Securities

Fraudulent or mule-operated brokerage accounts at regulated securities platforms execute numerous small trades in stocks, bonds, or other market instruments. By cycling illicit funds through these transactions, criminals blend them with legitimate investment flows. This repeated buying and selling across multiple accounts reduces transparency and conceals the original illicit capital beneath normal market activity.

Insiders in brokerage or securities divisions can waive due diligence on complex transactions or ignore beneficial ownership verification, allowing clients to trade or transfer securities without the usual AML scrutiny. By selectively disabling monitoring, they make large or frequent trades opaque, facilitating the layering of illicit funds.

• Some CBI/RBI schemes permit investment in government or corporate bonds; criminals purchase these with illicit capital portrayed as legitimate wealth.
• Obtaining a new passport or residency status minimizes subsequent scrutiny regarding sources of funds, making future transactions appear legitimate under a newly established identity.

• Criminals designate a proxy as the registered holder of stocks or bonds, disguising the true controller of these instruments.
• By operating under the proxy’s name, the ultimate beneficial owner remains obscured, frustrating KYC and beneficial ownership checks.
• Transfers of securities can occur with minimal direct evidence linking the hidden principal.

• Using the investment entity, criminals buy, sell, or trade securities, sometimes manipulating share prices to generate fictitious gains.
• Leveraging regulated markets lends a façade of legitimacy to illicit proceeds, which are claimed as investment returns.
• Complex trading strategies and shell structures obscure beneficial ownership, hindering investigators from tracing capital origins.

Criminals purchase government or corporate bonds, which are categorically recognized as securities, using illicit funds. These instruments give the appearance of legitimate investments, while interest and redemption proceeds are subsequently presented as normal investment returns. Additionally, registering bonds in the names of relatives or nominees conceals true beneficial ownership, impairing due diligence and helping illicit funds blend into lawful financial flows.

• Criminals exploit brokerage accounts by frequently altering authorized traders or registered owners.
• Continual updates to account signatories mask who truly controls the securities portfolio.
• This repeated re-registration obstructs financial investigations, enabling layering and hiding the ultimate owner’s identity.

• Criminals leverage brokerage accounts holding securities in jurisdictions that do not require strict or updated beneficial ownership reporting.
• They repeatedly change the named account holders or authorized traders, using nominee controllers and fake identities, to obscure who actually controls the securities in these accounts.
• The frequent rotation of signatories or account owners adds layers of complexity, making it harder for financial institutions and regulators to trace illicit proceeds or identify the true beneficial owner.
• This technique supports layering by creating additional transactional steps and documentation changes each time the official account holder is replaced.

• Criminals can inflate or deflate a security’s price through matching buy/sell orders (wash trading) among controlled accounts, creating the illusion of genuine demand or supply.
• In pump-and-dump scenarios, fraudsters spread misleading information to attract investors before offloading their holdings at artificially higher prices, portraying illicit proceeds as legitimate investment gains.
• The ease of placing frequent trades in securities markets enables layering, further obscuring the illicit source of funds under the guise of normal trading activity.

• Criminals target publicly traded shares, particularly low-liquidity or penny stocks, to execute pump-and-dump or wash trading schemes that artificially inflate share prices and trading volumes.
• By cycling illicit funds through multiple brokerage or nominee accounts, they create the appearance of legitimate market activity, obscuring direct links to illegal proceeds.
• Once shares are sold at the manipulated peak, the resulting profits appear to be ordinary investment gains, effectively integrating illicit funds into the financial system.

• Criminals open or control multiple brokerage accounts or shell entities to repeatedly buy and sell the same stocks or bonds among themselves, artificially inflating perceived trading volume.
• By coordinating self-dealing trades at manipulated prices, they transform illicit proceeds into ostensible capital gains or losses, masking the original source of funds.
• Wash trading in securities leverages gaps in real-time oversight and beneficial ownership disclosure, making it difficult for regulators to distinguish legitimate trading from collusive transactions.

• Criminals place offsetting buy and sell orders on the same or linked securities across multiple accounts they control, creating the appearance of legitimate trading activity while secretly shifting funds.
• By booking these mirror trades in different jurisdictions or exchanges, they obscure the true ownership of the proceeds, avoiding typical AML triggers tied to straightforward deposits or wire transfers.
• Repetitive layering through multiple mirrored transactions makes it difficult for compliance teams to detect suspicious trading patterns, as each trade appears valid in isolation.

• Criminals place near-simultaneous buy and sell orders for the same stock or other securities across multiple accounts they control, creating artificial trading volume without genuine market exposure.
• These offsetting trades result in minimal net changes in the underlying positions, layering illicit funds while obscuring their true origin from regulatory scrutiny.

• Asset-management portfolios often include liquid securities like stocks and bonds; criminals exploit this liquidity to layer illicit funds.
• By quickly buying and selling or transferring securities among affiliated entities, they obscure the original source of the funds.
• Shell companies or trust vehicles may hold the securities' title, further hiding beneficial ownership from regulators.

• Criminals use non-public, market-moving information to trade company stocks just before key announcements, capturing illicit gains as stock prices shift after the news.
• The high liquidity and quick settlement of securities enable rapid liquidation of proceeds.
• Once liquidated, the profits are routed through multiple brokerage or corporate accounts, obscuring the origin of funds by blending them with legitimate trading activity.

• Criminals shift illicit proceeds into stocks or bonds—often via shell or front companies—to give the appearance of legitimate investment activities.
• Complex ownership or nominee arrangements within securities accounts further obscure the beneficial owner, making it difficult to trace funds back to the illicit sale of restricted or contraband commodities.
• Rapid buying and selling, or layering through multiple securities accounts, complicates oversight by financial institutions.

• Criminals exploit the short settlement windows and share-lending processes of publicly traded stocks to obscure actual ownership around dividend dates.
• By orchestrating rapid transfers and short-selling, multiple parties appear on record as share owners, each claiming the same dividend tax refund.
• Collusion with brokers or other facilitators conceals beneficial ownership, making it difficult for tax authorities and financial institutions to verify the rightful recipient, thereby enabling multiple overlapping refunds.