The mind of a criminal through the hospitality industry

Money Laundering/Terrorist Financing in the hospitality industry is gaining ground, and its activities are attracting criminals to use these avenues. Money laundering is the act of disguising the source of money obtained through illegal means.

To put it more simply, it’s the act of hiding money; this money is casually referred to as ‘dirty’ money. In basic terms, money laundering is when a business has ties or connections to organised crime and suddenly starts to book incredible, or even normal sales. That’s what criminals want to achieve – take dirty money from drugs or human trafficking or another criminal endeavour and put into the system to make it look clean. Then, they can make use of the money, and it looks like the money was made legitimately.

The success of a money laundering operation hinges largely on one action: getting the dirty money into the system (financial institutions).

The hospitality industry is made up of hotels, travel and tours, restaurants, night clubs, amusement and theme parks, gaming and betting and casinos, etc. One common feature of all these places is the fact that their operations are cash-intensive, which might attract criminal to wash their ill-gotten money.

Let’s take each of the sub-outlets under the hospitality industry and explain how money can be laundered.

Money could be laundered via the hotel business by operating a ‘black’ hotel. The criminal buys a bit of prime land. Cash is paid for the land and a five-star luxury-hotel resort is built. The hotel is then furnished with the best furniture, cutlery, china, linen. From then on, the hotels and bungalows are full up – except that nobody ever stays in them.

If a travel agent calls: “Sorry, we’re fully booked”. On a daily basis, cash from room rentals, bungalow rentals, the restaurants, the casinos, the nightclubs and bars are sent to banks for deposit. After a couple of years, the resorts are in perfect shape to be sold with a brilliant trading record.

Another way money can be laundered through the hotel is when the criminal books and pays online for hotel rooms for a number of his business partners – but cancels the booking due to some reasons. The hotel manager will be compelled to refund the money (after charging a cancellation fee) by issuing a cheque or draft to the criminal. Some criminals will even request for the cheque to be written in the name of a third party.

Because the hotel business is a cash-intensive operation, the hotel risk’s criminals paying their bills with ill-gotten cash.

The restaurant business is also gaining ground for money laundering activities. Mention can be made of Mizu Sushi Lounge in Puerto Vallarta, Mexico. No one would have described Mizu Sushi Lounge as nondescript. It wasn’t a traditional Mexican restaurant by any means. Patrons dined on deep-fried sushi rolls and washed the quasi-fusion food down with icy glasses of sangria.

Mizu Sushi Lounge hosted anniversaries, birthdays, and Oscar-viewing parties — and guests made sure to document each boisterous celebration on Facebook. In fact, more than 500 people ‘checked in’ to Mizu Sushi Lounge via various social media platforms, and many gave it high marks on online review sites. It was a place to see and be seen. But the place was being controlled a by drug cartel and was later closed down.

The first step in this criminal enterprise is to find a business – then, buy it. Buying a restaurant that’s already in operation would be the easiest way, because it already has employees. In reality, though, many restaurants involved in money laundering are legitimate businesses with cooks, a waiting staff, a menu and real profits. It’s the intermingling of legitimate profit and/or sales with proceeds from illegal activities (like drugs or human trafficking etc.) that constitutes money laundering.

Once the money is deposited, it becomes easy to further clean the money by either transferring some to tax havens, or using it to buy and sell real estate, cars, etc.; thereby generating real (i.e. legal) profits. Because the activities of restaurant business are highly cash-intensive, it’s easy for criminals to wash their dirty money. Dirty money is used to pay the bills. Also, fake expenditure invoices are raised to further the laundering activities

Casinos and other businesses associated with gambling – such as bookmaking, lotteries and horse-racing clubs – are natural targets for money launderers because of their highly cash-intensive operations. These activities provide a ready-made excuse for recently acquired wealth with no apparent legitimate source. Casinos offer many financial services (accounts, remittances, foreign exchange, cash issuing etc.), but in some jurisdictions – such as Ghana, they may only be regulated as ‘entertainment’ venues, rather than financial institutions.

The casinos are even more attractive to these criminals when they have international affiliations which allow customers to transfer their playing chips from country to country. This is achieved when the criminal uses the dirty money to buy the playing chips, plays one or two games and decides otherwise. The criminal then requests a refund for the remaining unused chips – which is obliged by the casino issuing a cheque. The criminal can even launder the money by requesting for his or her playing account to be transferred to another country he is traveling to. When he/she gets to that country, he/she plays one or two games and requests a refund of the unused chips.

Sometimes money laundering through casinos is also done through fixed-odds betting terminals (FOBTs), as players play and lose a little bit then cash out in the form of a cheque so they have a receipt to show as proof of their ‘winnings’.

Another means of disguising money laundering in a casino is through an anonymous individual using false identification to layer the source of their transactions in large amounts of funds through structuring – by creating multiple accounts and transactions in the casino to avoid tracing money laundering transactions taking place in the casino. This is made possible because most of the casinos and betting companies in Ghana are not regulated.

Travel and Tour businesses also contribute to laundering dirty money in the hospitality industry. Criminals buy travel packages (including airfare tickets, tourist sites) for their associates. The packages are cancelled days to the event (activities) date by the criminal with a good reason. The travel and tour agency will refund the money, less cancellation charges, by issuing a cheque or funds transfer to the criminal. Criminals can also create travel packages for people to purchase. Dirty funds are used to make payment for activities (such as transportation, visa, airfare tickets, tourist site etc.) on behalf of clients. The cash paid by clients is used to replace the dirty funds spent.

The hospitality industry can help in the fight against money laundering and terrorist financing by having itself regulated by the Ghana Tourist Board. The Ghana Tourist Board should work with the Financial Intelligence Centre to issue Anti Money Laundering/ Combatting Terrorist Financing guidelines for the industry.

Proper Know-Your-Customer (KYC), especially for the Hotel and Casino businesses, should be implemented. This will help in identifying any suspicious transaction and/or behaviour.

Players in the hospitality industry should develop procedures and policies. These policies and procedures should be properly disseminated and appropriate training provided on them to front-line staff. Senior management must be fully engaged in developing and maintaining procedures and controls which are necessary to manage the risks identified in the hospitality industry’s risk assessment.

Record-keeping of all Anti Money Laundering policies, procedures and controls – and all ongoing transactions with customers – should be maintained. Records of Customer Due Diligence (CDD) identification and verification must be maintained for at least 5 years. The purpose of the record-keeping requirement is to ensure there is an audit trail that could assist in any financial investigation by a law enforcement body.

Another way to fight money laundering is for industry players to train stakeholders and also create the necessary money laundering/terrorist financing awareness. This is to enable all relevant employees to make a report when they know, suspect (or have reasonable grounds to know or suspect) that a person is engaged in actual or attempted money laundering or terrorist financing.

The use of a digitisation can go a long way to help combat money laundering and terrorist financing. The use of physical cash for the payment of good and services rendered by players in the hospitality industry should be discouraged. This is because before a product or service is issued to the customer by the financial institution, ‘KYC’ and/or customer due diligence would have been done.

Being prone to being a front to illegal activities such as money laundering without any direct participation of the hospitality industry management, all means to protect the credibility of the hospitality industry establishment (such as casinos, hotels, restaurants, travel and tours etc.) should be observed.  This must be through keen observation by all hospitality industry players (stakeholders) in eyeing suspicious financial transactions and behaviour beyond the usual expected process that takes place within the hospitality industry.

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