How Cults Make Money ?

How Cults Make Money ?
Laws & Regulations in India to Curb
Suspicious Money Transactions

How Cults Make Money
• The way a cult organizes itself isn't unlike a
business.
• Often, there is a business front to a cult,
whether they are selling a product, service, or
their lifestyle brand.

• Cults can't just survive on good feelings
alone.
• After all, all organizations need a way to
sustain themselves.
• So how do cults make money?

• Unsurprisingly, no two cults are exactly the
same, though there are some persisting
organizational structures prevalent throughout
cults as a whole.
• Some cults subsist on donations from their
followers, several institute membership fees,
and others start businesses of their own.
Frequently, it is a combination of some or all
of these approaches.

• How they choose to spend their money is
another thing entirely.
• Cult leaders such as Bhagwan Shree
Rajneesh and Herbert W. Armstrong spent the
money on dozens of Rolls Royces and
private jets.

• Others keep their overhead low, like The
Brethren who have been given the name "The
Garbage Eaters" for their practice of
"freeganism" – a portmanteau of "free" and
"vegan" – which involves collecting discarded
food to eat.

How Cults Make Money
• Cults can be broken down into three
common business models to better
understand how they can afford to
disseminate their lifestyle and message,
whatever it might be.

Providing A Product Or Service
• A classic business model is providing a
product or service, an easy way for cults
to cement their staying power, exercise
influence, and recruit more followers

• The Rajneeshees took advantage of this
model, but instead of a product, they sold their
lifestyle and the idea of "spiritual healing."

• One of their largest revenue streams –
diversified by consistent income from
followers selling their possessions to support
the ranch – was from their annual World
Festival which charged for admission,
accommodation, and classes, not to mention
souvenirs.

• These classes, which ranged from beginning
courses to movement therapy and rebalancing,
cost anywhere from $2,100 to $7,500.
• Their 1984 World Festival had an estimated
15,000 attendees. Suddenly, how the
Bhagwan could afford 90 or more Rolls
Royces starts to make a lot more sense.

Their 1984 World Festival had an estimated 15,000 attendees.
Suddenly, how the Bhagwan could afford 90 or more Rolls
Royces

• The Worldwide Church of God, founded by
former ad man Herbert W. Armstrong, used a
mandatory donation of 30% of its followers
income to start a media powerhouse.
• Armstrong ran an international radio, TV
network, and publishing business all
promulgating the strict, conservative views of
the movement in order to bring in more members.
The various outlets would discuss topics such as
prophecy, the apocalypse, and the paradox of
progress and evil.

Herbert W. Armstrong, used a mandatory donation of 30% of
its followers income to start a media powerhouse

Subscriptions & Memberships
• For many cults, their revenue streams are
kept overflowing through the use of
subscriptions and memberships.
• In business terms, it is similar to a multi-level
marketing scheme: each level comes with its
own rewards, each more enticing than the one
before, but you must spend money or
complete certain courses in order to get to
the next level.

• In the case of NXIVM, under the guidance of
Keith Raniere, his organization began offering
self-help workshops out of Albany, NY in
1998 under the name Executive Success
Programs.

NXIVM 'SEX CULT' LEADER KEITH RANIERE
ARRESTED 'FOR FORCING FOLLOWERS TO BECOME
HIS SLAVES'

• Their intensive, multi-day workshops allegedly
cost up to $7,500, according to Rolling Stone.

• As followers become more involved, they
are encouraged to cut ties with their friends
and families on the outside, becoming
increasingly isolated, believing the members of
NXIVM are the only people they can trust.

• Perhaps one of NXIVMs most loyal, and certainly
highest spending, members is multi-millionaire
heiress, Clare Bronfman who allegedly lavished
an astounding $65 million on Raniere and his
following over the course of 20 years.
• In her eyes, nothing was too good for Raniere
including money for private jets, meetings with
the Dalai Lama, and a private island in Fiji for
retreats.

• What devoted followers and occasional
enthusiasts didn't know was that at the highest and
most committed levels of NXIVM was an elite
"sorority" of women who were forcibly branded
and coerced into being sex slaves to Raniere, or
so the recent lawsuits that have Raniere and his
associates awaiting trial for identity theft,
extortion, forced labor, sex trafficking, money
laundering, wire fraud, and obstruction of
justice would allege.

Donations-based
• One day, you are going about your life as an
independently thinking person.
• The next, you are selling off everything you
own and donating the money to a cult.
• It may not happen that fast, but cults have
thrived for decades off followers and the
concept of "brand loyalty."

Donations-based
• Followers of Reverend Sun Myung Moon's
Unification Church were indoctrinated
through subtle brainwashing into leaving
their lives, possessions, and families under the
belief that the cult was their true family and a
third World War as imminent.

Reverend Sun Myung Moon's Unification Church were indoctrinated
through subtle brainwashing into leaving their lives, possessions, and
families under the belief that the cult was their true family

The Cult Of Self-styled Godman
Virender Dev Dikshit

Donations-based
• "Before we talk about loyalty and cults, we
first have to understand how human empathy
works. Human connection is based on
empathy, and empathy doesn’t quite scale.

Donations-based
• We are social creatures. Oxytocin is what gets
social bonding going. The more you love your
tribe, in this case a cult, the more oxytocin is
released,"
• "The more oxytocin is released, what’s kind of
crazy is, the more you hate the other group. How
this plays out with empathy and social groups as
far as cults, people see the cult as an extension of
themselves. You have a massive sense of identity
attached."

We are social creatures.
Oxytocin is what gets social bonding going

Donations-based
• The Rajneeshees also fall into this category in
addition to providing a product.
• Many followers of the Bhagwan, known
sannyasins, were all-too-willing to selling
everything they owned in the name of
supporting the ranch.
• This likely came after followers were already
committed to the movement after taking a class
or attending the World Festival.

Many followers of the Bhagwan, known sannyasins, were all-
too-willing to selling everything they owned in the name of
supporting the ranch.

Donations-based
• Once brand loyalty is established, the
movement becomes inextricably tied to the
person's perception of their identity.
• This steady inflow of cash was then
strategically channeled through the Rajneesh
Investment Corp.

Steady Inflow Of Cash Was Then Strategically
Channeled Through The Rajneesh Investment Corp

Donations-based
• From there the money was invested in buying
property, publishing books and videos, and
funding restaurants and nightclubs.
• The return on their investments soared due
to their largely "voluntary" workforce.
• Followers not only donated their personal
finances, but their time as well.

Anti-Money Laundering Laws in India
• In India, before the enactment of the Prevention of Money
Laundering Act 2002, a number of statutes addressed
scantily the issue in question. These statutes were
• The Conservation of Foreign Exchange and Prevention of
Smuggling Activities Act, 1974,
• The Income Tax Act, 1961,
• The Benami Transactions (Prohibition) Act, 1988,
• The Indian Penal Code and Code of Criminal Procedure,
1973,
• The Narcotic Drugs and Psychotropic Substances Act,
1985,
• The Prevention of Illicit Traffic in Narcotic Drugs and
Psychotropic Substances Act, 1988.

Anti-Money Laundering Laws in
India

The Conservation of Foreign Exchange and
Prevention of Smuggling Activities Act, 1974
• This was passed in the year 1974 in furtherance of the
government endeavours to retain foreign exchange
within the country.
• The Act was enacted to give wide powers to the
executive to detain individuals on the
apprehension of their involvement in smuggling
activities.

The Benami Transactions (Prohibition)
Act, 1988
• This Act was passed in the year 1988, ‘to
prohibit Benami transactions and the right
to recover property held Benami and for
matters corrected therewith or incidental
thereto’.

Act, 1988
• Under section 2(a) of this Act, a ‘Benami transaction’ is
defined as follows:
• “Benami transaction means any transaction in
which property is transferred to one person for a
consideration paid or provided by another person;”
• Section 3 of the Act, categorically debars anyone from
entering into a Benami transaction.
• The Act further lays down that properties acquired
under Benamii transaction are liable to be acquired
by the competent authority without any liability of
compensation to be payable by such authority.

Act, 1988

The Indian Penal Code, 1860 and Code of
Criminal Procedure, 1973
• The Indian Penal Code of 1860 is the major
substantive law which identifies a number of
criminal activities and also prescribes penalties
for them.
• To better understand laws against money
laundering, reference must be made to these
laws as well.

The Indian Penal Code, 1860 and Code
of Criminal Procedure, 1973

The Narcotic Drugs and Psychotropic
Substances Act, 1985 – the NDPS Act
• This Act was passed in the year 1985 with
the objective of consolidation and
amendment of laws relating to narcotic
drugs, to make stringent provisions for the
control and regulation of operations relating to
narcotic drugs and psychotropic substances, to
provide for the forfeiture of property derived
from, or used in, illicit traffic in narcotic drugs
and psychotropic substances.

The Narcotic Drugs and Psychotropic Substances
Act, 1985 – the NDPS Act

The Prevention of Money Laundering
Act, 2002
• The Prevention of Money Laundering Act,
2002 or the PMLA is an Act of the Parliament
of India enacted to prevent money-laundering
and to provide for confiscation of property
derived from money-laundering.

The Prevention of Money Laundering Act,
2002

The Prevention of Money Laundering
Act, 2002
• The PMLA and the Rules notified there under
came into force with effect from July 1, 2005. The
Act and Rules notified there under impose
obligation on banking companies, financial
institutions, and intermediaries to verify identity
of clients, maintain records and furnish
information in prescribed form to the competent
authorities formed and appointed in that regard
[e.g., Financial Intelligence Unit – India (FIU-
IND)]. The Act was subsequently amended in the
years 2005, 2009 and 2012.

The Prevention of Money
Laundering Act, 2002

The Objectives
• The PMLA seeks to combat acts pertaining
to money laundering in India and in view of
this, it mainly has three main objectives:
• To prevent and control money laundering
• To confiscate and seize the property obtained
from the laundered money; and
• To deal with any other issue connected with
money laundering in India.

Terminology
• Money Laundering
• Under section 3 of the PMLA, in a manner to
include those activities whereby there are
‘attempts to indulge or assist other person’ or
become ‘involved in any activity connected
with the proceeds of crime and projecting it as
untainted property’ are said to be activities
which may be acts of money laundering. ii)
Proceeds of crime.

Terminology
• Beneficial Owners
• The term ‘beneficial owner’ is defined
under section 2(1) clause (fa) of the PMLA
to mean a person who ultimately owns or
controls a client regarding a reporting
entity, or someone on whose behalf a
transaction is effected and who is meant to
reap the ulterior benefits out of such
transactions

Terminology
• Non-Profit Organizations
• “Non-profit organisations” (NPO) means any
entity or organisation that is registered as a
trust or a society under the Societies
Registration Act, 1860 or any similar State
legislation or a company registered under
Section 25 of the Companies Act, 1956.

Terminology
• Reporting Entities
• The PMLA further has provisions pertaining to
certain units known as ‘reporting entities’
within its ambit.
• Reporting entities include banking
company, financial institution, intermediary
or a person who may be carrying out a
business or profession specifically
designated within the PMLA

Terminology
• Structuring
• Also known as smurfing in banking jargon, is
the practice of executing financial transactions
such as making bank deposits in a specific
pattern, calculated to avoid triggering financial
institutions to file reports required by law, such
as the United States' Bank Secrecy Act (BSA).

Structuring
• Structuring may be done in the context of
money laundering, fraud, and other financial
crimes.
• Legal restrictions on structuring are concerned
with limiting the size of domestic transactions
for individuals.

Structuring
• Criminal enterprises may employ several
agents ("smurfs") to make the transaction.
Structuring appears in federal indictments
related to money laundering, fraud, and other
financial crimes

Other Uses
• The term "smurfing" is also applied to activity
associated with controlled substances such as
pseudoephedrine.
• In this context the agent will make purchases of
small, legal amounts from several drug and
grocery stores, with the intent to aggregate the lot
for use in the illegal production of
methamphetamine. Also, since the monthly
pseudoephedrine purchase limits in US are too
low for mass meth production, this practice often
involves using multiple "smurfs".

Terminology
• Bank Secrecy Act of 1970
• The Bank Secrecy Act of 1970 (BSA), also
known as the Currency and Foreign
Transactions Reporting Act, is a U.S. law
requiring financial institutions in the United
States to assist U.S. government agencies in
detecting and preventing money laundering.

Bank Secrecy Act
• Specifically, the act requires financial
institutions to keep records of cash purchases
of negotiable instruments, file reports if the
daily aggregate exceeds $10,000, and report
suspicious activity that may signify money
laundering, tax evasion, or other criminal
activities

Terminology
• Salami Slicing
• refers to a series of many small actions, often
performed by clandestine means, that as an
accumulated whole produces a much larger action
or result that would be difficult or unlawful to
perform all at once.
• Although salami slicing is often used to carry
out illegal activities, it is only a strategy for
gaining an advantage over time by
accumulating it in small increments, so it can
be used in legal ways as well.

Salami Slicing
• An example of salami slicing, also known as
penny shaving, is the fraudulent practice of
stealing money repeatedly in extremely small
quantities, usually by taking advantage of
rounding to the nearest cent (or other monetary
unit) in financial transactions.
• It would be done by always rounding down,
and putting the fractions of a cent into another
account. The idea is to make the change small
enough that any single transaction will go
undetected.

Salami Slicing Attacks
• In January 1993, four executives of a rental-car
franchise in Florida were charged with
defrauding at least 47,000 customers using a
salami technique.

• In Los Angeles, in October 1998, district
attorneys charged four men with fraud for
allegedly installing computer chips in
gasoline pumps that cheated consumers by
overstating the amounts pumped.

• In 2008, a man was arrested for
fraudulently creating 58,000 accounts which
he used to collect money through
verification deposits from online brokerage
firms a few cents at a time.

Cuckoo Smurfing
• 'Cuckoo smurfing' involves criminals hiding
transactions in the bank accounts of
innocent individuals or businesses.
• The word smurf is used to describe a money
launderer - or someone who seeks to avoid
government scrutiny by breaking up large
transactions.

Cuckoo Smurfing
• Criminals can use cuckoo smurfing to move
cash around the globe completely under the
radar by working with unscrupulous bankers.
• For it to work, a criminal transaction is
married up with a legitimate transfer from an
unwitting individual.

Smurf
• A smurf is a colloquial term for a money
launderer, or one who seeks to evade
scrutiny from government agencies by
breaking up a transaction involving a large
amount of money into smaller transactions
below the reporting threshold.
• A smurf deposits illegally gained money into
bank accounts for transfer in the near future

Front Organization
• A front organization is any entity set up by
and controlled by another organization, such as
intelligence agencies, organized crime groups,
banned organizations, religious or political
groups, advocacy groups, or corporations.

Shell Corporation
• A shell corporation is a company or
corporation that exists only on paper and has
no office and no employees, but may have a
bank account or may hold passive investments
or be the registered owner of assets, such as
intellectual property, or ships.

Shell Corporation
• Shell companies may be registered to the
address of a company that provides a service
setting up shell companies, and which may act
as the agent for receipt of legal correspondence
(such as an accountant or lawyer)

Shell Corporation
• Sometimes, shell companies are used for tax
evasion, tax avoidance, and money
laundering, or to achieve a specific goal
such as anonymity.
• Anonymity may be sought to shield personal
assets from others, such as a spouse when a
marriage is breaking down, from creditors,
from government authorities, besides others.

Front Groups
• A front group is an organization that
purports to represent one agenda while in
reality it serves some other party or
interest whose sponsorship is hidden or
rarely mentioned

Kinds of Penalties under the PMLA
• The PMLA prescribes that any person found
guilty of money-laundering shall be
punishable with rigorous imprisonment
from three years to seven years and where
the proceeds of crime involved relate to any
offence under paragraph 2 of Part A of the
Schedule (Offences under the Narcotic Drugs
and Psychotropic Substance Act, 1985), the
maximum punishment may extend to 10 years
instead of 7 years.

Anti-money Laundering Regulators In
India
• FIU-IND Financial Intelligence Unit – India (FIU-
IND)
• FIU-IND Financial Intelligence Unit [FIU-IND] was
set by the Government of India, on 18 November 2004,
as the central national agency responsible for receiving,
processing, analysing, and disseminating information
relating to suspect financial transactions.
• The FIU-IND is also responsible for coordinating
and strengthening efforts of national and
international intelligence, investigation, and
enforcement agencies in pursuing the global efforts
against money laundering and related crimes.

FIU-IND Financial Intelligence Unit
– India (FIU-IND)

Other Anti-money Laundering
Regulator(s)
• There are various bodies and authorities involved in
the implementation and enforcement of the anti-
money laundering laws.
• RBI is one of such authority which lays down anti-
money laundering guidelines for banks and other
financial institutions to adhere to.
• Similarly, SEBI has also prescribed certain
requirements relating to Know Your Customer
(KYC) norms for the financial intermediaries in
securities market to follow to combat money
laundering.

Regulator(s)

Regulator(s)
• Further, there are law enforcement bodies like the
Directorate of Enforcement and the Central
Bureau of Investigation – Economic Offences
Wing, dealing with money laundering issue.
• Further, the Income Tax Department,
Government of India under the Income Tax
Act, is also authorised to take steps to prevent
the offence of money laundering by imposing tax
on undisclosed foreign income and assets on
Indian residents.

References
• Are Successful Companies The New Cults?
• https://www.forbes.com/sites/jmaureenhenderson/2015/08/31/are-successful-companies-the-new-
cults/#2b19fa6d46b3
• Cuckoo Smurfing
• https://moneycompliance.com/2015/04/07/cuckoo-smurfing-means-criminal-a-pays-criminal-b-in-
different-countries/
• How Cults Make Money
• https://www.refinery29.com/en-us/how-cults-make-money-business-models
• Prevention of Money Laundering Act, 2002
• https://en.wikipedia.org/wiki/Prevention_of_Money_Laundering_Act,_2002
• Signs of a Destructive Cult
• https://www.quackwatch.org/02ConsumerProtection/cult.html
• Structuring
• https://en.wikipedia.org/wiki/Structuring
• The Psychology of Cults and Marketing
• https://www.business2community.com/infographics/the-psychology-of-cults-and-marketing-
infographic-0357131

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