Basel Institute on Governance ¦ Money Laundering, Money Dirtying (Part I) – The Odebrecht Case

From Clean to Complicit: Reframing Money Dirtying and Money Laundering through the Odebrecht Case

Money laundering and what scholars call “money dirtying” are closely related but distinct phenomena. Both manipulate financial flows to obscure origin and destination, and both rely on professional enablers, offshore vehicles and cross-border financial infrastructure. Yet they differ at a fundamental level: money laundering takes proceeds that are already illicit and seeks to reintroduce them into the legitimate economy; money dirtying converts legitimately obtained funds into illegitimate ones, typically to finance corruption, terrorist activity or other illicit ends. Examining the Odebrecht scandal shows how those two processes can be complementary parts of a single, sophisticated criminal architecture.

Defining money dirtying versus money laundering

Originally developed in the post-9/11 era to describe terrorist financing, the money-dirtying concept emphasized secrecy, low-tech means to avoid detection and goals that were political rather than purely pecuniary. Terror networks often used informal value transfer systems and deliberately avoided financial footprints that could be picked up by global banking controls. Over time, however, researchers found that when the concept is transferred from terrorist financing to large-scale corruption, its profile changes markedly: professional accounting and advanced financial techniques become central, the architecture of transfers is highly sophisticated, and the principal objective is to pay large bribes while minimizing detection risk. In short, when applied to grand corruption, the method of dirtying begins to resemble sophisticated money laundering, while remaining distinct in purpose. The endgame is to produce an illicit payment (a bribe) from legal corporate resources, rather than to legitimise the proceeds of crime.

The convergence of infrastructures and actors

Both money laundering and money dirtying draw on the same class of enablers and infrastructure: banks, lawyers, accountants, resident agents in offshore jurisdictions, money transfer services, shell companies and informal exchangers. Both often use layered offshore chains linking onshore operational firms to offshore holding entities. This transnational web of service providers and corporate wrappers is a shared operational toolbox that can be adapted to either process depending on the actor’s goal. The practical overlap becomes especially strong in large-scale corruption: parallel accounting systems, encrypted communications, bespoke corporate units and specialist intermediaries make the dirtying of funds as technically layered and opaque as typical laundering chains.

Bastian Schwind-Wagner _Follow

"Money dirtying and money laundering operate as complementary mechanisms within transnational corruption schemes: one converts legitimate corporate receipts into illicit payments, the other conceals those payments and reintegrates value into private hands. Understanding both sides of the process is essential because each uses overlapping professional enablers and offshore infrastructures while serving distinct operational goals.

The Odebrecht case demonstrates that corporate innovation – parallel accounting, bespoke payment units and encrypted communications – can institutionalize bribery at scale, making detection harder and increasing harm to public governance. Effective response therefore requires coordinated action targeting both the internal corporate architectures that generate illicit payments and the offshore laundering chains that hide the beneficiaries."

The Odebrecht scandal as a case study

The Lava Jato investigations exposed one of the most elaborate intersections of dirtying and laundering in recent history. Odebrecht, a major Brazilian construction conglomerate, created an institutionalized bribery mechanism that spanned multiple continents, paid hundreds of millions of dollars in bribes, and produced billions in illicit benefit. Crucial to Odebrecht’s model was a formal internal unit – named the Department of Structuring and Operation – tasked with designing and managing covert payments. That unit relied on parallel accounting, encrypted digital systems to coordinate covert bookkeeping and payments, and a global network of offshore service providers in jurisdictions such as Panama, the Bahamas, the British Virgin Islands and Belize.

At the heart of the Peruvian component was a “Peruvian cluster” of domestic operative firms and offshore entities that acted as an intermediate stretching point for funds. Between 2007 and 2015 roughly $30 million flowed through that cluster alone. Funds originated as legitimate corporate receipts for construction contracts, then were channeled through the Peruvian cluster and offshore entities to politically exposed persons and inner-circle beneficiaries. Once paid, portions were often laundered back through additional offshore structures and invested into real property and other assets.

How dirtying and laundering mirrored each other in practice

The Odebrecht network demonstrates a mirror image: on the corporate side, money dirtying converted legally obtained corporate revenues into bribes through elaborate transfer and concealment strategies. On the recipient side, customary laundering techniques concealed and reintegrated those illicit payments into personal wealth. The two halves were tightly interwoven: proprietary corporate architecture and specialist enablers on the payer side complemented offshore chains, nominee directors and holding vehicles on the recipient side.

Operational choices exposed differences in method and vulnerability. Some offshore companies tied directly to beneficiaries were controlled indirectly through long-standing intermediaries and Swiss law firms, leaving administrative roles to resident agents in Panama while strategic decisions were driven by distant principals. Other entities were managed more directly by family members or close associates, which simplified control but created prosecutable links for investigators. These operational trade-offs reveal how inner-circle appointments and kinship ties can both facilitate concealment and create investigative openings.

Empirical lessons: professionalization, innovation and obfuscation

Several consistent empirical findings come out of the Odebrecht evidence.

First, corruption-driven dirtying in grand corruption is highly professionalized: it leverages accounting expertise, encrypted digital systems for covert bookkeeping and bespoke corporate units to coordinate payments.

Second, innovators within corrupt firms combine advanced financial techniques with traditional social networks – kinship, trusted associates and informal exchangers – to create resilient and adaptive concealment architectures.

Third, the goal-driven logic matters: dirtying arrangements are designed primarily to enable illicit payments while minimizing detection, so complexity, redundancies and layering are introduced to increase the cost of forensic tracing.

Implications for enforcement and policy

Recognizing dirtying as distinct from, yet often complementary to, laundering has practical implications.

First, investigators should look beyond classic post-facto money-laundering trails to the corporate mechanisms and internal units that engineer illicit payments from legitimate receipts.

Second, prosecutions and compliance efforts must target both sides of the mirror: corporate payment structures and the recipient-side laundering chains.

Third, the prominence of professional enablers and digital covert accounting indicates the need for cross-border cooperation with banks, resident agents and service providers, and for regulatory focus on internal corporate units that can serve as covert payment engines.

Conclusion: mirrored crimes, unified threat

The Odebrecht case shows that dirtying and laundering are often two faces of a single, transnational criminal strategy: the payer’s infrastructure transforms legal corporate profits into illicit payments, while recourse to offshore chains and nominee structures launder and conceal the resulting proceeds. Distinguishing money dirtying from money laundering sharpens analytical clarity and points to new investigative priorities: identify and disrupt the internal corporate mechanisms that engineer illicit payments as well as the offshore networks that conceal the beneficiaries. Only by addressing both halves of the mirror can enforcement and compliance meaningfully respond to modern grand corruption.