Anti-money LaunderingWhat is 'Money Laundering'Money laundering is:the process of creating the appearance that large amounts of money obtained from criminal activity, such as drug trafficking or terrorist activity, originated from a legitimate source. The money from the illicit activity is considered dirty, and the process "launders" the money to make it look clean. – Investopedia“Money laundering is giving oxygen to organised crime.”—Enrique Nieto, President of Mexico, in June 2012
Ways and means of Money Laundering•Tax Evasion•Corruption
Process of Money Laundering•Placement•Layering•Integration
First step of Money Laundering•money is laundered whenever a person or business deals in any way with another person’s benefit from crime. - countless number of diverse ways.•Placement, the stage at which criminally derived funds are introduced in the financial system.•One of the most common techniques: “FRONTS”•Open a business - a restaurant, •Inflates the daily cash receipts and puts in restaurant's bank account•Withdraws as per need.•Criminal breaks up large chunks of cash into multiple small deposits, often spreading them over many different accounts, to avoid detection.
Layering•Layering,the substantive stage of the process in which the property is ‘washed’ and its ownership and source is disguised.•Investing in and selling valuable assets such as•real estate, •gambling, •counterfeiting; and •Using shell companies (inactive companies or corporations that essentially exist on paper only).
Integration•Integration, the final stage at which the ‘laundered’ property is re-introduced into the legitimate economy.•This three staged definition of money laundering is highly simplistic •The stages often overlap and in some cases, for example in cases of financial crimes, there is no requirement for the proceeds of crime to be ‘placed’.
In summary•In the initial - or placement introduces his illegal profits into the financial system. •by breaking up large amounts of cash into less conspicuous smaller sums that are then deposited directly into a bank account, •After the funds have entered the financial system, the second – or layering – stage takes place.•In this phase, conversions or movements of the funds to distance them from their source. •the funds might be channelled through the purchase and sales of investment instruments,•simply wire the funds through a series of accounts at various banks across the globe.