With cases of money laundering and high-profile financial crimes on the rise over the last couple of years, Iowa City arrests of Paradise Spa operators point to a broader national trend. Money laundering and high-profile financial crimes have jumped by 45 percent since 2020, according to the U.S. Sentencing Commission.
Zhenshi Liu and Junping Ren, both Iowa City residents, are accused of laundering $2.6 million in cash among several other crimes, including sexual abuse, prostitution, and money laundering, at two Iowa City Paradise Spa locations, one of which can be found at 1901 Broadway St. and the other at 805 S. 1st Ave.
Emily Hughes, a University of Iowa law professor, said there are many ways people launder money, but that “dirty money” typically comes in cash.
“The idea is that somebody has made money illegally, right? And if they were to take their money and deposit it in a bank, that would raise red flags as to where did you earn this money?” Hughes said.
Hughes said there are multiple ways people launder money, but the process usually takes place by using a separate, legitimate business to run money through. In this case, the couple allegedly laundered $2.6 million through rental properties they purchased in Iowa City.
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“The idea is they would combine the illegal cash with legal cash, and push it through the business so that it looks like it was all legal,” Hughes said.
Money laundering typically happens in three stages and involves other criminal activity, according to the United Nations Office on Drugs and Crime. The three stages of money laundering usually follow a standard system: initial movement of a large sum of money, layering money through multiple transactions, and finally integrating the money to be used freely.
The Anti-Money Laundering Act, a U.S. law established on Jan. 1, 2021, includes a multitude of legislation working to stop money laundering. This act amended the previously existing legal framework, which was the Bank Secrecy Act, passed in 1970. Each regulation under the act helps law enforcement identify and monitor money laundering and its consequences on affected communities.
The couple’s son, Yang Liu, of Hoover, Alabama, was also arrested. He is currently being held at Shelby County Jail and is awaiting extradition to Iowa. He is accused of assisting his parents, laundering $1.5 million through his own personal accounts.
The arrests followed a human trafficking investigation into the spas. According to a report by the Iowa Department of Health and Human Services, illicit massage businesses are the number one venue for sex trafficking.
Interviews with several male clients found female workers who were being made to work more than 12 hours a day, seven days a week, providing sex acts to clients.
The Hoover Police Department and the Shelby County Jail were also involved in the arrest, and confirmed Yang Liu’s warrant was valid and took him into custody.
The Iowa City Police Department works similarly, communicating with other agencies and fulfilling warrants when needed. In cases that take place across state lines and involve multiple agencies, it is common that law enforcement from around the state is involved.
With this particular case, the Johnson County Joint Emergency Communication Center, the FBI, the Iowa State Patrol, the University of Iowa Police, the Iowa Division of Narcotics Enforcement, and the Wapello County Sheriff’s Office were all involved in serving the warrants.
The arrests were made in a joint effort between both the Iowa City Police Department and the Iowa Department of Criminal Investigation.
All three defendants are being held on cash or surety bonds in the amount of $125,000, pending initial appearances.
The Daily Iowan was unable to confirm the exact date of extradition and obtain information on further proceedings.