Money laundering is the process of washing illegally proceeded ‘black money’ into ‘clean’ & ‘white’. Money laundering is also referred to financial crimes and business crimes. The term is also used for the misuse and appropriation of financial systems both local or international. In simple terms this placement of black money in ostensibly legal business channels and transactions is what washing dirty money is all about.
Money laundering is largely defined as an obfuscation of the sources of assets. The money proceeds that has no outright track source or destination or the money that is obtained through the misusing of financial services or systems is called Black money. This criminally derived property is most vulnerable to be infused in money laundering practices.
Several countries define money laundering in such a way as to include money from activities which are a crime in that country, even if the activity was legal where the actual conduct occurred.
This black money is obtained through the profitable proceeds of criminal activities such as trafficking drugs, terrorist activities, cybercrime etc., or through any illegal sources. The process of making this black money appear as if it is obtained from legitimate sources like bank deposits, investments, transfers etc. is how the black or dirty money is reintroduced as legal. Washing all of the excess baggage of illegitimacy of it and rendering it practically unidentifiable.
Now this money is not easily washed into ‘white’ or ‘clean’. There is a pretty intricate process that involves a lot of misuse of the financial machinery that comes handy to convert this black money as legitimate.
Why does this Illegal Money need Laundering?
Unless this criminally originated money is laundered, this illicit money is extremely difficult to be used. That is because explaining where the cash or property came from is not a plausible thing and thus it is linked back to the crime. Now, that you know the money is illegal and blackened, so, for it to get introduced into the financial system without any difficulty it needs to be washed off. The process of introducing the black money into the financial machinery is called Placement. The second step of disguising this black money is called Layering and the final step is called Integration. Let’s discuss these in detail.
This is the most important step in money laundering. This step involves the movement or rather the circulation of illicit cash / money from its original source through shops, casinos, exchange bureau and other small business local or abroad. Call it an introduction of black money into the global market. Purchasing property or any other assets through this cash is the most classic way of money laundering.
This step is most complex one. It involves the act of concealing the sources through which the money is obtained. This concealment is not actually hiding but involving this black money in a series of complex transactions and book keeping tricks so that the source of money gets very difficult to trace for law enforcement agencies. Property bought through this cash is now resold making assets difficult to trace or seize.
This is the third and final step in the whole process. Integration refers to the act of infusing the funds in legitimate means. This step involves the banking system so that the money looks like a normal earning. The money thus integrated is detected and identified through informants.
Modern Technologies and Money Laundering
Financial services that include managing, controlling and possessing property that belongs to others makes this property most vulnerable to be involved and abused in money laundering. Not that traditional money laundering tactics were any less putrid, but the modern technology has given it a newer and a much more complex dimension. Proxy servers, anonymizing software, etc. make detection of black money virtually untraceable as they wipe out the IP addresses.
Money now a day’s is also laundered through online sales, auctions, gambling websites, virtual gaming websites etc. Through such options, the illegally gotten money is converted into gaming currency and then it is transferred into real usable money.
Who Launders Money?
There are a wide range of people who are actively embezzling money from one place or another. Mostly drug traffickers, corrupt politicians, public officials, embezzlers, mobsters, con artist, terrorists etc. are involved in such cash related scams and appropriations. Many a times these people make use of seemingly non-profiting business outlets likes shops, restaurants etc. with fake earnings to transform their illegal proceeds as normally earned usable assets.
Drug traffickers among all of them are primarily the one who need a well scooted money laundering system for the simple reason because they deal with extensive cash which is easier to draw attention. To drive that attention away, they need to disguise the money in the least trackable and most complex transactions.
Anti-Money Laundering Regulations
Money laundering is a crime that every country in the world is trying to combat. In spite of the fact that financial crimes are pretty complex crimes, money laundering is much complex, thanks to the advanced internet approach. Rise in global market has made it easier than ever for those who make a moolah by trafficking money.
Though modern technology has made laundering easy and virtually undetectable, the tools to trap these monies and the mafia involved have too been advanced. Also, vigilant monitoring of suspect institutions and or persons, due diligence and proper support from finance and banking agencies is required for a well-oiled law enforcement machinery to work properly and ensure the abuse is restricted.
Transferring money through several countries is the simplest way to obscure the origin of the money. Through these tactics the criminals intend to disguise the source of money made out of illegal activities as if it was legally obtained through white collar transactions. This is done so the money could be rendered issuable without linking them to any criminal offence so that no law enforcement agency could seize the property and convict them.
Challenges faced by Anti-Money Laundering Squads
Money laundering detection is a challenging task specially because of the huge amount of money being transacted globally on an everyday basis. There are several well-oiled and fueled anti-money laundering and law enforcement agencies that work for specific jurisdictions or globally which make use of several money laundering detection devices and tools for the job.
These agencies make use of such systematic and sophisticated modules that detect and monitor all transactions of any suspect institutes and persons or groups. The law enforcement agencies and squads work not only against local fraudsters but have a very international approach.
Although, it is one of the most complex and challenging task to detect black money and its laundering, but not impossible. With smart tactics and, sophisticated tracking systems the task is but achieved with considerable success. However it is the duty of all the law abiding citizens both local and global, to respect hard earned money and report whatever and whenever a suspicious embezzlement is being conducted.
With this, we are signing off, if you need any more information regarding black money, how to detect it and how to report any suspicious transaction, contact us on below given channels. Till then keep your money safe and be stay smart!