Primer on money laundering and tax havens

High level overview on the how-to of laundering money and using tax havens. Will leave you curious for more details, but it’s a good intro. Also, article on another couple of billion in another settlement from the Great Recession.

4/7/13 – ICIJ – Tax Havens 101: the high cost of going offshore – Good 4 minute primer on how to set up and run an offshore operation to hide assets, whether from the taxman, your spouse, or creditors.



For under 4 minutes, it is a good explanation.

A few places to expand the ideas:

I will guess the setup cost is actually quite a bit higher. Also, there are ongoing operational costs.

It is also more complicated. You likely would need to create a couple more jumps to get the money where you really want to park it.

You need to get it offshore in the first place. Doing so effectively and secretly takes effort.

You need a way to get it back into the US, preferable as a loan or capital investment in your company so you don’t have to pay taxes (cheating the IRS is often the original goal, right?). That will create another layer of complexity and will likely add another shell company or two.

Why do I mention tips for evading taxes? In part because it gives context for my other writing on bank fiascos. Another part is so that if auditors see something that sort of looks like these techniques in an audit, they will know to think carefully about what they just saw. A company or individual  moving money to the Caribbean or South Pacific when there isn’t an obvious need to do business outside the U.S. is a major warning sign to an auditor.

At a simpler level, shell companies can be obtained inside the U.S. if your goals are a little simpler.

2/25 – Wall Street Journal – Morgan Stanley to Pay $2.6 Billion to Settle Mortgage Cases – Article says DoJ and Morgan Stanley reached an agreement in principle for $2.6B to settle issues over selling mortgage-backed securities before the Great Recession.  This is one of several settlements by Morgan Stanley with different regulators. This is apparently smaller than the similar settlements from JP Morgan, BofA, and Citigroup. I’ve not been tracking all the settlements of all the banks with the host of involved regulators, so I can’t quite put this one in context.

Meh. Just another couple of billion from one of many players on one of many issues in the misty fog bank of fiascos.

2 thoughts on “Primer on money laundering and tax havens”

    1. Hi Rumbi:

      It is very sad. And scary.

      I am actually trying to pay attention to the various settlements on various issues but can’t keep track of them all. It is to the point that I need to create a spreadsheet to keep track of all the issues and all the banks and all the regulators. Let me illustrate:

      Somehow I lost track of why HSBC isn’t included in the rumors of settlements with US authorities over forex manipulation even though they wrote a check in the previous round of settlements with other regulators. Did I miss a billion? Or do they get a pass from DoJ? Or did I miss some report on them being in a separate settlement discussion?

      Are all the banks settled with all the regulators on Libor manipulation? Has anyone settled yet on the gold/precious metal manipulation? Or is that issue just in rumors with settlement talks not yet started? Gotta check my notes.

      A billion here, three there. I used to work at a moderately large bank in New Mexico. They had half a billion in assets. The entire asset base of that company is merely a rounding difference on any issue in the news today.

      Thanks for the comment and tweet.


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