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Summary

Laundromats

Complex financial schemes designed to move very large quantities of money or assets – usually derived from illicit activities including various forms of corruption or organized crime – across international borders and in the process clean (or launder) the funds so that they can enter the legitimate economy.

The term “laundromat” was coined by the Organised Crime and Corruption Reporting Project (OCCRP) following its investigation into and exposure of a series of international money laundering schemes. The OCCRP has exposed several such schemes, including: the Proxy Platform in 2011, the Russian Laundromat in 2014, the Azerbaijani Laundromat in 2017 and the Troika Laundromat in 2019. In 2022, Transparency International exposed another operation, which it named the Bottle Laundromat; the London Laundromat is the name given to the role that London and its financial services play in cleaning “dirty money”, particularly for Russian oligarchs.

Laundromats involve very large quantities of funds and an extremely high number of transactions and related vehicles. For example, the Russian Laundromat involved the laundering of $20.8 billion from 19 Russian banks, through 5,140 companies with accounts at 732 banks in 96 countries (OCCRP 2017). Laundromat schemes are characterized by the involvement of banks, secretive offshore shell companies with proxy directors and shareholders, and formation agents able to quickly create and dissolve the offshore companies.

In the simplest terms: banks with weak anti-money-laundering (AML) compliance procedures enable illegal funds to enter the financial system (placement). The funds are then converted or moved to distance them from their source, often through the bank accounts of shell companies and offshore financial centres (layering). These funds then re-enter the legitimate economy through legal purchases or investments (integration). Where concerns are raised or when investigations are undertaken, the legal system is often ill-equipped to trace or respond to the complexity of the financial manoeuvres.

Investigations into Laundromats have revealed the sophisticated way in which illicit funds, often the proceeds of corruption, can be laundered by engineered complexity and building cycle after cycle of financial transac-tions. Each transaction launders the money a little more by creating greater distance from the original source of the funds. Involving well-regarded financial institutions at the earliest possible stage is an important part of the process.