Introduction
“Money is the fruit of evil, as often the root of it”, a famous quote by novelist Henry Fielding (“Henry Fielding Quotes,” n.d., par 1). This quote quantifies what this presentation will be about today: money laundering. Money laundering is the process of taking the income from criminal activities and making them appear legitimate. This is also known as making dirty money appear clean. A simple comparison I will be comparing a money launder and a magician: a money launderer appears to make money from drugs, fraud, or other illicit activities untraceable. Where a magician uses the illusion of making objects disappear on stage. Both the money launder and the magician require professional skills and techniques to make their illusions successful.
Money laundering is a well-known act by criminals. Launders primary goal is to take illegal funds and make them clean through the financial system as quickly as possible. I There are three steps in making money laundering successful they are: placement, layering, integration, it is important to know how each step impacts the money laundering process.
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Today, I will be talking about how money laundering works. Members of the U.S. Congress passed the Money Laundering Act of 1986, which required banks to have stricter policies against money laundering (GovTrack.us, 2019).
Today, to help us understand money laundering, we will begin by first examining the first step of money laundering.
Placement is the maneuvering of cash from its illegal source, such as drug money, tax evasion, and embezzlement. On occasion the source of the cash can be easily camouflaged by certain techniques in which money launders will use to make the money laundering process successful. Money launder’s primary goal in placement is to place the cash funds from criminal earnings into the financial networks or systems, import/export businesses, and casinos.
According to a written testimony by Steven M. D’Antuono, Section Chief of the Criminal Investigation Division of the FBI there are several ways money launders will place illicit funds into the financial system.
- Loan repayments- in the process of loan repayment, the funds that are paying the loan in full are from illegal sources. By money launders using this technique it hides the true nature of where the funds were originated from. (D’Antuono, 2018).
- Gambling- in the process of using gambling as a form of placement, launders will buy large sums of gambling chips and ask for a monetary instrument like a check to hide where the funds were generated from. (D’Antuono, 2018).
- Currency Smuggling- currency smuggling is the physical process of taking illegal funds from criminal activities and moving the funds across international borders. (D’Antuono, 2018).
- Blending of funds- in the technique of blending funds, a money launder will ask a legitimate business to mingle the dirty money into the legitimate day to day transactions of the business to cover up the source of funds from the illegal activities of the money launders. (D’Antuono, 2018).
Now that we’ve examined what placement is, let’s move onto the second step of money laundering which is layering.
The purpose of this step is to make it challenging to distinguish and expose laundering activity. The purpose of this is to make the tracking of illegal cash sources difficult for law enforcement and government agencies to detect. Layering is considered the most critical step in the money laundering process.
There are several ways that criminals achieve success through the layering process of money laundering. Today I am going to discuss two main ways:
- Smurfing- Once funds are effectively stationed into the financial network or system, the proceeds can then be changed over into monetary instruments. Monetary instruments can include things like checks, reloadable cards, gift cards, official checks, and money orders. Criminals will hire “Smurfs” to conduct multiple cash transactions at separate banks, to keep all the transactions under the mandatory cash reporting threshold, which is $10,000.01. This process is known as smurfing (Frankl, 2017).
- Money Mules- a money mule is a person who acts on behalf of someone else’s direction to move illegal funds from criminal activities through the financial network or system. Money launder’s recruit mules to move money by electronic means through the financial network, examples can be establishing front accounts and then wiring funds out stating the purpose is to purchase an asset. A money mule can be a victim or employed by the money launders. Often money launders will target retirees, single mothers, or students via email to open the front accounts, in which they victim can keep a small portion of the funds. Unfortunately, money mules add layers to the complicated process of detecting money laundering activities. (Frankl, 2017).
We have discussed the first step of money laundering which is called placement, and the second most critical step layering, we will discuss the final step of money laundering integration.
Money laundering has a significant influence on the world’s economy and can impact political instability, social instability, and open trade market. (Frankl, 2017). Once integration, the transfer of previous laundered money into the economy has occurred, the laundered money is considered clean and often untraceable.
Criminals strive to make the laundered money appear to be normal business earrings, some of their methods are:
- Property Dealings- is the process of purchasing large assets bought with laundered money. For example, a real estate transaction is considered clean and marketable. Once the purchase is made it is considered clean and marketable, the asset then can be resold on the open market for profit (D’Antuono, 2018).
- Front Companies and False Loans- Front companies often prefer to be in foreign states or countries that provide corporate secrecy laws that will protect the fraudulent corporation or business. Criminals choose to establish fraudulent corporations or businesses to be a front to lending their own laundered money to themselves under the disguise of a legitimate transaction (D’Antuono, 2018).
Today, we have discussed what money laundering is and how it works.
Conclusion
Over the past few minutes I have explained that money launders primary goal is to take illegal funds and make them clean through the financial system. Throughout this presentation I explained how dirty money is placed into banks, this is known as placement. I discussed layering, and how launders make dirty money appear clean by the process of smurfing or using money mules. The goal of layering is to keep the transactions non reportable to the government and add layers the system to make it more complex. The final step of money laundering was discussed was integration. Money launders will buy real estate or big-ticket items that can be sold on the open market and integrated into the economy as clean. A famous quote by author Agatha Christie that is relatable to today’s presentation is” Where large sums of money are concerned, it is advisable to trust nobody” (‘Agatha Christie Quotes’ n.d., par 1).
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