An FATF Case Study of How Criminals Can Use The Securities Markets to Launder Money

In 1994 a small eastern European enterprise was incorporated in Country A and started trading on a venture capital market. Company B supposedly manufactured magnets at its European subsidiary and was also in the business of trading oil to and from the former Soviet Union. During this period, the company was reporting tens of millions of dollars in sales and its year over year sales growth was double digit. The company’s head office was located in Country C and in 1996, as a result of its dramatic growth, it met the listing requirements and its shares started trading on one of the stock exchanges of Country A.

The company was able to attract a high profile board of directors, including a former high ranking politician and was represented by a well-known established law firm. It had been identified that the founding shareholders of the European enterprise were connected to an Eastern European organized crime group and whose interest in the company had been relinquished through a series of transactions in European and Caribbean “tax havens”.