Illegal Deposit-Taking as a Predicate Offence of Money Laundering

On 12 June 2020 Ecuador's Superintendence of Companies, Securities and Insurance warned the public that Llakirurak Global Administradora de Fondos y Fideicomisos Llakirurakglobal S.A. held no authorisation to operate or to act as a fund and trust manager. Despite that published warning, some people were swayed by the "high" returns it offered.
According to the Office of the Attorney General (FGE), the company offered financial intermediation and investment services, such as policies yielding 70% every six months, 180% a year, 400% over two years or 700% over three, marketed through digital platforms, social media and public events at which Marco R. was presented as co-owner of an international company called Emporio Global (a fictitious company) and of the domestic company Llakirurak Global Investment, which served as an apparent guarantee of legality.
In the early hours of 30 August 2023, during an operation carried out by the FGE as part of a money laundering investigation arising from a case of illegal deposit-taking, Marco R., Orlando R. and César R. (members of the same family) were arrested and sentenced to ten years' imprisonment for money laundering. The FGE proved they had caused losses of USD 1,623,367.54. The company Llakirurak Global Investment S.A. was also found guilty.

As background, the prosecution had received a Report of Unusual and Unjustified Transactions (ROII) issued by the Financial and Economic Analysis Unit (UAFE) regarding the suspected offence, which led to an investigation by the Anti-Money Laundering Unit in 2022.

After analysing that information, evidence emerged that between 2017 and 2022 the defendants, directly and through the Llakirurak company, had simulated that their assets came from lawful activities by acquiring movable and immovable property worth approximately USD 1,534,830.22, with the aim of introducing them into the National Financial System.

Source:
FGE PRESS RELEASE No. 976-DC-2024
Public announcement of 12 June 2020 by the SCVS

What the rules say

It is worth noting that, under the regulations, no individual or legal entity may provide intermediation services, investment services or lending without the proper authorisations from the supervisory bodies (Superintendence of Banks, Superintendence of Popular and Solidarity Economy, Superintendence of Companies, Securities and Insurance). This is not the first time such cases have occurred; people do not learn the lesson, and it only comes to light once they have lost their supposed "investments".

The big question we should ask ourselves is: who in their right mind offers policies yielding 70% every six months, 180% a year, 400% over two years or 700% over three?, when the Central Bank's reference rates do not exceed 10%. It may be fairly obvious that unlawful acts lie behind such offers; even so, the lack of awareness and knowledge, and above all the wish for easy money, keeps criminals operating and lining their pockets, because we must be aware that not every case ends in a conviction.

Red flags for compliance officers

For those responsible for applying due diligence, this case leaves some red flags worth considering:

1. When the customer or supplier does not hold the permits required to operate in their line of business.

2. Services with features very different from what the market offers.

3. Trade names that suggest well-known companies or banks but have no link to them.

4. Existing complaints against the customer or supplier for possible unlawful acts, such as illegal deposit-taking, fraud or money laundering.

How to avoid being used to launder money

1. A culture of prevention is key. Be wary of excessively profitable offers and remember that easy legal money does not exist, or at least is not common.

2. Verify the minimum information about the person or company offering a product or service: legal existence and line of business, checking that these match what is being offered; that they hold the relevant operating permits; and that there are no complaints or court proceedings against them.

3. For financial services, make sure they hold the proper authorisations and do not appear on the register of unauthorised companies.

4. Check who the legal representative of a company is and make sure that person has no complaints or court proceedings for possible unlawful acts linked to money laundering.

At Líderes Empresariales APLA we specialise in training and advising compliance officers, and in implementing money laundering, terrorist financing and proliferation financing prevention rules for the various obligated entities. If you need help, do get in touch.

Detecting illegal deposit-taking requires controls designed for the sector: that is what shapes our AML/CTF consulting.