For any country or law enforcement agency, one of the most challenging
and troublesome tasks is to keep a check on illegal activities.
Over time, criminals have come with sophisticated ways to
hide their tracks and appear squeaky clean from the outside.
Due to this, laundered money becomes very difficult to track and also gives
rise to funding and capital for many other crimes and criminal activities.
What is money laundering?
Money laundering, in simple terms, is the process of transforming profits
and money obtained from illegal activities to appear as legitimate assets.
Most red flags for criminal activities is the transfer/deposit of huge sums of money.
This definitely raises eyebrows and questions
putting the criminals under the radar.
Due to this, they make use of money laundering to avoid any
suspicion and tend to appear fully legal to the agencies.
After the money is laundered, the criminals
can now simply spend it without any question
or use it to acquire or invest in legitimate businesses
and also use it to fund other criminal activities.
Right from organized crime and terrorism, to the small time criminals,
money laundering today is a global operation that converts of millions in illegally
obtained money to appear as legitimate assets almost on a day-to-day basis.
How does money laundering work?
There are many options and methods used in order to launder money.
Along with the time, the sophistication and the detail that went
into cleaning the “dirty” money also increased considerably.
Some of the methods are listed below:
Structuring - Arguably one of the most common ways to launder
money, structuring basically breaks down a large amount of money
into considerably smaller chunks in order to avoid detection and suspicion.
These chunks can then be deposited individually or used separately.
Cash Businesses- Businesses which receives most of
its income as cash is an ideal way to launder money.
The business owners can deposit large sums of money (which is
a mixture of legitimate as well as illegally obtained money)
into the banks while declaring them as legal money obtained through business.
To corroborate the income, fake bills and invoices are usually kept handy.
Casinos and Gambling - Another highly common way to
launder money is to gamble away the illegal money.
Individuals walk into casinos or other similar establishments
with the dirty money and spend it on games or bets.
At the end of the day, they can request for invoices or a
check which can declare the income as gambling winnings.
At the same time, the casino owners can also use
the money and declare it as legitimate income.
Criminals can be in cahoots with the casino owners making this
a highly controlled option to launder money without detection.
Apart from this, there are methods such as making use of
shell corporations, trusts, offshore bank accounts, etc.
which can play a role in laundering money effectively.
Who does it affect?
Money laundering today affects almost everyone in the world.
The laundered money is sometimes even used to fund terrorist organizations and other
organized crime which can play a big role to impact even a simple citizen of a country.
It is estimated that anywhere between 2-3% of
the world economy deals with laundered money.
To control this, law enforcement agencies implement methods such as
conducting strict background checks for businesses and other establishments,
tracking large shipments of money, marking and
tracking money bills in circulation, etc.
To summarize, laundering affects all individuals and gives
rise to unpleasant activities and organizations in society.