Money laundering, what is it?

Money laundering is the process by which the illicit origin of funds obtained through criminal activity is concealed so that they appear to be the result of legal activity. The objective of money laundering is to make illegally obtained money look legitimate, so that it can be used without arousing suspicion from the authorities.

Money laundering can be carried out in a variety of ways, such as through real estate investments, the creation of shell companies, the transfer of funds to offshore accounts, the use of casinos, among others. Money laundering is a serious crime that affects countries' economies, finances organised crime and promotes corruption. Authorities at national and international level work together to detect and prevent money laundering and bring those responsible to justice. If you ever find yourself in a money laundering case it is advisable to seek advice from a criminal lawyer.

How can money laundering be detected?

This process can be difficult to detect, but some of the ways in which it can be detected are:

• Unusual transactions: Financial transactions that are unusual for the business, customer or industry can be an indication of money laundering. For example, a company that normally processes small transactions suddenly starts processing huge transactions without a reasonable explanation.
• Transactions that make no economic sense: Transactions that have no apparent economic sense can also be an indication of money laundering. For example, if a person buys an asset that has no market value and then sells it for significantly more, this could be a sign of money laundering.
• Customers without a clear source of income: If a customer has no clear source of income, but is conducting significant financial transactions, this could be a sign of money laundering.
• Cash transactions: Cash transactions are more difficult to trace than credit card or wire transfer transactions, making them more attractive to criminals trying to launder money.
• International transactions: International transactions can be used to transfer funds from one country to another and can be more difficult to trace due to the different laws and regulations that apply in different countries.
• Financial activities that avoid reporting: If a company or individual attempts to avoid required financial reporting, this could be a sign of money laundering.
• Use of unregulated financial intermediaries: If a person uses unregulated financial intermediaries to conduct financial transactions, this could be a sign of money laundering.

How can money laundering be prevented?

Preventing money laundering involves implementing measures to prevent criminals from using the financial system to disguise income generated from illegal activities. Some of the measures that can be implemented to prevent money laundering are:

• Knowledge of customers: It is essential to know your customers well and to conduct due diligence before conducting any financial transactions with them. This includes verifying the identity of the customer, their source of income and the purpose of the transaction. It is also important to keep detailed records of all transactions and update them regularly.
• Policies and procedures: It is important to have clear policies and procedures in place to prevent money laundering. This includes training staff to detect possible signs of money laundering, as well as establishing internal control measures to ensure that transactions comply with regulations.
• Transaction monitoring: Regular monitoring of financial transactions can help detect possible signs of money laundering. This can be done by implementing automated money laundering detection systems, which can identify unusual patterns or transactions that do not make economic sense.
• International cooperation: Since money laundering often involves international transactions, it is important to cooperate with other countries to exchange information and coordinate efforts to prevent money laundering.
• Regulations and sanctions: Effective regulations and adequate sanctions for violations of regulations are essential to prevent money laundering. Regulations should be clear and regularly updated to ensure that they are in line with the latest money laundering trends and methods.

How is money laundering done?

1. Integration: The process of integration involves making money generated from illegal activities appear to come from a legitimate source. For example, a criminal could buy a legitimate business and then use it to deposit money obtained through illegal activities into the business's bank accounts.
2. Stratification: The layering process involves separating the money from its illegal source and moving it through different accounts and transactions to hide its origin. For example, a criminal might transfer money obtained through illegal activities to bank accounts in different countries and then move it through different transactions to make it harder to trace.
3. Conversion: The conversion process involves changing money generated from illegal activities into a form that makes it difficult to trace. For example, a criminal could convert money into goods such as jewellery, gold or artwork, which can be more difficult to trace than cash or bank transfers.
4. Transfer: The transfer process involves moving money generated from illegal activities across different accounts and countries to make it difficult to trace. For example, a criminal might use a number of bank accounts in different countries to transfer the money through before finally depositing it into a bank account in their home country.

Who does money laundering?

Money laundering is a criminal activity that can be carried out by a wide range of criminals. Some of the groups that are often involved in money laundering include:

1. Organised criminals: Organised criminal groups, such as drug gangs, transnational organised crime and terrorist groups, are often involved in money laundering. These groups use money obtained from illegal activities to finance their operations and hide the source of their income.
2. Corrupt businessmen: Corrupt businessmen may be involved in money laundering through setting up shell companies or conducting fraudulent transactions to conceal the origin of their illicit proceeds.
3. Corrupt politicians and public officials: Corrupt politicians and public officials may be involved in money laundering through accepting bribes or conducting illegal transactions to conceal the source of their illicit income.
4. Individuals: Individuals may also be involved in money laundering. For example, someone who has obtained money from illegal activities, such as drug trafficking, may attempt to launder it through investments in the stock market or in real estate.