money laundering

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Money Laundering

The process of taking the proceeds of criminal activity and making them appear legal.

Laundering allows criminals to transform illegally obtained gain into seemingly legitimate funds. It is a worldwide problem, with approximately $300 billion going through the process annually in the United States. The sale of illegal narcotics accounts for much of this money. Those who commit the underlying criminal activity may attempt to launder the money themselves, but increasingly a new class of criminals provides laundering services to Organized Crime. This new class consists of lawyers, bankers, and accountants.

Criminals want their illegal funds laundered because they can then move their money through society freely, without fear that the funds will be traced to their criminal deeds. In addition, laundering prevents the funds from being confiscated by the police.

Money laundering usually consists of three steps: placement, layering, and integration. Placement is the depositing of funds in financial institutions or the conversion of cash into negotiable instruments. Placement is the most difficult step. The easiest way to begin laundering large amounts of cash is to deposit them into a financial institution. However, under the federal Bank Secrecy Act of 1970 (BSA), 31 U.S.C.A. §§ 5311 et seq., financial institutions are required to report deposits of more than $10,000 in cash made by an individual in a single day. To disguise criminal activity, launderers route cash through a "front" operation; that is, a business such as a check-cashing service or a jewelry store. Another option is to convert the cash into negotiable instruments, such as cashier's checks, money orders, or traveler's checks.

Layering involves the wire transfer of funds through a series of accounts in an attempt to hide the funds' true origins. This often means transferring funds to countries outside the United States that have strict bank-secrecy laws. Such countries include the Cayman Islands, the Bahamas, and Panama. Once deposited in a foreign bank, the funds can be moved through accounts of "shell" corporations, which exist solely for laundering purposes. The high daily volume of wire transfers makes it difficult for law enforcement agencies to trace these transactions.

Integration involves the movement of layered funds, which are no longer traceable to their criminal origin, into the financial world, where they are mixed with funds of legitimate origin.

Many banks did not comply with the BSA during the 1970s and early 1980s. Following several federal investigations where it was revealed that banks had failed to report billions of dollars of cash transactions, reporting requirements were strengthened. Congress also enacted the Money Laundering Control Act of 1986 (MLCA), 18 U.S.C.A. §§ 1956 et seq. This statute criminalizes money laundering itself. It centers its attention on the criminals and conspirators who seek to launder the proceeds of illegal activity, including merchants, bankers, and members of the professions who assist criminals with money laundering. Another provision of the MLCA authorizes the government to confiscate all property that is traceable to violations of laws against money laundering.

After the September 11th Attacks on the United States in 2001, the federal government began to investigate more closely the connection between Terrorism and the sale of illegal drugs. According to President george w. bush, "[T]errorists use drug profits to fund their cells to commit acts of murder. If you quit drugs, you join the fight against terror in America." Terrorists have laundered money through such foreign countries as Colombia and Afghanistan. In September 2002, the Drug Enforcement Administration opened a museum exhibit in New York entitled "Target America: Traffickers, Terrorists and You" in an effort to educate the American public about the connection between drug sales and terrorism.

Further readings

Lilley, Peter. 2003. Dirty Dealing: The Untold Truth about Global Money Laundering. 2d ed. Sterling, Va.: Kogan Page.

Sulltzer, Scott. 1995. "Money Laundering: The Scope of the Problem and Attempts to Combat It." Tennessee Law Review 63.

U.S. Department of the Treasury. 2000. The National Money Laundering Strategy for 2000. Washington, D.C.: Department of the Treasury.

Vukson, William B.Z., ed. 2003. Organized Crime & Money Laundering. Toronto, Ont.: G.7 Report Inc.

Woods, Brett F. 1998. The Art & Science of Money Laundering: Inside the Commerce of the International Narcotics Traffickers. Boulder, Colo.: Paladin Press.


Banks and Banking.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

money laundering

the moving of the proceeds of crime through the financial system so as to conceal its nature. As a result of a European directive, the UK has implemented rules against this practice. Aside from controlling the actual criminals, persons can be guilty of offences if they do not report suspicions or information as soon as reasonably practicable where the laundering concerns terrorism or drug money. Assisting another person to retain the benefits of all types of crime is also made an offence, especially by TIPPING-OFF.
Collins Dictionary of Law © W.J. Stewart, 2006
References in periodicals archive ?
"With the exception of those with good intentions and who are cleared of having knowledge of the laundered money, courts have every right to seize questionable money temporarily until a verdict is issued," added Shaikh Khalid.
Ltd., was mentioned to have received $21.6 million (P1 billion) from the $81 million in laundered money as well as to have made several withdrawals from his personal and corporate accounts on February 10 and 11.
The sheer amount of this laundered money is amazing.
Akbar apprised that talks are underway with few countries regarding the legal aspects of freezing the laundered money of culprits.
'PMLN's government brought 1992 indemnity for foreign accounts and laundered money through their own companies and there is need of prompt actions to be taken by NAB to initiate inquiries into the money laundered under the 1992 indemnity' added Senator A.
During the hearing, Philrem president Salud Bautista vowed to return the P10.4 million which Philrem earned from the handling fee in the transactions from the laundered money.
Replying to a question, he said that facts about U$.600 million deposits in Swiss Banks should be ascertained, and arrangements should be made to return the laundered money. Accepting the vital role of Chaudhry Aitzaz Ahsan in restoration of Judiciary, he however was stunned at the change of his (Aitzaz's) tone and policy at this juncture.
KARACHI -- After having failed to expand the tax net within the country, the Federal Board of Revenue (FBR) is embarking on an highly ambitious mission to collect data of rich Pakistanis who have invested hundreds of billions of rupees in real estate in the Gulf countries, mainly the UAE, with the aim to tap into the alleged laundered money for collecting income tax.
Fawad stated that a very small capital of the laundered money has been brought to Pakistan by the Sharif family and the rest is still abroad.
PM Imran said that not democracy but those who laundered money are in danger, in a reference to ongoing action by the National Accountability Bureau against some people.
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