After analysing disclosures CTIF-CFI reported several money laundering files to the judicial authorities related to “virtual” diamonds. In recent weeks, the FSMA received several complaints about online platforms where diamonds can be bought and sold. Click here for more information

The number of massage parlours is on the rise in Belgium. The city of Antwerp, for example, noticed an increase by 43 % of the number of new massage salons. There is a shift from Chinese restaurants, which are subject to increasing inspections, to Asian massage parlours. The files reported to the judicial authorities indicated the following elements with regard to the individuals involved: the use of bogus self-employed people and/or front men, dormant companies that suddenly become active, multiple companies are set up simultaneously, multiple companies in name of the same owner, and managers often change and operate the same massage parlours, the registered office is also frequently moved. With respect to the transactions, these files often feature many cash deposits, as well as exchange transaction where small-denomination banknotes are changed into large-denomination banknotes, or transfers to Asia or to individuals of Asian origin. Other offences are also identified in connection with massage parlours, such as forged accounting, arrears in social security, successive bankruptcies, tax evasion, etc.

Since 2014, CTIF-CFI has identified the use of the national or international “offsetting technique” (also referred to as “compensation technique”).

This technique involves criminals/fraudsters with large amounts of cash they wish to launder without raising suspicions getting in touch with criminals/fraudsters who need this cash for their illegal activities without their bank noticing. The cash is handed over in exchange for (inter)national transfers with (fake) invoices as proof.

The files that CTIF-CFI reported to the judicial authorities feature atypical transactions on accounts mainly held by companies in the building and industrial cleaning industry. The transactions were transfers by order of these companies to companies in China and Hong Kong. In Asia the financial flows could be combined with financial flows from concealed commercial transactions with the vast Asian market. Sometimes the money was sent to Asia, from where it was subsequently transferred to an unknown final destination.

So the cash handed over to the Belgian companies, which were proceeds of illegal activities (illegal trading, drug trafficking…) does not end up in the financial system. As a result, the offsetting technique largely takes place outside the traditional banking system and is therefore not easy to detect. As this money is laundered outside of the conventional system, the proceeds of activities such as drug trafficking are not detected by the usual monitoring by banks.

The economic justification of these transactions can be questioned though, as transfers often take place between companies operating in completely different industries. This is an important warning sign.

After reconstruction CTIF-CFI was able to link the offsetting schemes with laundering the proceeds of various predicate offences, such as illicit drug trafficking, human trafficking, and illicit trafficking in goods and merchandise or fraud.