Construction Project Schemes

Criminals channel illicit funds into construction or infrastructure projects so that, upon completion or sale, they appear as legitimate assets or revenues. This end-stage merging of illicit capital with lawful development costs or property sales constitutes the primary objective, fully integrating the laundered proceeds into the formal economy.

Shell firms, undisclosed beneficial owners, and PEP involvement create vulnerabilities in verifying who ultimately controls or benefits from construction projects. Criminals split or obscure ownership stakes, channel illicit funds through corporate layers, and bypass KYC obligations, especially when politically influential individuals or complex ownership webs are involved.

Criminals exploit large construction and property development undertakings to launder illicit funds under ostensibly legitimate project expenses. By inflating costs, routing payments through shell subcontractors, and mixing illicit proceeds with real development budgets, they capitalize on the substantial capital flows and complex cost structures inherent to these projects. This masks the true origin of funds, making real estate and construction-based transactions appear routine while hiding illicit financial activity.

• Screen project stakeholders against sanctioned or high-risk individuals who hold prominent public responsibilities.
• Flag Politically Exposed Persons (PEPs) who invest in or facilitate construction contracts without legitimate, verified sources of wealth.
• Assist in evaluating heightened risk factors associated with corruption or abuse of public office in the awarding of government construction projects.

• Compare stated project costs to standard market rates or industry benchmarks to identify inflated or excessive disbursements.
• Verify the authenticity and amounts of invoices to uncover potential over-invoicing or unsubstantiated charges.
• Match payment schedules to contractual milestones, flagging irregular or off-sequence payments.
• Track unexplained revisions to invoices or cost estimates that deviate from legitimate project progress.

• Identify large or unusual cash-based inflows or outflows that finance construction costs, highlighting potential over-invoicing or layering steps.
• Track payment schedules and amounts, detecting irregular intervals or suspicious recipient accounts, such as shell entities.
• Reveal foreign or unknown funding origins, flagging high-risk jurisdictions or unverified investor sources.
• Monitor excessive payroll or wage disbursements to non-verified individuals, revealing ghost employees or inflated labor costs.
• Expose the misdirection of NGO or charitable funds intended for construction into personal or affiliate accounts.

• Maintain requests and submissions of project documentation (e.g., cost breakdowns, progress reports), identifying delays or omissions.
• Track version control and revisions of documents, revealing frequent or unexplained changes to cost estimates or invoices.
• Provide an audit trail of all uploaded or modified files, highlighting potential attempts to conceal or alter evidence.

• Track funds donated for nonprofit-driven construction initiatives, verifying final recipients and usage.
• Flag movements of donated assets into personal or affiliate accounts, revealing misuse or misappropriation.
• Detect signs of layering where charitable funds are redirected under false pretexts of building community infrastructure.

• Cross-check official staff rosters against wage disbursements to reveal non-existent employees or inflated payroll costs.
• Identify discrepancies between declared roles and actual work performed on construction projects.
• Flag large or repeated wage payments to individuals lacking verifiable employment credentials.

• Provide baseline industry metrics (e.g., typical cost structures, staffing needs) for construction projects to help identify inflated or unjustified expenses.
• Offer comparative data on usual operational scope and spending patterns to reveal anomalies in cost estimates or invoices.
• Support ongoing assessment of a company’s actual construction activity against stated business operations.

• Capture detailed identity and background information for project managers, beneficial owners, and key personnel, revealing inconsistencies or evasive explanations.
• Document financial profiles, declared sources of funds, and ownership structures to support deeper analysis of suspicious financing.
• Verify or challenge PEP status and high-risk attributes, especially when public officials award or invest in suspicious construction projects.

• Identify significant cross-border transactions and the involved jurisdictions.
• Highlight inflows from high-risk or poorly regulated regions used to fund construction projects.
• Support enhanced due diligence on foreign investors whose geographic profile presents elevated AML risk.

• Verify corporate registration details and operating history to detect shell companies or recently formed companies lacking real construction experience.
• Track sudden or frequent changes in beneficial ownership that obscure the true controllers.
• Check subcontractors or affiliated entities receiving large payments to uncover undisclosed relationships or dormant businesses.
• Validate newly formed government contract awardees to ensure they have genuine capacity and are not front entities.

Require full disclosure of all investors, beneficial owners, and sub-developer relationships for large construction or infrastructure projects. For government contracts, perform thorough background checks on principal contractors, sub-developers, and key suppliers using official registries and OSINT. Continuously verify changes in beneficial ownership throughout the project lifecycle to identify disguised or newly introduced stakeholders connected to illicit funds.

• Flag irregular or round-number payments, frequent payments to subcontractors in high-risk jurisdictions, or a disproportionate ratio of subcontractor payments to project size.
• Monitor patterns of frequent or high-value cash deposits related to the project.

Require thorough due diligence on project subcontractors, suppliers, and external partners to detect shell entities or newly formed businesses lacking genuine operational history. Validate references, licensing, and past performance records. Periodically reassess third-party compliance to ensure these relationships are not used as conduits for laundering illicit funds via inflated or phantom contracts.

Regularly monitor shifts in beneficial ownership, capital injections, and the project's organizational structure. Investigate sudden or unexplained changes in ownership, new sub-developer roles, or partial stake transfers to ensure that illicit funds are not introduced at later project milestones.

Perform independent cost audits to detect over-invoicing or inflated budgets. Check that the quantity of materials billed matches construction logs, such as comparing cement or steel usage to the actual project size.

• Construction-related shell companies open multiple bank accounts to receive and move funds derived from inflated contracts or questionable investors.
• By circulating funds among these accounts—often across different entities or jurisdictions—criminals layer and conceal the illicit source.

• Criminals direct illicit capital into property development or infrastructure projects with inflated budgets to justify large incoming funds.
• Upon selling or refinancing the completed property, launderers integrate illicit proceeds as legitimate gains, further obscuring their origin.

• Shell firms issuing bearer shares can quickly shift ownership through the handover of physical certificates, avoiding registration that would otherwise reveal the true owners.
• This feature is exploited to obscure who ultimately controls the entity responsible for funding or receiving proceeds from the construction project, enabling secrecy around the end beneficiaries.

• Over-invoicing is documented through exaggerated or fabricated invoices from shell subcontractors, creating plausible paper trails of project expenses.
• These inflated accounts receivable justify significant capital inflows as legitimate payments for construction services or materials, effectively laundering illicit assets under the guise of ordinary business transactions.

• Criminals and their associates acquire or transfer partial ownership stakes in companies tied to property development, obscuring beneficial ownership.
• Splitting equity among sub-developers or shell firms circumvents certain due diligence measures, masking the source and control of funds behind multiple layers of corporate structure.

• Illicit proceeds can be introduced into large construction projects through bulk cash payments to undocumented workers or shell subcontractors, resulting in minimal transactional records.
• Cash-intensive operations facilitate the circumvention of AML reporting thresholds and obscure the money trail, as physical currency is harder to trace and can be repeatedly deposited or withdrawn under various pretexts (e.g., construction wages, material purchases).

• Enable generation and management of inflated or fictitious invoices to justify over-invoicing in construction projects.
• Facilitate layering by dispersing surplus funds through ostensible expenditures and subcontractor billing cycles.

• Criminals use NGO or charity accounts ostensibly designated for building projects (e.g., roads or community infrastructure) to funnel funds into personal or affiliate accounts.
• Exploit a philanthropic facade to evade scrutiny while large sums pass through charitable entities, recorded as legitimate construction expenditures.

• Facilitate the formal purchase or sale of property linked to construction projects, allowing criminals to integrate illicit proceeds under the guise of legitimate real estate deals.
• Provide an official financial channel through which large capital inflows or outflows appear as normal property transactions, masking their illicit origin.

• Facilitate substantial physical cash transactions for purported construction expenses and subcontractor wages, reducing electronic audit trails.
• Accommodate bulk cash deposits or withdrawals that obscure the true origins of funds involved in large development projects.

• Enable criminals to invest illicit capital in property development or infrastructure projects, portraying it as legitimate financing.
• Facilitate concealment of ultimate beneficiaries through partitioned ownership stakes, multiple developer roles, or complex development agreements.

• Allow the formation of shell or front companies that can receive and disguise illicit funds under inflated project costs or subcontracting arrangements.
• Enable layering by obscuring beneficial ownership through nominee directors, multi-jurisdictional structures, and complex corporate setups associated with construction deals.

Charities or NGOs engaged in infrastructure or community projects can be misused by:

• Transferring funds labeled as project expenses into personal or affiliate accounts.
• Exploiting the charitable facade to reduce scrutiny of unusually large or continuous inflows.

Such misuse complicates financial institutions’ due diligence, as activity may appear philanthropic while actually masking illicit transfers.

PEPs facilitate or invest in construction projects by:

• Leveraging political influence to award government contracts or channel public funds to co-conspirators.
• Splitting ownership stakes or engaging in sub-developer arrangements to conceal illicit gains.

Illicit operators initiate and manage these construction schemes to launder proceeds by:

• Channeling unlawful funds into large development budgets for apparent economic legitimacy.
• Manipulating subcontracting chains and cost structures, layering proceeds through multiple transactions.

This fragmentation makes it problematic for financial institutions to ascertain the true source of capital and identify suspicious cash flows.

Shell or front companies are leveraged to:

• Receive inflated payments or subcontracting fees with limited or nonexistent legitimate operations.
• Obscure ultimate beneficial owners and layer funds across multiple corporate accounts.

Financial institutions struggle to track real money flows, as these companies appear in official documentation yet lack genuine commercial activity.