Going by the first contract, I'd be receiving a one-time payment of ~40k total and then divvying up and forwarding the money to 5-7 employees in different countries in Southeast Asia and Europe. Then my job would be done unless I want to take on another contract.

Definitely keeping in mind that this could be some kind of well-disguised scam, so I'm mostly considering the legality of this situation if we were to take it at face value. Friend says that it's more convenient to write up 1 contract for me than an individual contract for each employee.

Transfer methods are flexible -- venmo, paypal, international transfers.

Does the logic check out? What should I keep in mind in terms of what I'd have to report on my taxes or the legality of this arrangement?

  • 4
    Who is this friend? (Yes, it's a scam.) – RonJohn Sep 16 '19 at 17:30
  • 14
    This isn't even a well-disguised scam. Any time someone want to send money into your personal account in order to have you pay someone else on their behalf, it's a scam. – Luck Sep 16 '19 at 17:56
  • If our business was a provider of HR/payroll outsourcing, you should have processes in place already to filter and qualify your potential clients. If you’re not in that business, are you sure you want to make that your business? – Lawrence Sep 17 '19 at 15:49
  • Every employee of a given company (whether they're freelance contractors or directly employed) will have a contract. An employer would know this. An employer would WANT this, regardless of how "inconvenient" it is. If the employees in question were any kind of professional, they would want individual contracts, too. The idea that it's "more convenient" to only write up a contract for one person when there are 8ish employees is ridiculous. It doesn't even make a little sense. – Steve-O Sep 18 '19 at 13:18

You asked,

Does the logic check out?

No, it does not check out. It fails some obvious tests. First of all, why would your friend not do this themselves? They claim it's "easier" for you to do it, but having you involved means moving the money across international borders one extra time, and presumably paying you something. At any rate, if your friend really needed this service, there are well established vendors that provide it. Again: why would they want you to do it?

If the friend is insinuating that you should use your personal account to distribute the funds - or even create a new account in your name - then this reeks of money laundering. Your friend may be hiding their end of the transactions well, and by relying on you to move the money to the ultimate recipients, you are the one the police will come looking for if or when those recipients are ever caught for whatever illegal activity they are involved in. Even if you are never personally "scammed" in a manner that causes you financial loss, you may still be setting yourself up for significant problems.

This reeks of other classic scams, too. Your friend may use a funding method that is reversible - they send you money, you send money to the third parties, and then your friend reverses the original transaction, and you are left with an account that is overdrawn by $40k.

Generally, someone you meet on the internet who tries to talk you into handling money for them is a scammer, not a friend.

If this person is a real friend - someone you have known your whole life, and someone you trust deeply - then tell them to use an escrow service. Or Tell them to establish an account in the name of the business, and then give you access as an agent of the business. And, tell them that you need to be paid above the table, with a W2 or 1099 as appropriate. Then, you won't have problems or tax implications to think about, because you'll be a normal employee or contractor like every other legitimate tax payer.

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  • 1
    "and then your friend reverses the original transaction" or the bank / finance institution reverses the transaction because they discover it was fraudulent. – TripeHound Sep 17 '19 at 7:14

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