Let’s say you’re a Russian bad guy or shadowy Malaysian financier or a lawyer trying to conceal a cryptocurrency pyramid scheme or the president of the United States, and you’ve got some money to launder. Sure, you could just go to your local (or, preferably, not-so-local) bank to do it. But the FBI has a better idea (not one that it intended to make public; thanks, leakers!): Just invest it in a hedge or private equity fund.
“Hedge funds and private equity firms receive funds from entities registered in nations that maintain laws conducive to masking underlying beneficial owners,” which makes it harder for U.S. financial institutions and regulators to determine the source of funding, the FBI bulletin read…. Martin Kenney, a British Virgin Islands-based asset recovery attorney who has represented victims of hedge-fund swindler Allen Stanford and other frauds, said: “It stands to reason that a not-insignificant proportion of the capital managed by private investment funds is dark money.”
So what of these four cases? Well, one is the aforementioned cryptocurrent lawyer. The others? They are some real doozies.
Intelligence dated July 2019 details how a representative of an unnamed New York and London-based hedge fund “proposed investing in private placement funds and using a series of shell corporations to purchase and sell prohibited items from sanctioned countries to the United States….”
A human source, whose account has not yet been corroborated, told the FBI that an unidentified Mexican cartel operative operating in Los Angeles and Orange County recruited and paid people to open hedge fund accounts at private banking institutions….
And fourth, a “reliable source with excellent access” told the FBI that a “New York-based private equity firm received more than $100 million in wire transfers from an identified Russia-based company allegedly associated with Russian organized crime.”
FBI concerned over laundering risks in private equity, hedge funds – leaked document [Reuters]
Threat Actors Likely Use Private Investment Funds To Launder Money, Circumventing Regulatory Tripwires [BlueLeaks]