What Is a Company Formation Agent?
Hidden assets, money laundering, tax dodging, and the firms that help make it all possible. Here’s how formation agents can facilitate abuse of the global financial system.
Most investigations of transnational criminal networks follow a known group or commodity such as the Italian Camorra, Chinese triads, or rhino or elephant poachers. By having a focus on key actors and commodities, much falls outside the attention of investigators. This fascinating analysis of a global Romanian crime group reveals a gaping hole in our transnational crime investigations. OCCRP exposes a major transnational crime group with 1,000 members and 50 core members operating for eight years without major disruption. The criminals netted about $240 million annually by inserting their own skimming machines into bank ATMs around the world and cloning credit and debit cards. This one gang, dubbed the Riviera Maya by OCCRP, accounted for about 10 percent of all the skimming operations in the world and operated in the European Union, Australia, South Korea, Japan, Taiwan, Brazil, Cuba, Paraguay, Turkey, the United States, and many other countries.
The members of the Romanian group that generated these huge revenues had little formal education but great criminal savvy. They recruited tech personnel online, they bribed ATM technicians to install their skimmers, they moved their cash through DHS and Western Union and bank transfers. Since their prime targets were tourists on vacation in Mexico, U.S.-based banks lost hundreds of millions over the years without connecting the dots. To accomplish this feat, there were the usual hallmarks of transnational crime — fake passports, bribery, and money laundering into real estate in Mexico, Romania and a lesser extent in the United States, accompanied as elsewhere, by significant environmental destruction. The gang used money mules to disguise the transfer of funds. Romanian prosecutors identified dozens of Romanian students, construction workers and even a priest, paid little or nothing to assist in this activity, They even had criminal connections in the notorious tri-border areas in Latin America, facilitating their nefarious activity.
How did the criminals of Riviera Maya get away with this massive transnational crime until 2019? As OCCRP writes, “Partially, the answers lie in the gang’s ability to use local corruption to their own advantage, to operate in the large gaps between international jurisdictions, to hide behind smoke and mirrors and to resort to blackmail, extortion and even assassination when needed.”
The group did not operate unnoticed but its disruption was not the result of investigative work. Its problems have been an unfortunate attribute of the business model of organized crime: violence. Their use of violence in Mexico finally brought this foreign group to the attention of Mexican authorities, who moved against them in Spring 2019. Mexican law enforcement could more easily move against foreign transnational criminals than domestic ones, even though the gang’s nervous neighbors in Cancún, habituated to the brutality of organized crime, chose to keep their silence,
I plan to use this case as a lesson in “how not to detect and disrupt a criminal network.” The criminal acts were not only perpetrated in Romania and Mexico, countries with high levels of corruption in law enforcement. The financial victims were largely in the U.S., money was laundered into Miami real estate and the group operated through a Delaware-based bank. Yet the warning signs go way back. As early as 2012 a Western Union compliance officer filed a warning on this group to Romanian police. But the Romanian police failed to act. In 2015, the guru of online and financial crime, Brian Krebs, posted a three-part series on his website about a Eastern European group operating a massive skimming operation in Mexico. Yet despite his widely read blog posts, American law enforcement failed to investigate these massive losses and American banks did not sound the warning bell on the many suspicious transactions emanating from the Yucatán.
When OCCRP first contacted me about this case, I heard most about the criminals’ large-scale financial fraud and their money laundering into real estate. But there was also an intriguing subtheme — the criminal network was smuggling Romanians across the U.S.-Mexican border into the U.S. This comment rang a very strong bell with me.
Several years ago I was teaching a class on human trafficking. One of the students became very concerned that she was observing on her daily subway rides a phenomenon she was studying in my class. On the cars of the Washington, D.C., metro, she frequently observed Eastern European women, sometimes accompanied by little children, begging on the subway cars. She mentioned this to me, I immediately recognized a pattern I had seen repeatedly in Europe where trafficked Romanian girls and women were forced to beg by their human traffickers. I helped her contact many diverse organizations responsible for combatting human trafficking. These included the managers of the human trafficking hotline, officials of Virginia and D.C. police, transit police as well as federal law enforcement officials concerned with fighting human trafficking. They were all informed that Romanian human trafficking had arrived in the United States but all dismissed this as a trivial, localized problem or said they did not have the resources to allocate to a phenomenon that involved only a limited number of individuals.
If someone had investigated the low end of the criminal investigation and worked their way up the chain — the key investigative technique used against criminal organizations — someone might have detected and disrupted this organization. In local law enforcement, there is the broken window theory that states that small visible signs of crime may help lead to and reveal more serious crimes. This adage of urban policing should certainly be applied to transnational crime, especially human trafficking.