Thesis: The process of money
laundering can be divided into three steps, placement, layering, and
integration
Intro: what
is money laundering, crimes that lead to or need the process of money
laundering, why criminals money launder, brief description of process, maybe
famous case to gain attention in the beginning.
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“In
October 2005, U.S. congressman Tom DeLay was indicted on money laundering
charges, forcing him to step down as House Majority Leader. Money laundering is
a serious charge -- in 2001, U.S. prosecutors obtained almost 900
money-laundering convictions with an average prison sentence of six years. The
rise of global financial markets makes money laundering easier than ever --
countries with bank-secrecy laws are directly connected to countries with
bank-reporting laws, making it possible to anonymously deposit
"dirty" money in one country and then have it transferred to any
other country for use. “
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The most common types of criminals who
need to launder money are drug traffickers, embezzlers, corrupt politicians and
public officials, mobsters, terrorists and con artists.
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Drug traffickers in particular need to
launder money because they deal with everything in cash, and cant keep all the
cash on them because its physically to much to store
Placement
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”).
Layering
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).
Integration
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”).
Conclusion
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.
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The Bank Secrecy Act (1970) basically eliminates
all anonymous banking in the United States. It gives the Treasury Department
the ability to force banks to keep records that make it easier to spot a
laundering operation. This includes reporting all single transactions above
$10,000 and multiple transactions totaling more than $10,000 to or from a
single account in one day. A banker who consistently violates this rule can
serve up to 10 years in prison.
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The 1986 Money Laundering Control Act makes
money laundering a crime in itself instead of just an element of another crime,
and the 1994 Money Laundering Suppression Act orders banks to establish their
own money-laundering task forces to weed out suspicious activity in their
institutions. The 2001 U.S. Patriot Act sets up mandatory identity checks for
U.S. bank patrons and provides resources toward tracking transactions in the
underground/alternative banking systems frequented by terrorist money handlers.
For a more complete list of U.S. anti-money-laundering legislation, see FDIC:
Bank Secrecy Act and Anti-Money Laundering.
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