What we need to know about money laundering and its dangers

Written by Rez Eleazar P. Santiago on .

People who have earned their income from criminal activities find creative ways for their funds to look as if they were earned legally.

Laundering money is a dangerous crime

The ultimate goal of crooks is to make their black money legal for personal gain or to fund criminal activities. They do this by employing a mix of complex strategies in order to conceal the true origins of their funds which primarily is obtained through criminal activities. Financial conduct authorities have identified the three most common processes money launderers use to clean their "dirty" funds. 

How is the cleaning usually done?

Money laundering could be considered “placement” if the dirty money is deposited in either traditional or alternative financial institutions. The money could also undergo “layering” or multiple transactions in an attempt to obscure its true source. A good example of this process is when money launderers hire professionals who will then create layers of fictitious company owners. Furthermore, a laundering could be considered an “integration” if dirty money is presented as income in legitimate businesses or by purchasing luxury properties or activities. It's important to note that crooks often use combinations of or even all of the laundering methods to fully conceal the true origin of their funds.

 Placement

 Depositing a large amount of money into a reputable bank is the most common method to launder dirty money. 

 

Layering

 Money launderers could also obscure their fund origins by using multiple dummy depositors or even legitimate companies to deposit funds in their bank accounts.

  

Integration

Money launderers are more interested in protecting their funds rather than investing them, that's why they tend to purchase luxury cars, expensive jewelry, and properties. 

 

Money laundering consequences are simply dangerous.

The economy and the society, in general, suffer when money laundering activities are successful. Oftentimes, large sums of money are mobilized to fund organized criminals who are either involved in illegal drugs, human trafficking, or even terrorism. We’re all aware that such criminal activities not only result in thousands of deaths but also cripple a government by wasting its finances. Legitimate private investors suffer income loss from competing with other businesses that have been used by money launderers. It’s important to note that money launderers would rather protect their money instead of investing it.

Catching money launderers is tough but it’s possible.       

Money laundering has been difficult to prevent because crooks often use combinations of or even all of the three laundering processes. The arrival of fintech, specifically the cryptocurrency, has made it a great challenge and almost impossible for governments to trace the origins and operators of laundered money. Government agencies and global financial institutions continuously work together to prevent money laundering from affecting the economy and society. Laws have been created to criminalize money laundering activities and to empower countries to catch the perpetrators.   

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