SOCA Alert A9A194N. The use of music tours and club events as a vehicle for money laundering

Transcription

1 NOT NOT PROTECTIVELY PROTECTIVELY MARKED MARKED SOCA Alert A9A194N The use of music tours and club events as a vehicle for money laundering This is Alert warning A9A194N issued by the Industry Exchange and Alerts Branch of the Serious Organised Crime Agency (SOCA). It is based on assessed intelligence, warns of dangers and threats from serious organised criminality and is devised with the aim of bringing about preventative or remedial action. 1

2 July 2009 The use of music tours and club events as a vehicle for money laundering Overview SOCA has identified that criminals posing as entertainment promoters and organisers are directly, or on behalf of others, using the industry as a vehicle to launder the proceeds of crime. Although not limited to any one type of crime, such money is likely to have derived from the proceeds of drugs trafficking or other serious crimes. Organised events include both service-based and trade based 1 activities in which criminally derived profit is falsely inserted to inflate the declared earnings from ticketing and other sales. This is then paid into the UK banking system which allows for flexibility to disperse criminal proceeds both here in the UK and overseas. What we would like you to do We know that organised criminal groups deliberately seek to find ways that exploit opportunities to conceal the proceeds of crime. This includes the use of legitimate business services, such as those that are cash based or which operate outside of the regulated sector 2. We are giving you this information as a means of raising your awareness about the threat. It is hoped that by taking this step we might put you in a position to identify and report any related suspicious activity. The Alerts process is the way in which SOCA provides information to the private sector. To help us to improve this service, we would welcome any feedback you have on both the Alert itself and the information provided to you. Please all feedback to alerts@soca.x.gsi.gov.uk and include the reference AGRIUS in the subject line. 1 The UK Threat Assessment defines service-based money laundering as a process that specifically abuses the sale of services rather than goods or commodities to launder proceeds of crime. It defines trade-based money laundering as a process by which the proceeds of crime are disguised, or assets are transferred, through the use of trade transactions. 2 Businesses in the regulated sector include, but are not limited to: accountants and auditors, tax advisors, financial institutions, credit institutions, dealers in high value goods, casinos, estate agents, some management consultancy services, company formation agents, insolvency practitioners and legal professionals. 2

3 Information Report Legitimate promoters of music tours and club events make their profits from sponsorship, ticket and concession sales. Associated costs will include the hire of acts, venues and in some cases, the running of concessions. Often these expenses are paid in cash and involve transactions between multiple parties. We recognise that given better information, legitimate business specialists across the entertainments industry, i.e. venue operators (including local authorities), suppliers and subcontractors and members of the reporting sectors can identify and report possible cases linked to crime. Traditionally, the music and entertainment industry has not been considered as posing a particular money laundering risk. This is unlikely to be an accurate statement today. Criminals are just as likely to operate very sophisticated business networks; investing in expert knowledge and effort to help avoid personal detection and to conceal criminal gains. The business model used by criminals in this arena is essentially the same as that used by legitimate promoters. The only difference being that criminally derived profits, from illegal activities such as drug trafficking, are combined into legitimate takings, to make it harder for banks and law enforcement to detect. This activity is often managed through deliberately staged or other controlled events which have the framework to conceal significant amounts of criminally derived cash. Although not exclusive, successful individuals are likely to have a good working knowledge of the industry which enables them to operate close to levels of credible business practice. Some UK-based, foreign organised criminal groups are known to exploit their own national, ethnic and cultural entertainment activities to launder the proceeds of crime. This includes the potential transfer of money out of the UK to their countries of origin, or to other countries in which ethnically-linked communities have been established. Trade-based money laundering is an effective method for criminals to exploit because it enables them to launder illicit cash into the regulated sector through a seemingly legitimate business framework. However, the additional benefit of controlling a servicebased business is that it enables criminals to more easily manipulate pricing and turnover 3

4 for services that are often less tangible than the actual exchange of physical goods or commodities. The following examples are ways in which money can be laundered through service-based activities. In these examples, events are taking place, but anomalies occur which may indicate that they are in some way bogus or have been staged for money laundering purposes. Ticket sales Business records for ticket sales can be manipulated to falsely indicate a higher profit - from the individual ticket face values to the actual numbers sold. The difference between the actual profit and the declared profit can then be inflated by adding the criminal money. A mitigating excuse might include, we sold lots of tickets, people just failed to show up There have been some instances where declared sales figures for tickets have actually exceeded the capacity of the venue. Other indicators for potentially illicit activity might include that an event promoter took a deliberately less than interested view in actually filling the venue, it was poorly advertised or staffed, or that from the start it appeared to be a loss-making venture that was never convincingly put together. All of these factors are likely to be regular occurrences within the entertainments industry. However, it is the unexpected or repeat failure of events, which are organised by otherwise generally savvy individuals, which should attract suspicion. The use of concession sales 3 Whether operating in a legitimate or criminal capacity these activities are often highly profitable. They offer the concession holder with the potential for making considerable profit, e.g. through the sale of drinks, food and merchandising etc. Therefore when looking for opportunities to launder money, it is more likely that criminals will seek out those venues where they are able to control both ticketing and concession sales. Larger venues tend to have their own concession operations which might limit their interest to criminals; however this assumption should not be relied upon. 3 A business that operates within the property of another business and provides complementary goods or services. 4

5 It is possible that several variations of this type of scam are likely to be in operation, with each of them geared to show a greater turn over than actually occurred. To validate bogus turnover figures, business records are likely to include false purchase and sales invoices but the physical sight at a venue of too much or too little stock to support an event should stand out as a possible indicator. Sponsorship and bookings To add an air of authenticity, criminals might also recruit associates who reside overseas to sponsor tours on their behalf. With this as a plausible reason and together with professionally produced documentation, any hint of suspicion is often avoided when money is subsequently transferred overseas. Points to consider The following should be considered as potential considerations and indicators for suspicion and reporting through the normal reporting mechanisms. Know Your Customer - Is the customer known to you; is the amount of monies or frequency of deposits unusual for the normal business model expected for this type of activity?; are you able to easily verify their credentials? If a new customer, you may wish to ask for further information on their business history, business contacts, company or group details, etc. Are the contact details and company information provided in sufficient detail to satisfy with the business requirements? Be aware of those persons who only provide a P.O. Box address. Has a sufficient level of information been provided about the event being sponsored? Are you aware of any payments to an unknown third party or to an account overseas? If you are responsible for the management of the business accounts, or are responsible for the contractual side of the business, please also consider the following: Scrutinise the accounts, associated documentation and contracts relating to the business and sponsorship of the event to identify any reasonable suspicions. Look 5

6 out for fraudulent invoices (especially over-and-under invoicing) and supporting documents. Compare ticket and concession sales with what should be normally declared for a particular venue. What else to consider If, as a result of information provide to you by SOCA, you know or suspect that there has been money laundering or terrorist financing activity and your business falls within the regulated sector, then you are reminded of the obligations to make reports to SOCA under Part 7 Proceeds of Crime Act 2002 and the Terrorism Act If you decide to make a report in this way you should adopt the usual mechanism for doing so and it will help our analysis, if you would include the key word AGRIUS within the text. This reference is specific to the Alerts process. Where appropriate, we would ask that this is used in addition to the ongoing use of the Glossary of Terms. Guidance on making suspicious activity reports is available at Disclaimer While every effort is made to ensure the accuracy of any information or other material contained in this document, it is provided on the basis that SOCA and its staff, either individually or collectively, accept no responsibility for any loss, damage, cost or expense of whatever kind arising directly or indirectly from or in connection with the use by any person, whomsoever, of any information or other material contained herein. Any use of the information or other material contained in this document by you signifies agreement by you to these conditions Serious Organised Crime Agency 6

7 Protecting this document NOT PROTECTIVELY MARKED This is a government document that has been graded as Not Protectively Marked. The information contained herein is time sensitive and to maximize protection against the documented threat is deemed appropriate for wide dissemination. We do however request that you handle and manage this Alert in a considered way and dispose of it accordingly. Handling advice Legal information This information is supplied by SOCA in strictest confidence under authority of Section 33 of the Serious Organised Crime and Police Act In accordance with Section 35(1) of the Serious Organised Crime and Police Act 2005, this information must not be disclosed by the recipient without express prior consent from SOCA. Therefore, do not pass on this document or any part thereof, or disclose any information contained in it, to any third party without the express prior written consent of SOCA. In addition, if, because of this exercise you are able to provide any information to SOCA that you consider might be relevant to identifying or preventing crime, then we encourage you to do so. We would like to remind you of the provisions contained in Section 34 Serious Organised Crime and Police Act These provisions say that any information provided by you to SOCA, in order to assist SOCA to discharge its functions which include the prevention and detection of crime, will not breach any obligation of confidence which you may owe to any third party or any other restriction on the disclosure of information. S34 requires that disclosures of personal information about living individuals by you to SOCA must still comply with the provisions of the Data Protection Act 1998 (DPA), but you may be satisfied that disclosure by you of such personal information to SOCA in order to assist SOCA to prevent and detect crime is in deed permitted by the DPA. Please, therefore, submit all S34 information to Halerts@soca.x.gsi.gov.ukH. This Alert is exempt from disclosure under the Freedom of Information Act 2000 (FOIA) and should not be disclosed in response to FOIA requests made under this Act. Requests for disclosure under the provisions of the Data Protection Act 1998 or other legislation must be referred to the Industry Exchange and Alerts Branch of SOCA, by to Halerts@soca.x.gsi.gov.ukH or by telephoning Alert Coloured Roundels SOCA Alerts are marked with either a Red or Amber Roundel. This is designed to indicate the urgency of the warning. Red may indicate a more immediate or specific threat, whilst those marked Amber will provide more general information that may complement existing knowledge. SOCA Prevention and Alerts Recognising that the private sector is often the victim of serious organised crime and is engaged in its own efforts to prevent, deter and frustrate criminal activity, SOCA Prevention and Alerts seeks to forge new relationships with business and commerce that will be to our mutual benefit and to the criminal s cost. By issuing Alerts that warn of criminal dangers and threats, Prevention and Alerts seeks to arm the private sector with information and advice it can use to protect itself and the public. For further information about this Alert, please contact SOCA Industry Exchange and Alerts Branch by Halerts@soca.x.gsi.gov.ukH or by telephoning For more information about th e Serious Organised Crime Agency go to Hwww.soca.gov.ukH. 7