A Hong Kong court has found a woman guilty of laundering an estimated US$86om (US) between 2002 and 2005. That works out at roughly US$286m per year. To put this ridiculous figure into perspective, the median wage for a US employee in 2011 was US$26,965.43, or less than 10,000 times the amount the woman laundered in one year. The median salary for a Hong Kong domestic household in 2010 was HKD$18,000 (US$2,319.15), or 12,000 times the amount laundered annually.
- Lam, 61, was instructed to transfer money through her accounts by a woman who formerly babysat her children
- The babysitter went on to become a factory owner
- Local media say that the money was laundered through nine banks, and that Lam laundered an average of HK$155m (US$20m) every month.
- The case came to light after a Dutch citizen filed a fraud complaint that led to the investigation of two of Lam’s many bank accounts.
- Lam said she received occasional monthly payments of HK $4,500 (US$580) in return for her services. She also said that she was illiterate.
The South China Morning Post named the banks, who all closed the accounts connected to the laundry in 2005.
Alarm bells ringing
There are many alarming points in this story. The scale of laundering, the number of bank deposits and enormous sums involved. Lam received a paltry sum for her services and will spend the next ten years behind bars for her part in this crime.
Most alarmingly, this low profile woman who received telephone orders from mainland China to carry out this laundry managed to transfer an enormous amount of money from her own bank account to several others. This was only detected when an independent person reported her for suspected fraud. The press reports make no mention of any suspicions or reports made from the banks about the level of transactions before that.
Good customer due diligence – although in 2002 this was only a twinkle in the FATF‘s eye – could have spotted the discrepancy between the woman’s income and the deposits made into her account. Decent transaction monitoring would have flagged up the frequency and volume of the transfers.
While this laundry was on top spin almost a decade ago, I would be interested to find out how Hong Kong banks are managing customer due diligence today. Would counter staff in a retail bank raise a red flag if a Chinese mainland client walked in and issued a series of high value transactions?
Training – whether on-line or face-t0-face – is the only way to raise awareness of financial crime among bank staff. Generating and maintaining a culture of compliance with the law within banks will go a long way to re-enforce training within banks.
The scale of the laundry in this story is enormous, yet the method used to operate it – an occasional phone call from a mysterious voice in a different country – smacks of a mass operation. The babysitter-cum-factory owner could have a string of low paid strawmen and women, just like Lam, who are willing to make a few transactions in return for a few extra dollars. And after all, where’s the harm in that?