Round-Tripping

The owner sends funds out of the country, sometimes by under-invoicing exports or using informal channels, and places them in an offshore company he controls. That company then invests in his home business or buys assets there, so the money returns with a foreign label. Reasons include hiding illegal income, claiming tax breaks meant for foreign investors, avoiding currency rules or making the business look better funded. The path usually uses shell companies, tax havens and layered ownership. In accounting, the term also has a second sense: two firms sell the same asset to each other, or swap contracts, to inflate revenue without real economic change. Both uses involve a circular flow with no real purpose. Banks look for inbound investment from an offshore entity owned by the same person as the recipient, and for flows that match earlier outbound transfers. Statistics on foreign investment overstate genuine inflows when round-tripped money is counted, and the same loop can launder the proceeds of corruption and evasion.

A local owner moves 1 million abroad through falsified export invoices and places it in a company he owns in a low-tax jurisdiction. That company later invests 1 million in his domestic firm as foreign equity, with tax benefits. A bank notices that the offshore shareholder shares an address and signatory with the owner and escalates the case.