Scott Johnson
Dr. Kerr
EN101-12
8 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. Any way
money laundering
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 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, 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 impossible to
trace it back to the illegal source (Layton). The cleaned money must be
legitimately assimilated into the financial system so that the criminal has
access to it (Steel). 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.
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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