Posted by : Dougie Morris
Money laundering is one of the footholds of criminal industry. The term is used to convey the idea of “washing” illegitimate money so that it becomes “legitimate”. Money laundering occurs in every country in the world, even the United States. It can be devastating to a country because money laundering erodes the purpose of financial institutions. With illegitimate money, economic growth is just an illusion because investments are distorted. As money laundering includes falsifying official documents, it can destabilize an economy by providing false information about the economy and its health.
Money-laundering isn’t something that’s very simple. In fact, there are different steps that have to be completed in order to do so. First, the money has to be physically disposed of. This usually occurs when it is deposited into some type of formal financial institution like a bank or a credit union. Sometimes, the money is shipped across borders so that it can be deposited in foreign banks because can be difficult for the foreign banks to press the depositor into revealing personal information. Sometimes, that money is even used to buy expensive items like artwork or jewelry that can be resold for the same amount of money later on.
The next step usually taken is something called “layering”, where a long series of financial transactions take place to make the money appear legitimate. Basically, the money is transferred and then used to buy stocks or bonds, invest in real estate or other legitimate businesses, and even invested in shell companies that funnel the money in, and then back out.
The final step of launderers is to make that money “legitimate”. This part can be tricky. Some examples include cases where the shell companies “lend money” out to people using the same illegitimate cash that was funneled into the company in the first place. It’s also very common to over-invoice products or make fake invoices for goods sold. They draw up fake papers that explain why there is more money in an account than there should be. Once this process is complete, the trail is so confusing that following it back often leads to seemingly dead ends or ends that look 100% legitimate.
Money laundering can ruin businesses. Money provided from illegitimate sources tends to dry up rather quickly, and if an innocent company gets duped into handling it, it can also be taken down by authorities. Organized crime thrives on money laundering, which is why governments are constantly trying to sniff out these operations.
For more information on money laundering, check the following sites:
- Money Laundering FAQ: Outlines how money laundering affects businesses.
- FamGuard: Money Laundering: Detailed article that discusses money laundering and what occurs when it goes on.
- Steps: Shows how money is laundered.
- IMF and Money Laundering: Explains how money laundering can destabilize areas.
- Anti-Money Laundering Laws: A look at different laws to stop money laundering.
- CCE Law: Outlines another one of the systems in place to prevent money laundering.
- History of Anti-Money Laundering Laws: Overview of the history of the evolution of anti-money laundering laws.
- Bank Secrecy Act and Anti-Money Laundering: Another page that discusses money laundering.