Methods used in Money Laundering

Methods used in Money Laundering

Money laundering refers to the processing of the financial proceeds resulting from criminal activity. It includes any type of predicate crime ranging from tax evasion and forgery, to drug- and people-trafficking. It is assumed that the criminal will want to disguise the illegal source of the money, while trying to maximize profit.

The methods by which money may be laundered are varied and can range in sophistication. In purely definitional terms different countries may or may not treat
(i) unlawful tax evasion, and
(ii) payments in breach of international sanctions, as money laundering.

In practice, the money launderer tends to commit various forms of crime – for instance, smuggling and tax evasion will occur simultaneously because the person who brings goods to a country without declaring them to customs is also unlikely to pay taxes on the profits of such activity.

The cast of characters in the world of money laundering is varied, and ranges from individual criminals that launder the money themselves, to the highly sophisticated organised crime group that has its own “financial director”. The type of launderer will be determined by a number of factors, such as the volume of money to be processed or the type of predicate crime committed.

Regardless of who intervenes in the actual task of laundering the proceeds of crime, the underlying principle is, in the words of the National Crime Intelligence Service (the British Financial Intelligence Unit): “Most organised crime is not worth anything to a criminal unless they can launder the money. A high percentage of criminal gangs has money laundering as a secondary activity”.

Being an illegal activity, there are no official measures of its size – but, estimates from the International Monetary Fund suggest that the volume of funds being laundered every year is in the range £500 billion to £1 trillion worldwide.

The stages of money laundering include the:

1. 1. Placement Stage
   2. Layering Stage
   3. Integration Stage

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