The Dutch investigation service for financial and tax crime (FIOD), the Dutch National Office for Serious Fraud, Environmental Crime and Asset Confiscation, and the Financial Intelligence Unit the Netherlands (FIU-the Netherlands) look back on the investigation, which showcased the importance of reports of unusual transactions.

It was the police who initially launched an investigation into the handling of stolen materials, says an FIOD employee involved in the case. “During that investigation, the police procured a part of the cash records. Because these records indicated money laundering, the police transferred the case to us.”

Cash purchases

The FIOD examined the cash records meticulously. “The enormous cash purchases of scrap metal were striking. We calculated that on average, about six individuals per day delivered scrap metal to the company, for which they were paid in cash. On average, each individual brought in almost 6000 kilograms of scrap metal. To put this into perspective: an average utility trailer can carry less than 1000 kilograms of iron. So almost all those private individuals would have had to drive lorries, which was highly implausible.”

“On average, each private individual delivered almost 6000 kilos of scrap metal at a time.”

Requesting suspicious transactions

The FIOD questioned these figures. “But the cash records didn’t give a clear picture of what was really going on.” For further insight, the FIOD contacted FIU-the Netherlands, the organization which collects all reports of unusual transactions. These are reported by entities – such as banks, notaries and buyers and sellers of goods – which have an obligation to report unusual transactions if they suspect money laundering or terrorist financing. The FIU analyst involved explains: “We analyse these unusual transactions to determine whether they are relevant for preventing or detecting crime. If so, we declare the transactions suspicious and make them available to the investigation services. From that moment on, they are officially called ‘suspicious transactions’. An investigation service may also contact us requesting information about an ongoing criminal investigation. We then check whether we received unusual transactions that are relevant to the investigation and declare them suspicious, based on the information obtained.”

Tens of thousands of euros per day

The suspicious transactions provided a deeper insight into the money flow. “Several banks reported large cash withdrawals by the company to FIU-the Netherlands,” says the analyst. The FIOD employee: “That’s how we found out that a person within the company was withdrawing thousands of euros in cash every day using various bank cards, totalling around 20,000 euros per day. In addition, banks reported that large amounts of cash were being delivered to the metal recycling company by a cash transport company. In about five years’ time, more than 70 million euros was delivered in cash.”

The analyst adds: “Banks have insight into their customers’ activities, which is a major advantage for this type of investigation. They have access to account statements, they know how high the turnover is and how much cash was involved, they see what goes out and in what way. In this case, they noticed the enormous cash flow. We are talking about millions on an annual basis, not a few dozen euros.”

Useful for suspicion

The public prosecutor who led the investigation continues: “Suspicious transactions are extremely useful in establishing suspicion, which is necessary if we want to use special investigative resources. What makes them especially helpful, is that they often reveal unusual situations at the start of a case. We usually combine this with other data, for example from the Dutch Tax and Customs Administration and the Criminal Intelligence Team. Together, these elements usually provide sufficient grounds for a reasonable suspicion of involvement in a criminal offence.”

“The company withdrew around 20,000 euros in cash daily”

Reverse situation

The information from the banks’ reports did raise some questions. The public prosecutor explains: “When laundering money, criminals usually want to convert their cash into bank deposits. In this case, bank money was being converted into cash, in very large amounts. This made us scratch our heads for a moment.” The FIOD employee adds: “In consultation, we therefore focused the investigation on the origin of the purchases.”

Shadow accounting

Part of the investigation involved a search of the metal recycling company’s premises that lasted several days. The FIOD employee remembers this well. “We found almost 200 identity documents, most of which turned out to be fake. They used the personal details on these forged identity documents to fake purchase receipts. We also came across a shadow cash book, which seemed to describe reality more accurately than the cash book that the accountant had seen. For instance, we found a cash balance during the search that matched the cash balance in this shadow cash book. This shadow cash book also showed that the owner had taken tens of millions in cash to an unknown destination. In the cash book that was presented to the accountant, these cash withdrawals were registered as purchases from private individuals.”

“We focused the investigation on the purchases”

Foreign customers

But what was the origin of all the money the company withdrew daily – and, according to the false cash records, paid in cash to private individuals? The FIOD employee explains: “The money flowed in through a number of foreign companies. Our investigation indeed showed transport movements to those companies, so scrap iron was actually delivered to those foreign companies. This constituted an important part of the main suspect’s argument: “We receive money from our customers via bank transfer, so what’s the problem? However, the question of the origin of the metals that generated this foreign turnover, remained. There were clear indications that something was amiss. For example, it became apparent that the accounting records had been altered to conceal the illicit purchase of metal or even stolen metal abroad.”

Everything in cash: common practice?

The company further argued that private individuals simply want to be paid in cash. “That is the traditional view of the industry: that everything is done in cash. However, that is not necessarily the case, certainly not when millions are involved,” says the FIOD employee. The FIU-the Netherlands analyst agrees: “The argument is often that people want immediate payment. The question is whether that is true. Research by the European Central Bank into payment behaviour in Europe shows, for example, that the average Dutch person pays the least in cash of all Europeans and doesn’t have much cash on hand, only 35 to 40 euros. This is completely disproportionate to the cash amounts involved in this case.”

“The traditional view of the industry is that everything is done in cash, but that is not necessarily the case”

No plausible explanation

During the investigation, evidence against the company piled up. The FIOD employee: “There were indications of black market purchases, handling stolen goods and falsified cash records. Later, drug smuggling was also added to the list. Both during the interrogations and later in court, the main suspect did not provide a concrete and verifiable explanation.”

Conviction

The findings from the FIOD and the Public Prosecution Service investigation ultimately resulted in the conviction of the company and four suspects. The main suspect was sentenced to ten years in prison, three co-suspects to eighteen months, twelve of which were suspended. “In this case, reports from banks put us on the trail of the cash flows which guided our investigation.” The public prosecutor adds: “The FIOD did a very good job conducting in-depth investigations into all kinds of data. From weighbridge data and cash receipts to false IDs: it was painstaking work that, together with the reports, led to these convictions.”

Importance of gatekeepers

“Reports from reporting entities are nowadays indispensable,” concludes the public prosecutor. “In almost all investigations I lead, they form part of various official reports. Even in later stages of a criminal investigation, new reports are useful for continuing to monitor what is happening. For example, they can demonstrate that criminal offences are still being committed which, in turn, can help to keep a suspect in pre-trial detention. In my view, the banks, accountants, traders and other gatekeepers are very important because they see things that we do not see. Thanks to their reports, we can focus our investigation on specific aspects. Just as we did in this case.”

Court rulings (Dutch)