate.

Case Study 1 - Accountant received funds on behalf of criminal - Read more

Case Study 2 - Using an accountant as an intermediary in the legal structure of a business - Read more

Case Study 3 - Accountant facilitated a round- robin tax evasion scheme - Read more

Case Study 4 - Using shell businesses as a front for drug supply network - Read more

Case Study 5 - Transnational drug dealing - Read more

In Operation Ark, the New Zealand Police investigated a case where drug offenders had engaged an accountant to set up a complex structure of legal entities, including a trust. This case demonstrates many of the principal ways trusts are used to launder proceeds – in particular, layering entities to hide the beneficial control of companies controlling assets; use of a professional service provider to access complex structures and act as an intermediary; and use of a trust to hide criminal involvement in transactions.

The drug offender used the trust to buy shares in a fitness magazine business and a company with the proceeds of drug offending. Vehicles owned by the drug offender were then registered in the name of the company, ostensibly distancing the offender from ownership of the vehicles. The offender also used his accountant as an intermediary and additional layer in the legal structure of his finances. Ultimately, as was the case in his layering of entities to hide ownership of the magazine and vehicles, the offender used the accountant and the trust to hide his own beneficial ownership of property. For example, the offender’s house was put in the name of a company whose nominee shareholder was the accountant’s trust company. The accountant’s trust company was in turn holding the shares on behalf of the offender’s trust.