Money Laundering: A How To Guide For The Modern Global Billionaire

[Music] so say you find yourself sitting on top of a vast fortune of funds that were acquired legitimately or otherwise and let's just say that vast fortune propels you to the ranks of a global billionaire congratulations you have made it sort of all that's left for you to do now is to make sure your fortune is secure for generations to come and it won't be lost just as quickly as it was made in today's uncertain world that might mean making your money dodge and weave through a myriad of tax havens banking privacy laws and cash fronts in order to avoid despotic governments or federal criminal authorities taxation agencies or angry ex-wives all of which pose an equal threat to your amassed fortune the world of money laundering normally conjures up imageries of shows like ozark or breaking bad where poor accountants are tasked with legitimizing piles and piles of ill-gotten gains but in the real world this sort of activity is small fry moving money in creative ways to circumvent negative outcomes is an art form that extends well beyond small-time criminals and involves billionaires investment banks and entire governments but that kind of triviality doesn't matter to you our brand new billionaire you just want to make sure that you are going to be able to enjoy your high life and to do this you are going to need to achieve a few things beyond just making your money the first is of course a way to legitimize any questionable revenue that you may have received it doesn't end here you then want to make sure that this cash is outside of the jurisdiction of any overbearing governments you want to try and avoid some taxes if at all possible oh and you also want to make sure your cash is available when you need it there is no point stashing all of your money away in some mountain bunker somewhere you want to be able to spend it on super yachts or supermodels or kfc chicken tenders wherever you are in the world at a moment's notice luckily for you though you're in the right place so take out your notepad and pen this is the first video in a two-part series on how to become the master of your finances so let's get straight into it with perhaps the easiest way to clean up your cash [Music] so good old-fashioned laundromats are a bit 1920s al capone for the modern globalized world today's more discerning billionaire demands their money have more international mobility in fact a majority of money laundering taking place today is not to cover revenue from some shady business it is instead just to get money out of nations that are a little bit more controlling over people's fortunes most notably china riding high on the coattails of the economic miracle china is now home to more billionaires than any other nation on earth but all is not necessarily well for these cashed up communists there are severe limitations imposed on what these people can do with their money and the ever-present threat of being disappeared if you somehow fall out of line what this means is that these billionaires want to get their money out of the country and into a bank account in a nation that is more accepting of rich people and their flagrant violation of the law the problem is that china has seen this happening and it's a really really bad problem for them for two reasons the first is that if people can get their money out of the country it means that they will no longer be brought to justice for any crimes that they have committed inside the nation that made them rich like say i don't know corruption for example now the arguments for or against the war on corruption are obviously very very controversial but that's not even the most important point here justice takes a distant second place to the issue of capital flight if millionaires and billionaires are sending all of their money overseas it means that that money is not staying in your country to be invested into making the nation a wealthier place this has been particularly apparent in nations like south africa that basically saw a majority of its upper class pack up and move abroad bringing all of their money with them now china really does not want a repeat of this whole mess so they have set severe limitations on the amount of chinese r b that can be exchanged for other currencies in a given year no individual can exchange more than the equivalent of 50 000 us dollars worth of chinese currency in a given calendar year which is a quick side note it must be recognized how distorted the market for chinese rmb is given that they literally set federal laws denoted in u.s dollars rather than in their own currency but anyway the takeaway here is that fifty thousand dollars a year is not a lot if you are trying to move a billion dollars that's going to take you more than like three years to do in all seriousness though if you want to offshore your funds in less than a thousand years or so you are going to need to speed things up a little bit so what you do instead is this run your money through a casino fortunately for you macau is conveniently right next door in its own special economic zone this city is the largest gambling center in the world handily beating out las vegas which comes in a distant distant second place but the problem still kind of stands you still can't take your money out of china to use in these casinos but what you can do instead is this pay a travel agent 100 million dollars for an all-inclusive package holiday sounds pretty steep right but wait till you hear the inclusions a private jet flight to macau a massive private hotel suite all the portuguese egg tarts you could eat and included in this package just so happens to be 100 million dollars worth of poker chips how convenient now you can have a grand old time playing cards with these chips but you just have to use them at least once so you play a few hands of baccarat you win some you lose some and eventually you're probably going to come out with more or less what you started with if you break down your bets into million dollar hands each and you play 100 hands you are likely to win about 49 out of the 100 which means that you'll walk away with about 98 million dollars which i am sure some of the more discerning viewers will note is less than what you started with but that's okay because suddenly you have generated 98 million dollars worth of revenue in macau which is conveniently just outside of china when your vacation is over the casino will ask you how you want to settle your chips and most people will answer in us dollars please so there you go congratulations you have circumvented the 50 000 limitation well done two side notes that are incredibly interesting here the first is that casino poker chips are basically a fixed price currency in every sense of the word they have a denoted value which people respect because they believe the underlying institution to honor the value of the currency and it's effectively transferable even in extreme situations like the one we just mentioned this is a completely irrelevant factoid to the process of moving your money about but still pretty cool to think about the second side note is more of a question and it's why on earth is china letting this happen they are a hugely powerful nation and macau is effectively under their control why on earth don't they just put a stop to this well partially it's because of publicity macau isn't the largest gambling center in the world because it's somehow more attractive than vegas it got to where it is today on the back of mega gamblers moving huge sums of money around the world think of their casinos more as investment banks with slightly tackier lobbies if china stamped out this industry the region would lose a lot of this prosperity which is a bad look for a region that has just fallen under chinese rule especially when china is in the process of trying to convince other micro states to join their ranks smashing through macau's primary industry might just send a message to all of those denizens in hong kong or whatever to protest just that little bit harder the second thing here is that china kind of has locked it down this process still happens but it's far far more difficult than it was just a few years ago so people are having to go further abroad to places like vegas or australia i mean it's a little bit further to travel but they do fall outside of the direct scrutiny of the government and hey you know what maybe while you're there you can pick up a britney spears concert or go nuke a wombat whatever gets you ready for a night at the high limit tables i guess anyway now you have your money out it's time to put it to good use and for this you're going to have to find yourself a good investment banker so you have your money out of wherever it is that you are trying to get your money out of and it's all sitting there in a lovely world reserve currency like us dollars it's time to start putting this money to work you are going to want your money to make more money which means investing you are going to want your money to be safe which means investing into a developed and very secure country and you are probably not going to want to pay taxes which means you are going to need a nice portfolio of offshore tax havens and the best place to get all of that in one convenient location is probably london go watch our video on the economy of the uk for more on that one but how do you actually structure this well it all gets extremely complex so stay with me here the first thing you want to do is find a nice stable investment portfolio go buy up some shares or an unbelievably expensive flat inner london it's all good it doesn't matter so long as it's nice and stable then what you do is effectively put a mortgage on that property but not a mortgage like any mere mortal would apply for what you do is call your private banker and ask for an equity line of credit or eloc for short you may have heard the term heloc loan before and it's basically the same thing it's just on your home rather than any random asset out there now since you are worth 98 million dollars after your soiree and macau you are going into an extremely low risk category in the bank's eyes so the terms you get for this loan are amazing for example mark zuckerberg famously pays one percent interest on his line of credit for his home in california but of course he didn't actually need this loan to buy your investment you had enough cash to pay for this outright but what this does instead is effectively act like a giant credit card a major investment bank like hsbc barclays credit suisse or whatever it would probably give you a 50 million dollar e-lock on a stable asset like a diverse share portfolio and that means if you ever want to buy a super yacht or a politician or a villa in france you can do that without having to sell your underlying asset which is that share portfolio and eloc is basically like renting a bank account that you put your shares down as security against people often ask where billionaires keep their cash the answer is they don't they have assets with lines of credit on them which they can use for their day-to-day expenses because these positions are so secure these individuals barely pay any interest on them so even if their actions were not nefarious it would just be foolish to structure your finances in any other way fortunately for you dear billionaire with a questionable background it also means that you now have the ability to spend your money wherever it is that your chosen investment bank operates which is pretty much anywhere you are going to be hanging out so yippie you have ticked all of your boxes your money is safe parked in assets held in the most secure financial center in the world you are earning a good return so long as you have chosen decent assets if your private banker is worth their salt you won't be paying any tax on it and best of all you can conjure up cash wherever you need at a moment's notice i mean how good is the banking system when you are super rich but wait there's more let's say you use your entire line of credit to buy a super yacht probably not the most responsible purchase but whatever yolo right well it's not all bad suddenly you now have an extra 50 million dollar asset and guess what you can put another relock against that again the bank may only give you 50 of the underlying value of the asset to draw down on but that's okay it's still another 25 million dollars that you can get at a one percent interest rate ever noticed how all of the world's mega yachts have georgetown written on the back of them well georgetown is a city in the cayman islands the cayman islands are a territory of the city of london where most of these banks are based even besides the generous tax allowances registering your yacht in the cayman islands makes it really really easy to get a loan on the world of high finance is unbelievably complex and intentionally opaque the system ultimately revolves around moving money from its lucrative origins to a more stable and useful home base is it always nefarious well no it actually very rarely is the banking systems that are in place to accommodate the needs of the world's billionaires today are modeled around making intelligent capital work in intelligent ways but it just so happens that people with ulterior motives can get lost in the mix of things which is basically the way that regular old money laundering works in the same way that mob bosses of yesteryear would lay their cash amongst revenue from their laundromats or car washes or whatever the destitute billionaires of today can use all manner of financial instruments to live the high life that they have earned so i hope you took notes because this is all going to come in handy when you find yourself sitting on top of a freshly formed fortune in the next video in this series we are going to learn about how the worlds elite use pieces of art as a high-end form of currency similar in many ways to how their more plebeian contemporaries use bitcoin and spoiler alert they aren't spending half a billion dollars on a canvas because they appreciate the brush strokes but until then i hope you enjoyed this video if you did please consider liking and subscribing if this video was useful for helping you move your billions around the world please send some of that cash over to your good buddy economics explained via our patreon like these amazing supporters already have otherwise i hope to see you all over in the q a linked in the video description thanks guys bye

Channel: Economics Explained

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Keywords: money laundering, how money laundering works, how does money laundering work, what is money laundering, how to launder money, how to money launder, money laundering tutorial, what is money laundering and why is it illegal, money laundering techniques, tax evasion, shell companies, anti money laundering, economics explained money laundering, money laundering crime, financial crime, money laundering explained, money laundering economics explained, economics explained

Id: ZmEvAk5LRko

Length: 14min 40sec (880 seconds)

Published: Thu May 07 2020