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Offshore Company Establishment

Offshore company establishment is one of the oldest methods of money laundering, involving investing monies in companies in specific countries where the secrecy relating to that company is guaranteed. In another legal transaction following, they can simply make out loans from that company, draining out the dirty money. This is known as one of the “minority” methods. This is because very little financial assets are lost out of the principle investment, even if an amount is lost in the process it can be gained back for one reason. There can be interest charged on the loan, also allowing to gain tax relief on the loan repayments. These companies are generally called “shell” or “shelled” companies (this term is used through multiple papers in research documentation). This is because more often than not there is not exactly a full company (meaning goods and services may not be offered, but can be). It is virtual, existing in the books of the laundering. It is only the shell of a company, it looks legit on the outside however inside it is hollow of normal business practices. An example of a company that used the offshore company establishment method (not specifically a loan oriented company) was the Bronfman family of Canada. Exporting alcohol to the U.S. was not illegal in Canada; it was only illegal to import it from the U.S. side. Naturally those writing checks to pay for imported Canadian booze didn’t like to be so obvious as to make them out to Bronfman. So the Bronfmans opened up an account at the Bank of Montreal under the fictitious name “J. Norton”. Since no one knew anything at all about J. Norton, money could be wired to this account from the U.S. Or U.S. cash or checks could be used to purchase a bank draft made out to “J. Norton” at any branch of the Bank of Montreal. These drafts could then be deposited into the bank account of any Bronfman-controlled company. The company treasurer would see the name “J. Norton” and credit the payments to the company’s U.S. account.
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