All about money laundering

Money laundering is a financial crime in which the source of illegally acquired money or property is hidden from law enforcement and financial regulators by generating an appearance of legitimacy for the illicit gains. Money laundering disguises the origin of money or assets and can be perpetrated by individuals, tax evaders, criminal organizations, corrupt officials and even terrorist financiers.

Many criminal acts aim to generate profit for the individual or group that commits them. Money laundering is to reprocess these proceeds of criminal origin to hide their illegal origin. This process is critically important as it allows the criminal to reap those benefits while protecting their source.

Illegal arms sales, smuggling and organized crime activities, including drug trafficking and prostitution rings, can generate enormous sums. Scams, insider trading, bribery or computer fraud also generate large profits, providing an incentive for criminals to “legitimize” these ill-gotten gains through money laundering.

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What is money laundering?

Money laundering is defined as the method by which illegally obtained money is altered to make the translation look legitimate. What constitutes money laundering?

Money laundering occurs when the location, source, ownership or control of funds is falsified. Money laundering is a process that criminals use to make it look like the money they have is legitimately earned. What they do is take dirty money – and indeed the “ nettoyer ».

When making money, criminals must conceal how and why that money got into their hands. Money laundering allows them to do this, making it look like the money they have is coming from a legal source.

Money laundering is illegal because it is a way for criminals to profit from crime and often involves more than one illegal activity. The act and origin of money laundering makes it illegal. The first crime occurs when a criminal secures funds and the second crime attempts to legitimize the proceeds by embezzling financial institutions.

Money laundering is illegal because it is a way for criminals to profit from crime and often involves more than one illegal activity. The act and origin of money laundering makes it illegal. The first crime occurs when a criminal secures funds and the second crime attempts to legitimize the proceeds by embezzling financial institutions.

The stages of money laundering

Money laundering methods are many and growing, but the process always involves three consecutive steps:

‍ Placement

The first step in the money laundering process is where ill-gotten gains are initially introduced into the legitimate financial system, cut into portions that do not set off alarms among the authorities. Some common investment methods to subvert reporting mechanisms include loan repayment programs, gambling at casinos or betting shops, smuggling, currency exchanges, and mixed funds.

‍ Overlay

The second step in the money laundering process is when successive layers of legitimacy are added to the funds initially placed, until the source of the winnings is sufficiently disguised from the authorities to be unrecognizable as having always been illegal. Some common methods of this step include, but are not limited to, electronic transfers between countries, the use of front companies, and the transfer of funds between multiple banks or between multiple accounts within an institution.

‍ Integration

The third and final stage of the money laundering process, this is when the criminal recovers his illicit funds, which are now so shrouded in layers of legitimacy that the source is practically untraceable. Some common methods of the onboarding stage of money laundering include making legitimate investments in legal financial flows and selling or buying high-value items.

‍Can you prevent money laundering?

Anti-Money Laundering (AML) regulations exist to prevent criminals from profiting from these crimes. These regulations require organizations to perform internal audits to ensure that they are not deliberately or accidentally contributing to the money laundering problem.

The Financial Action Task Force (FATF) brought global recognition to the issue when it formed to set international standards on money laundering. The UK has also set a precedent by pushing to strengthen defenses through a new watchdog.

To further prevent money laundering, the new customer identification requirements are more stringent to financial institutions. These are the conditions KYC (Know Your Customers).

Examples of money laundering

Money laundering can be perpetrated by individuals, groups of individuals or organizations – legal or not – of any size, anywhere in the world. Here are some examples of people who may commit this financial crime:

‍ drug dealers

Because the industry is totally illegal, multinational, and cash-intensive, it requires multiple ways to hide the source of the funds it generates, so that kingpins can safely access profits.

‍ Arms traffickers.

Similar in form to drug trafficking, illegal arms and ammunition transactions are often international and usually cash-intensive. They generate large amounts of revenue that must be funneled back into legitimate economies before being safely reclaimed by criminals.

‍ human traffickers

This illegal global industry is estimated to 150 billion dollars per year. Its growth has seen shell companies, abusive employment practices, funnel accounts and alternative payment methods proliferate, and the need for these violent and cynical criminals to launder their illicit funds has increased.

‍ Funders of terrorism Whether terrorists act for ideological reasons, alone or in groups, nationally or internationally, money is always needed to finance violent acts. Channeling funds to facilitate acts of terror can be simple or complex.

The FBI report on the 11/XNUMX atrocities revealed that the operation cost Al-Qaeda only US $ 400, using physical cash smuggling, overseas wire transfers, and debit or credit purchases from foreign banks while in the United States. These additional money laundering methods have gone undetected by US and other authorities.

‍ White Collar Criminals

White-collar crimes are defined by the FBI as "characterized by deception, concealment, or breach of trust and not dependent on the application or threat of physical force or violence." The motivation behind these crimes is financial – to obtain or avoid losing money, goods or services or to gain personal or business advantage.

It differs from the other categories in that the violence is not necessarily a threat ubiquitous and that the source of the money is not necessarily illegal, although the fraud, embezzlement or investment scams it involves may still require money laundering services.

Does the fight against money laundering help fight crime?

Money laundering is a threat to the proper functioning of a financial system; however, it can also be the Achilles' heel of criminal activity.

In investigations by operational services into the activity of organized crime, it is often the links brought to light through the traces of financial transactions that make it possible to locate hidden assets and establish the identity of the criminals and the responsible criminal organization.

When illegal funds are derived from theft, extortion, scams or fraud, launching a money laundering investigation is frequently the only way to trace the stolen funds and return them to the victims.

More importantly, focusing on the money laundering aspect of criminal activity and depriving criminals of these ill-gotten gains hits them hard. Indeed, in the absence of usable profits, the criminal activity is interrupted.

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