Scott
Johnson
Dr. Kerr
EN101-12
11 April 2013
The
Invisible Crime of Money Laundering
The crime of
money laundering is becoming an increasingly larger problem in the world with
rise of modern financial markets. There were almost 900 convictions of money
laundering in 2001 alone, and it is likely that there are many money launderers
that were not convicted or went completely unnoticed (Layton). Many people have
heard of the crime of money laundering, but are unaware of what it actually is.
The U.S. Department of the Treasury summarizes it as “financial transactions in
which criminals, including terrorist organizations, attempt to disguise the
proceeds, sources or nature of their illicit activities”. The specific details
of money laundering are complicated, but the entire process can be broken down
into the three general steps of placement, layering, and integration.
The first step
in the money laundering process is the placement of dirty cash into the
financial system. Before this stage, criminals have large amounts of “dirty”
cash on hand that they have acquired from illegal activity. They then need to
insert the money into the legitimate financial system to unload the burden of
guarding large amounts of cash (Layton; “Three-Stage Process”). According to
the article “How Money Laundering Works”, the most common way of inserting the
money into the financial system is depositing it into a bank or other financial
institution. This is the riskiest stage of the process because the money has
not yet been “cleaned”, and it is suspicious to deposit large amounts of cash
into a bank without identifying a legitimate source for the money (Layton). The
U.S. department of Immigration and Customs Enforcement explains that criminals
can move the money “by employing complex and sometimes confusing documentation
associated with legitimate trade transactions”. Another way that money launderers
often avoid suspicion from law enforcement at this stage is by using a
technique called “smurfing”, where they have many different people deposit
small amounts of money into different accounts at the bank so that it can be
acquired in full after it has been cleaned (“A Three-Stage Process”). Other
ways of inserting the money into the financial system include using the illegal
money to purchase chips at gambling institutions or using it to repay loans
from banks or money lending businesses (“A Three-Stage Process”).
In the second
step of the money laundering process, the money is “layered” through many
transactions to make it difficult, if not impossible, to trace. The money
launderer starts this process by sending the money that has been deposited to
many different offshore accounts (Layton). The money is then continuously
transferred to different accounts and other financial instruments in many
different countries (A Three-Stage Process”). According to Billy Steel, the
author of “Money Laundering: the Stages of the Process”, the purpose of this
stage is “to disassociate the illegal monies from the source of the crime by
purposely creating a complex web of financial transactions aimed at concealing
any audit trail as well as the source and ownership of funds”. This is the most
complex stage because the more “layered” the money is, the more difficult it
will be to trace back to the illegal source (Layton). Ways that money
launderers conceal the money even further include changing the currency,
investing in overseas stock markets that record only a small amount of
transactions, or purchasing high valued items such as diamonds or yachts
(Layton).
The final step
in the process is integration, where the money is “cleaned” and returned to the
criminal through an apparently legitimate source. At this stage, the money
launderer can use the money without being caught because it is extremely
difficult to trace it back to the illegal source (Layton). However, according
to the money laundering prevention specialist company, About Business Crime
Solutions Inc., the criminal must still complete this stage “in a manner that
does not draw attention and appears to result from a legitimate source”. Money
launderers often do this by taking advantage of other countries’ bank secrecy
laws and granting themselves loans that have guaranteed secrecy, investing in
legitimate business like casinos and check cashing institutions, or
transferring the money by wire from a bank in a different country that the
launderer owns (Layton; Steel). Another method includes the sale of high priced
items like artwork or jewelry (“A Three-Stage Process”).
The complicated
process of money laundering results in criminals benefiting from illegal activity,
while law enforcement attempts to unravel the mystery to put the criminals
behind bars. While some criminals who commit money laundering get away with the
crime, recent crackdowns by law enforcement have put some of the large scale
money launderers in prison. In 2005, Texas congressman Tom Delay was indicted
on money laundering charges after it was discovered that he had illegally
accepted corporate donations and used them for campaigning (Layton). Delay and
his conspirators had funneled the funds through the national republican committee,
which then sent equal amounts to Texas for use in his campaign (Layton). With large
scandals like this alerting law enforcement to the seriousness of money
laundering, efforts will certainly be made to punish more criminals who commit
this crime.
Works
Cited
"A Three-Stage Process." MoneyLaundering.ca.
Business Crime Solutions Inc.. Web. 6 Apr 2013. <http://www.moneylaundering.ca/public/law/3_stages_ML.php>.
Layton, Julia. " How Money Laundering
Works."HowStuffWorks.com. HowStuffWorks, inc., n.d. Web. 3 Apr
2013. <http://money.howstuffworks.com/money-laundering.htm>.
"Money Laundering." ICE.gov. Department
of Immigration and Customs Enforcement. Web. 8 Apr 2013.
<http://www.ice.gov/money-laundering/>.
"Money Laundering." Treasury.gov.
U.S. Department of the Treasury, n.d. Web. 6 Apr 2013.
<http://www.treasury.gov/resource-center/terrorist-illicit-finance/Pages/Money-Laundering.aspx>.
Steel, Billy. " Money Laundering - Stages of
the Process."Laundryman.u-net.com. Billy Steel, n.d. Web. 6 Apr
2013. <http://www.laundryman.u-net.com/page5_mlstgs.html>.
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