| We frequently hear term money laundering and the extreme of these money being used for terrorism purpose. Regulators in US, UK and many other countries have instituted strict law and regulation of which the responsibility is placed heavily on financial institutions to have controls in place so as to frustrate such money laundering activities and identify and report any suspected occurrences to the authorities.
So what is money laundering and how does it works?
- basically, it is a process whereby criminals attempt to conceal the true origin of the financial proceeds of crime;
- A criminal’s funds need to look as if they originate from a legitimate source, and they need to operate without being caught or arousing suspicion and
- As a result they are required to launder, or ‘clean’ the proceeds of their criminality and place ‘dirty’ money into the financial system.
So to conduct such money laundering business, the criminals need to enlist assistance from external businesses that have solid financial products, services or accounts.
The criminals will not use their own identity, as this would allow the ‘dirty’ money to be traced back to them. They would use ficticious and stolen identities to obtain the accounts, products and services they need. The launderer’s ultimate objective is to disguise the true origin of the funds.
How does Money Laundering Works?
Money laundering generally encompases three stages so as to allow ‘dirty’ money to pass through to conceal it’s true origin:
- Placement: The placing of funds into the financial system and disassociation them from the criminal activity
- Layering: Numerous transactions and movement of the funds to disguse and confuse the audit trail and
- Integration: Making the money available to the criminal once again with its occupational and geographic origins hidden from view.
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