Money Laundering (History, Process, Methods, and Impact)

3. A Brief History
• The term “money laundering “
originate from Mafia ownership of
Laundromats in the United States.
• Gangsters there were earnings
huge sums in cash from extortion,
prostitution, gambling, and bootleg
liquor.

4. • Robinson states that:
“Money laundering is called what it is
because that perfectly describes what takes
place-illegal, or dirty, money is put through a
cycle of transactions, or washed, so that it
comes out the other end as legal, or clean,
money. In other words, the source of illegally
obtained funds is obscured through a
succession of transfer and deals in order that
those same funds can eventually be made to
appear as legitimate income.”

5. What is Money Laundering?
 is the process of disguising illegally
obtained money
 occurs in connection with wide
variety of crimes, including illegal arms
sales, drug trafficking, robbery, fraud,
racketeering and terrorism.
 is to convert cash to some other form
of asset to conceal the illegal source of
origin of cash income.

6. The Money Laundering
Process
 Placement
 Layering
 Integration

7. PLACEMENT
The initial movement of
criminally derived currency
or other proceeds of crime,
to initially change it’s form or
location to places beyond
the reach of law
enforcement.

8. Process of Placement:
1.Blending of Funds
2. Bank Complicity
3. Asset Purchase

9. Layering
The process of separating the proceeds of
criminal activity from their origin.. Disguising
the origin through the movement of funds
trough accounts and financial institutions. The
use of layers of complex financial
transactions; loans, letters of
credit, investments and insurance

10. Process of layering:
1. Cash converted into Monetary
Instruments
2. Material assets bought with cash
then sold

11. Integration
The process of using an apparent
legitimate transaction to disguise
the illicit proceeds allowing the
laundering of funds to be disbursed
back to the criminal. Funds often
are used for payment for operations,
spending on luxury goods or
investments in businesses.

12. Process of integration:
1.Property Dealing
2. Front Companies and False
Loans
3.Foreign Bank Complicity
4.False Import/Export Invoices

14. MONEY LAUNDERING
METHODS

15. Money Laundering schemes may
vary greatly in character and
complexity. They may involve any
number of intermediaries and utilize
both traditional and non-traditional
payment systems.
The scope and nature of a money
laundering operation is limited only
by the creativity of those involve.

16. In 1996, Harvard-educated economist
Franklin Jurado went to prison for
cleaning $36 million for Colombian
drug lord Jose Santacruz-Londono.
People with a whole lot of dirty money
typically hire financial experts to
handle the laundering process. Its
complex by necessity:
The whole idea is to make it impossible
for authorities to trace the dirty money
while it's cleaned.

17. There are lots of money-
laundering techniques that
authorities know about and
probably countless others
that have yet to be uncovered.
Here are some of the more
popular ones:

18. 1. Black Market Colombian
Peso Exchange -
This system, which the DEA calls the
"largest drug money-laundering
mechanism in the Western
Hemisphere", came to light in the
1990s.

19. 2. Structuring deposits –
Also known as smurfing, this
method entails breaking up
large amounts of money into
smaller, less-suspicious
amounts.

20. 3. Overseas Banks –
Money launderers often send
money through various "offshore
accounts" in countries that have
bank secrecy laws, meaning that
for all intents and purposes, these
countries allow anonymous
banking.

21. 4. Underground/alternative banking -
Some countries in Asia have well-established,
legal alternative banking systems that allow for
undocumented deposits, withdrawals and
transfers. These are trust-based systems,
Often with ancient roots, that leave no paper
trail and operate outside of government
control. This includes the hawala system in
Pakistan and India and the fie chen system in
China.

22. 5. Shell companies
These are fake companies that exist
for no other reason than to launder
money. They take in dirty money as
"payment" for supposed goods or
services but actually provide no
goods or services

23. 6. Investing in legitimate
businesses
Launderers sometimes place dirty
money in otherwise legitimate
businesses to clean it. These
businesses may be "front companies"
that actually do provide a good or
service but whose real purpose is to
clean the launderer's money

25. •The first, and most
obvious, impact is the
increase in corruption and
crime.
• The second impact (valid
in any jurisdiction) is on
legitimate businesses.

26. How Can We
Prevent it?

27. The Financial Action Task
Force (FATF) on Money
Laundering has identified
certain “choke” points in the
money laundering process,
that the launderer finds
difficult to avoid and where he
is vulnerable to detection.

28. The choke points identified are:
a. Entry of cash into financial
system
b. Transfers to and from the
financial system
c. Cross-border flows of cash

29. How Does
Fighting
Money
Laundering
Help Fight
Crime

30. Money laundering is a threat to the good
functioning of a financial system;
however, it can also be the Achilles’ heel
of criminal activity.
Hitting him where he is vulnerable
Without a usable profit, the
criminal activity will not
continue

31. What Individual
Governments should
Do about Money
Laundering

32. Many Governments have already
established comprehensive anti-
money laundering regimes.
These regimes aim to increase
awareness of the phenomenon –
both within the government and the
private business sector – and then
to provide the necessary legal or
regulatory tools to the authorities
charged with combating the
problem.

33. What Role the
Financial Task
Action Force
(FATF) Play

34. FATF – is a multidisciplinary body that
brings together the policy-making power
of legal, financial and law enforcement
experts from its members.
FATF monitors members’ progress in
implementing anti-money laundering
measures; reviews and reports on
laundering trends, techniques and
counter-measures; and promotes the
adaption and implementation of FATF anti-
money laundering standards globally.

35. The FATF issued the Forty
Recommendations in 1990 and
completely revised them in 1996 and
more recently in 2003.The 40
Recommendations require are a
comprehensive blueprint for action
against money laundering. They
cover the criminal justice system and
law enforcement; the financial
system and its regulation; and
international cooperation