We address money laundering: examples, as well as a complete overview of the topic and consequences on financial systems.
Introduction
Money laundering is a crime that pretend to transform illegal assets into inputs or money that is legal or accepted by the legitimate financial systems of the nation’s governments.
According to specialists, this type of organized crime took place at the beginning of the 20th century in a modern economic system in which surveillance, control and inspection entities were consolidated, which were the pillars to identify the channels and ways in which this crime was generated.
This illicit operation can significantly affect the economy and financial flows of a nation, since they aren´t identifiable nor subject to a control process, which has the consequence of destabilizing the formal and legal financial markets.
This activity seems to be a solid investment in a certain sector or economic activity in order to have legal and formal profits, it also has effects in the social and political spheres of a country, however, this produces a totally opposite effect by promoting opacity and corruption.
Definition
Money laundering is an illegal act that refers to all actions that find to hide or disguise the origin and nature.
In most cases, these are criminal activities organized by crime groups engaged in fraud, robbery, kidnapping, drug trafficking, extortion, among others.
The objective of money laundering is to disguise the illicit origin of the funds, so the funds can be used without arousing suspicion and without linking them to criminal activities. To achieve this, individuals or groups who are involved in money laundering have a variety of complex techniques and mechanisms.
Money laundering not only has legal implications, also represents a significant threat to the economic and financial stability of countries. It also facilitates the growth and expansion of criminal organizations, enabling them to reinvest illicit funds in illegal activities and undermining the integrity of the financial system.
In many countries, there are specific laws and regulations aimed to prevent and combating money laundering. These laws impose obligations on financial institutions and other professionals, such as lawyers, accountants and notaries, to implement due diligence measures, report suspicious transactions and cooperate with the authorities, detecting and preventing money laundering.
Money laundering is a process and an attempt to give a legal appearance to illicitly obtained funds while concealing their criminal origin.
What is layered money laundering?
Money laundering is an illegal activity and is subject to specific laws and regulations in each jurisdiction. As a corporate lawyer, it is your duty to familiarize yourself with the laws and regulations applicable in your country.
Common steps in the money laundering process:
Placement
In this step, money that was generated from illegal activities is introduced into the financial system. This is done through cash deposits in financial institutions, purchase of valuable assets (such as property or vehicles) or use of unregulated financial services.
Stratification
In this step, the AIM try to complicate the traceability of illicit money. Multiple financial transactions, fund transfers and movements between accounts in different jurisdictions are carried out. These actions are made to confuse the authorities and make it difficult to identify the illegal origin of the money.
Integration state
In this final step, apparently the “clean” money is reintroduced into the legal economy. The different methods are used to achieve this, such as investing in legitimate businesses, buying real estate or acquiring stocks and bonds. The objective is give to the funds a legal appearance and allow their use without arousing suspicion.
It is important to note that these steps are general and may vary depending on the case and the techniques used by criminals to launder money. In addition, governments and financial institutions are constantly working to detect and prevent money laundering by establishing security measures and enforcing strict regulations.
If you are investigating or working on a case related to money laundering, I would recommend you to search specific legal guidance and consult the relevant laws and regulations in your country.
Traditional forms of money laundering:
Offshore banking:
Bank accounts in tax heavens or jurisdictions with lax regulations can be used to hide the illicit provenance of funds. These accounts are allow for anonymity and protection, making it difficult for authorities to trace the money.
Purchase of real estate:
Criminals can purchase real estate using illegally obtained money. The purchase of properties allows illegal funds to be converted into seemingly legitimate assets. Subsequently, criminals can sell the properties and obtain “clean” money.
International trade:
International trade can be used for money laundering through methods such as overvaluing or undervaluing the assets on import or export invoices. These practices artificially inflate or decrease the value of goods, allowing illegal money to be moved through commercial transactions.
Casinos and gambling:
Casinos and gambling-related activities are also been used to launder illegal money. Criminals can exchange cash into chips or gambling credits, wager some of the money, and then redeem the remaining funds as legitimate winnings.
Examples of money laundering:
Al Capone and ostensibly formal businesses
One of the most recognized mobsters in the United States, Al Capone, between 1920 and 1930, sought to invest in laundromats and similar businesses to preserve his wealth that was obtained, apparently through illegal activities such as the sale of prohibited liquor and prostitution.
Petrobras
In 2013, the Federal Police in Brazil uncovered a money laundering network that reached the Petrobras company. The police investigated irregularities between 2005 and 2014 surrounding this company. The corruption network was systematically engaged in the diversion of public funds, the rigging of contracts and the payment of bribes.
It is estimated that approximately US$2 billion was laundered between 2004 and 2014.
The Liberty Reserve Case
More than $6 billion was laundered through Liberty Reserve, a Costa Rica-based a company that allowed the clients, mostly U.S. citizens, to open accounts and move money anonymously using their virtual currency.
Odebrecht in Panama
The Odebrecht Case is one of the most representative corruption cases in Latin America, involving politicians, businessmen and former officials from 12 countries.
The investigation focuses on how the Odebrecht company allegedly laundered money and bribes to presidents, former presidents and government officials from 12 countries: Angola, Argentina, Brazil, Colombia, Cuba, Ecuador, United States, Guatemala, Mexico, Mozambique, Panama, Peru, Dominican Republic and Venezuela, during the last 20 years, to obtain benefits in public contracts.
Cryptocurrency
According to specialists, the decentralized and anonymous nature of most cryptocurrencies gives people the possibility to launder money.
Digital currencies, which use cryptography to secure transactions, are decentralized, and their regulation is still very new, and in some places non-existent.
When the cryptocurrency was born, the idea was just that the transaction could be done without an intermediary, without a company or government organization involved, so the confirmation to be able to make a transaction in cryptocurrency comes from your peers. But unfortunately, many people and many criminal cells have appropriated this in order to perpetrate their crimes.
Ethics Line and money laundering
EthicsGlobal‘s EthicsLine helps companies and organizations to prevent this type of crime, as well as helping to create a healthy work environment, free of retaliation and psychosocial risks.
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