HOW MONEY LAUNDERERS EMPLOYING LIFE SETTLEMENTS USE TRUSTS TO DECEIVE COMPLIANCE AT TRANSACTION MONITORING

Apparently, there have been some questions from readers regarding precisely how money launderers use Life Settlements to clean narco-profits. While this is hardly the forum to discuss advanced techniques, the most commonly-used method deserves exposure, because it is by and large the most-used trick laundrymen resort to.

I will use the well-known case of the Colombian national in the insurance field who successfully abused Life Settlements for his criminal clients as the most simplified example. With his experience in selling insurance products, he was aware that both high net worth individuals, as well as publicly-traded corporations in North America follow the advice of their counsel in the purchase of million dollar whole life or term insurance policies; they always set up trusts first, and purchase the policies in the name of the trusts, for several very good reasons, from protection of assets, to tax reasons, to a number of valid points not relevant to this article.

This means that, upon the death of the insured, XYZ Insurance company will make payment in the name of the trust, and to no other entity or individual. The laundryman makes sure that he is acquiring only Life Settlements for his clients that are owned by, and payable upon death to, a trust. He then acquires the trust instrument,and quietly changes the name of the trustee and the beneficiary internally, after the previous trustee and beneficiary resign and assign ver their rights.Remember, the insurance company is only obligated under the insurance contract to pay out to the trust. Its compliance officers have no reason to suspect that the beneficiary is changed, nor do they have any responsibility to inquire.

The laundryman then opens a new bank account in the name of the trust, with himself or a nominee as trustee, with signature powers.He may amend the trust to facilitate or improve his powers and abilities in that role. Upon the death of the insured, the insurance company, not aware that the beneficiary has been changed, and not having any other contractual responsibility, except to make payment, sends the payment, payable to the trust. The money is never scrutinized by the bank's compliance officer, as it is a legitimate life insurance payment. It is later wired or transferred, directly or indirectly, to an offshore tax haven, out of the reach of law enforcement. it is now squeaky clean, and if desired can be invested anywhere.