Family-Controlled Companies Laundering Drug Proceeds through Trade Mis invoicing, Forgery, and Tax Evasion

Introduction:

This case illustrates how a network of family-owned companies exploited the formal financial system to launder funds suspected of being linked to international drug trafficking. The scheme involved false documentation, forged licenses, misrepresentation of imports, and the use of multiple related companies to obscure the flow of illicit funds. Analysis revealed significant discrepancies between declared foreign transfers and actual imports, alongside strong indicators of tax evasion. The case underscores the vulnerabilities of trade-based money laundering (TBML), the abuse of financial institutions, and the intersection between drug trafficking and fraudulent business operations.

Background:

FinTRACA received suspicious transaction reports (STRs) from several reporting entities concerning Companies A, B, C, and D. The reports highlighted irregular foreign transfers, unverifiable invoices, contradictory explanations from company officials, and the refusal of customers to provide requested documentation. Further analysis revealed links to a major drug trafficking case investigated by the Directorate of Revenue Intelligence (DRI) of India, which had seized nearly 3,000 kilograms of heroin linked to Company C. Companies A, B, and D were found to be operated by members of the same family, raising suspicion of collusion and coordinated money laundering activities.

Method of Operation:

• Suspicious Transfers by Company A to Company C:
Company A transferred USD 44,000 to Company C in two tranches, initially stating the purpose was a loan, later changing the explanation to the purchase of chemical fertilizers. No documentation was provided. Investigations revealed Company C’s involvement in heroin trafficking (2,988 kilograms seized en route to India).
• Contradictions and Forgeries in Company A’s Activities:
From 2019–2021, Company A transferred USD 3.32 million abroad for urea, cement, wheat, and transit costs. However, ASYCUDA customs data showed imports worth USD 8.2 million, 40% higher than the declared foreign transfers, suggesting underreporting or undeclared revenues. Company A also submitted invoices with incomplete information, repeated formatting, and computer-generated stamps, likely fabricated. Further investigation revealed inconsistencies in business licenses, with different individuals listed as vice presidents, indicating forgery.
• Suspicious Operations of Company B:
Between 2016–2021, Company B sent USD 4.7 million abroad for fertilizer and other imports. Customs data showed imports worth USD 9.9 million, a 47% discrepancy. Company B also made significant transfers to Russia, Turkey, and the UAE without corresponding imports. Approximately USD 2.7 million was sent to a money service provider suspected of money laundering and tax evasion. Despite receiving USD 1.9 million in foreign transfers, no exports were recorded, and the money-sending companies could not be verified. Company B declared only AFN 1,675 in income tax for 2016, despite handling millions, demonstrating clear tax evasion.
• Company D’s Suspicious Behavior:
Company D transferred USD 16,160 to Uzbekistan in 2020 for urea purchases but failed to provide customs documents. The bank halted its transactions and filed an STR. Between 2018–2022, Company D sent USD 584,789 abroad but imported USD 7 million in goods, far exceeding declared transfers, suggesting undeclared income sources.
• Family-Controlled Structure:
All companies were operated by members of the same extended family. The pattern of underreported transfers, suspicious invoices, unverifiable counterparties, and links to known drug trafficking networks suggested the laundering of narcotics proceeds under the guise of legitimate trade.

Red Flags / Indicators:

• Contradictory explanations for the same transactions (loan vs. fertilizer import).
• Use of multiple companies controlled by the same family to move funds.
• Outward transfers not supported by valid invoices or contracts.
• Invoices with incomplete details, identical formats, and computer-generated seals/signatures.
• Significant discrepancies between customs-declared imports and foreign transfers.
• Transfers to foreign companies with no verifiable existence.
• Tax declarations grossly inconsistent with financial activity (e.g., AFN 1,675 tax on multimillion-dollar operations).
• Direct links to a company (Company C) implicated in large-scale heroin trafficking.
• Refusal of customers to cooperate with banks when asked for documentation.
• Transfers to money service providers already under investigation for ML/TF activities.

Outcome:

Based on these findings, FinTRACA disseminated the case to law enforcement agencies for investigation on suspicion of money laundering, drug trafficking, forgery, capital flight, and tax evasion.

Updated On: May 2023