MONEY LAUNDERING THROUGH LITIGATION FINANCE

FROM THE - CHRONICLES of Monte Friesner – Criminal & Intelligence Analyst and Consulaire for WANTED SA~
~Contributed & Written by Kenneth Rijock ~

Innovative money launderers are constantly on alert for new, and safe, methods of cleaning their clients' proceeds of crime, and of making a return on their "investment" in the process. It was only when a drug-laden smuggling vessel was seized off the coast of California, that US law enforcement learned about the abuse of Life Settlements, the secondary market for life insurance policies, by an insurance agent who was a laundryman in Colombia; we often learn too late about new avenues to launder illicit profits.

The proliferation of litigation financing, also known as litigation funding, in high-stakes civil lawsuits in the United States, should concern trial lawyers, not for ethical reasons, though there are valid issues, but because outside financing of their expensive major cases might be coming from a source of funds that they definitely do not want to accept; money launderers.

Litigation financing occurs in major products liability, personal injury, or several other types of lawsuits, especially where the defendant, or its insurer, has a deep pocket to defend the case. Depositions, pretrial discovery, motions, experts, consultants, investigations, all cost money, and some defense lawyers try to bankrupt litigants, through years of litigation, to force settlements, or even dismissal of cases against their clients.

It is logical that clients with limited means would seek out funding sources, to obtain non-recourse advance funding of pretrial, and trial, litigation costs. the problem is that the law has not yet caught up with this emerging field, and there is no requirement that the Source of Funds, or Beneficial Owner, behind such funding companies be disclosed, or obtained through due diligence. 

Since many offshore hedge funds are getting involved, why not domicile the "lenders" of the funds, to the bogus litigation finance company overseas as well. The lawyers, happy that their costs will be paid in advance, will not examine the golden goose.

Any good money launderer worth his salt could create a company that looks like a legitimate business, and borrows money, to lend out to law firms, for their clients' litigation finance needs. In truth and in fact, the captive litigation finance company is a shell, and it "borrows" funds from other shell companies owned and controlled by the money launderer, and funnels criminal proceeds into the lawsuit. 

After settlement of the case, a check, or wire transfer, from the winner's law firm will rarely, if ever, be subject to any regulatory, or law enforcement, scrutiny.

Only if the law firms conduct enhanced due diligence, in advance, will the wheat be separated from the straw, and illegitimate finding sources be unmasked, and refused. One wonders how many major civil cases have already been funded with drug profits.