How to Launder Money Using a Mirror

The laundering scheme was ingenious in its own way and is called mirror transactions. I will now explain with an example. Given: an Islamic fundamentalist with companies or bank accounts at BCCI branches in Pakistan and Luxembourg. The goal is to transfer funds obtained from opium trade or arms from Pakistan to a shell company in Luxembourg. What to do?

BCCI solved the problem with a chain of fictitious transactions without directly moving funds between accounts. The bank places a stock purchase order in the name of the client in Pakistan and simultaneously a mirror order to sell the same volume of stocks in Luxembourg.

A couple of simple manipulations — and the money ended up in the client’s account in Luxembourg. Naturally, no actual stocks were bought or sold; mirror transactions occur within a short period, the Pakistani company pays, the Luxembourg company receives. And no funds are actually transferred abroad.

This is the beauty of the scheme. It is generally legal and can only be considered illegal if its purpose is laundering. And it is difficult to detect. In BCCI’s case, an informant helped uncover it.