The Good Professor reveals an FCPA Secret

FROM A
DIFFERENT ANGLE by Kenneth Rijock

Financial Crime Consultant, for World-Check

10 March 2010

Can a government official "successfully" take a bribe without receiving money or a gift, and thereby minimise his chances of being exposed to an FCPA violation, because there's no paper trail ? He certainly can, at the place where the Foreign Corrupt Practices Act (and the proposed UK Bribery Bill) meets trade-based money laundering. Professor John Zadanowicz, from Florida international University, who first scientifically proved the existence of widespread trade-based money laundering two decades ago, explains it all.

Here is the scenario; would you be able to unravel this puzzle?

Remember, the primary principle of trade-based money laundering is underpricing or overpricing international transactions, thereby moving value in or out, without the potential exposure that arises with bare wire transfers.Unless you know the true value of the imports/exports, you do not know what happened.

You are a corrupt foreign official who has been extended an "opportunity" to enter into business, in your official capacity, and purchase goods or services. This offer is accompanied by an explicit promise of a large bribe.

You cannot be taking the money directly, so you enlist the assistance of a friend in the private sector, who has a company in the same industry as the foreign company who seeks your official business through bribery.

Through an arrangement with the corrupt foreign company, they sell your friend the products at a grossly lower price than the market value.

Your associate then sells the goods, and funnels the additional illicit profit to you, often through a seemingly legitimate joint business venture. You pay him a fee for this illicit service.

Thus, there is no direct, or indirect, connection between the foreign company and you, the government purchasing agent or official.

The only way for an investigator to penetrate and unmask this method is to review all transactions in your country, to determine whether any trade-based money laundering has occurred with respect to the foreign company's local sales. This may be both labor-intensive and cost-prohibitive.

Our thanks to Professor Zdanowicz for this.

________________________________________________________________________________________________________

For further reading: International Trade Alert

http://www.inrternationaltradealert.com/

The facts and opinions stated in this article are those of the author and not those of World-Check. World-Check does not warrant the accuracy of any facts and opinions stated in this article, does not endorse them, and accepts no responsibility for them.

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