A swap transaction designed to reverse the cash flows and cover the exposure of an existing swap position in a money laundering scheme.
EG. – Brokers would transfer Chinese currency from bank accounts they held in China to the launderers’ accounts in China, bypassing the U.S. banking system. The amount of Chinese currency they transferred was equal to the amount of U.S. drug currency they got. No money was wired from the U.S. directly to China. So US investigators do not see a paper trail of U.S. dollars going into China and RMB [Chinese currency] leaving China and going into Mexico.
It’s called a mirror swap and can take as little as three hours to complete.