Taken in its simplest form, money laundering is a process by which the origins. And ownership of profits derived from criminal activities can be hidden. Indeed, the money is “cleaned” or “laundered” by legitimate means, and, as a result, the proceeds lose their criminal identity. And appear to come from a legitimate source. In this article, we will give you a complete guide about what is money laundering?
This process is usually repeated several times and is common in the proceeds of drug and human trafficking, prostitution, corruption, smuggling, racketeering, and illegal arms smuggling. The process allows you to control the money without fear. That the transaction will lead back to the originator or authors of the proceeds. Criminal organizations are using this process to take advantage of more crime opportunities on a systematic and large scale.
What is the money-laundering story?
The term “money laundering” was first used in the early 20th century to refer to transactions. That somehow intended to legalize proceeds from illicit activities. Thus facilitating their entry into the cash flow of the economy. And develop measures to prevent the laundering of “dirty” money, i.e., of illicit proceeds through the legitimate economic-financial sector. Merchants and money lenders have evaded the laws. That punished usury and covered it with often ingenious mechanisms.
The beginning of piracy and the concealment of looting by those. Who has practised piracy goes back even further in time. In the year 67 AD, the city of Pompeii embarked on an expedition against the pirates of the Mediterranean. Who was plundering Rome of its supplies? Cilicia – a district on the southeastern coast of Asia Minor north of Cyprus. Then the traditional “homeland” and refuge for pirates.
The financial shelters, a modern version of these hiding places, complement openly dubious or fraudulent practices. That occurs with the progression of what is money laundering. Pirates were pioneers in the practice of gold laundering, and their focus was on European trading ships. That crossed the Atlantic Ocean during the 16th and 18th centuries.
The buccaneers and freebooters then added their practices to classic piracy. Something that would not have been possible without the hidden help of the British, French and Dutch governments. In this regard, the case of the British pirate Sir Francis Drake is famous. Besides, in 1612, England offered all pirates who abandoned. Their profession unconditional forgiveness and the right to keep the profit of their raids. Three and a half centuries later, modern societies will see similar attempts to grant some amnesty.
What is money laundering methods?
In the previous paragraph, we have seen how the crime of money laundering can be incurred. In practice, anything that serves to prevent the identification of dirty money constitutes what money laundering is.
Here are some methods often used to carry out money laundering and make illegal proceeds unavailable:
- cash deposit at banks or post offices and subsequent transfers to other accounts;
- gambling. Casinos, horse races, and lotteries are means of legalizing illegal proceeds. The purchase of tickets takes place with dirty money while in casinos it is possible to replace. After the purchase of chips. The remainder with clean money or requests a check to be sent to a bank of legal origin;
- purchase of insurance policies or other securities ;
- purchase of a commercial activity in which to invest the dirty money to obtain legitimate earnings then.
Crime and confiscation?
The confiscation of property is not only a modern policy. In the beginning, it was a punishment for political crimes. Over time, it has extended to grave crimes. Today it is evident in the application of international law that the objective of confiscation is twofold. On the one hand, deterrence for the perpetrator of the infringement; on the other hand, income for the treasury. The categorization of the crime of money laundering as a separate crime is, in fact, recent. Traditionally, the focus was on the crime that gave rise to money. When applied to crimes with economic motivation, assets’ seizure was considered a punishment against the underlying crime. Recently, there has been a radical change.
The tendency to punish the act of money laundering and emerged. In modern legislation in the second half of the twentieth century when it began to consider it a crime in its own right. As an independent complement of the underlying offence, offence-called premise. And, therefore, considered a reason for the confiscation of assets. Furthermore, in some countries, such as the USA. The punishment for laundering the product of the crime can. Sometimes be more severe than the punishment of the underlying crime. The criminal hypothesis of the crime of “Money laundering” was introduced in our Criminal Code with art. 648 bis since 1978, when four types of predicate offences were identified: aggravated robbery, extortion, kidnapping, and drug trafficking. To date, however, the predicate offence can be any non-culpable crime.
Dirty money – what is it?
In practice, dirty money represents the profit or the fruit of a crime. Dirty money is, for example, that obtained from a robbery, from a scam, from theft, embezzlement, embezzlement, etc. This evolution has sparked considerable controversy. The problem has its roots in the atypical nature of money laundering. Money laundering consists of acts that separately can be unrelated to crime and be lawful.
But which together become an attempt to hide the product of a crime. The difficulty of obtaining convincing evidence of the harm caused by money laundering has led to delays. And doubts in its classification as a crime. In fact, many countries have not been able to do this and are not yet. Even though the trend is to make what is money laundering a global crime. There are several reasons for this trend. The net benefit or personal gain constitutes the motivation for the underlying crime. And provides the economic means necessary to continue criminal activities. Second, the anti-money laundering laws offer a practical tool, not only to extend.
The scopes of surveillance to categories of “participants” in previously criminalized offences. But also to create the basis for enabling the imposition of penalties. Stricter to those who commit the underlying crime. In this way, the threat of severe penalties can help persuade alleged criminals to cooperate with the law. No less important is the tendency to use the laws on the seizure of assets as possible financing sources for the anti-money laundering system.
Monetary crimes, both forgery and money laundering, are neither new crimes nor crimes derived exclusively from drug traffickings, such as forgery, kidnapping for extortion, hostage-taking, illegal enrichment, tax evasion, terrorism, and much more.
Money laundering today
The globalization of the financial system, with advances in communications and transportation. It has made concealing the proceeds of crime a much easier task than in the past. Proceeds can be instantly transferred from one financial institution to another, and crime has become more “global.” It is no longer sufficient for criminal prosecution authorities to know what is happening within their jurisdiction. They also need to anticipate and cooperate with other authorities and jurisdictions, as criminal activities can spread within minutes.
Furthermore, many criminals no longer desire to remain or limit their activities to just one country. International criminal organizations have become experienced. And competent in launder money through the transfer of ownership from one country to another. Taking advantage of existing notoriously lax legislation in some countries offering safe-havens. For foreigners who try to hide their wealth. Many of these countries provide veritable “dead ends” for investigators trying to follow the proceeds’ trail.
Money laundering has ultimately become a successful tool for criminals. Because it is the financial system itself that does not prevent the possibility of money laundering, in fact, if criminals are willing to make concessions, the system can be more accommodating. Generate detailed and often permanent records of all financial transactions. Flexibility is the key to successful money laundering. The lower standards and lax legislation of many countries offer flexibility. To allow criminals to use the system to launder their criminally obtained profits.
From a “technical” point of view, money laundering, in its simplest form, is a three-step process :
- The first phase is that of the so-called “positioning” or “ smurfing.” This is where the proceeds of crime are converted. Through a succession of small anonymous transactions or deposits. Into bank accounts or other negotiable, redeemable, or salable instruments or items. With the assistance (voluntary or unwitting) of professionals. For laundering dirty money. These companies or businesses are often “front.” As their legitimate appearance hides the illicit activities that generate the proceeds of crime. The amounts are always small enough to remain below the bank’s risk thresholds. Cash and cash equivalents, being now in a legitimate entity.
- The second phase is that of the so-called “layering” or “ layering.” The smurfing business proceeds are converted or moved further from the source by purchasing legitimate goods. That has a high percentage of cash sales (for example, a casino).
- There are arguments. However, that “dirty” money, the money associated with criminal activity, can never lose. The reason is that the proceeds never go away. They only change in appearance and shape, making it more difficult to track them down. Ultimately, money generated by criminal activity has a more limited use than normal “clean” money. Those are not very visible, as there is always the risk that the proceeds lead the authorities back to the initial criminal activity and/or originator (or originators).
The fight against money laundering
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For the reasons set out above, the fight against money laundering must be complex, dynamic, and proactive. Authorities should constantly change their reference paradigms, just as criminal organizations constantly change their modus operandi to launder money. The anti-money laundering compliance (AML) departments of Western legislations are traditionally staffed but technologically poor. That will significantly reduce the number of employees.
As fines and regulatory pressures rise, financial institutions are taking additional precautionary measures to identify suspicious activity. So, as a result, anti-money laundering investigative departments have significantly expanded. And opened new operations centres to handle an increasing number of alerts as the new centres are expanding their IT capabilities. Data mining work for a single case can often take over 50% of an investigator’s time.
The issues of data access and storage have largely been raised following the merger of large financial institutions. That has not made the right IT investments. As a result, companies are now investing in technology to enable data processing through smoother processes. Financial institutions rely on internal experts, external consultants, and/or external suppliers to optimize. Each financial institution, being a reality almost in its own right. We will have to face unique challenges, which will require unique solutions.
Also, the creation of standard templates for common. And simple investigations are becoming increasingly popular in the anti-money laundering compliance industry. With the increased use of templates, investigators will complete the most common cases with minimal changes. By 2023, compliance departments will automate the most typical cases (e.g., through the restructuring of cash flow between states) by incorporating the latest technologies.
How does recycling work?
Many different behaviours may implement money laundering.
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Let’s take some examples.
A classic example of money laundering is the one that occurs when sums of money (obviously the result of crimes) are transferred to the bank or postal account of a third party. Who, in turn, undertakes to re-transfer a part of it to the account of another person. Yet. There is the crime of money laundering in the disassembly and subsequent sale of individual pieces of a car of criminal origin (theft). Due to the suitability of the indicated conduct to obtain the concealment of the origin of the asset. The replacement or modification of the license plate of a stolen car constitutes the crime of money laundering.
In short: everything that allows you to hide or “disguise” dirty money by making illegal proceeds inserted into the legal economy constitutes money laundering.