MoneyLaundering

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**What is Money Laundering? ** Money Laundering is the process by which criminals make money that has come from an illegal source seem legit.As shown below, money laundering often involves the illegally gotten money being transferred into many, typically offshore, accounts. Basic money laundering has 3 steps: Placement, Layering, and Integration.

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 ** Proof of Money Laundering **

There are three stages in the process of money laundering. The first stage is when the launderer introduces his illegal profits into the financial system. The second stage is when the launderer engages in a series of conversions or movements of the funds to distance them from their source. The third and final stage is also known as integration. This stage is when the funds reenter the legal economy. (www.fatf-gafl.org). Launderers are continuously looking for new routes for laundering their funds. Launderers often send money through “offshore accounts” in countries that have bank secrecy laws, meaning that for all intents and purposes, these countries allow anonymous banking.  The massive profits generated by organized crime and the drug cartels have created, out of necessity, a new profession within the criminal circle, the professional money launderer. Criminals launder anywhere between five hundred billion and one trillion worldwide every year. Criminals also try to disguise where the money came from obtained through illegal activities so it looks like it was gained through legal sources. There are lots of money techniques that authorities know about and probably countless others that have yet to be uncovered. Money laundering happens in almost every country in the world. The global effect is staggering in social, economic, and security terms.  The Money Laundering Control Act of 1986 also known as MCLA made money laundering a federal crime to launder proceeds from particular unauthorized activity. Congress was concerned with the increasing number of professionals, such as lawyers, accountants and bankers, who was either willing to look the other way or to become active participants in the laundering of criminal money. Congressman Shaw, one of the sponsors of the House Bill, declared, "I am sick and tired of watching people sit back and say, `I am not part of the problem, I am not committing the crime, and, therefore, my hands are clean even though I know the money is dirty I am handling.'(Gurule).  There are two different concepts of Money Laundering: Classic money laundering and Modern money laundering. Now we are basically back into classic money laundering. If you stashed a duffel bag full of cash it in a safety deposit box or under your bed, all you need to do is pull out a few bills now and then when you're heading out for a night of fun. You can raise your standard of living reasonably. Alternatively, you could increase the amount that's going into your 401(k) and then use the cash to keep your standard of living about the same--gradually turning the hidden money into above-board money.  If have the money overseas somewhere, bring it back in some way that makes it legit. The easiest would be to create an overseas company that then hires you to do something. You do whatever it is and send an invoice whenever you want some cash. You can also reverse the invoice scam that let you get the money overseas in the first place; Now you under-pay or over-bill, while making up the difference out of your foreign bank account. A third option is a fake loan where you "borrow" the money and then simply fail to pay the money back.  The conclusion is very clear. And it is that money laundering is a very well known crime around the world. Whatever will we do? media type="youtube" key="vxZeTncWgMo" width="425" height="350" align="center"

**Causes of Money Laundering ** Money laundering is very much considered as organized crime. Money laundering occurs in almost every country of the world (Layton). Drug traffickers, embezzlers, corrupt politicians and public officials, mobsters, terrorists, and con artists are the most common types of criminals who launder money (Layton). Those types of criminals usually practice classic money laundering (Brewer). Money Laundering has a dangerous effect on the financial banking systems and the national economy of the country in which money is being laundered (Al-Omari). Money laundering causes a lot of problems, for the person whose money is being laundered and for the country where the money is being laundered.  Money laundering will cause capitals to run outside the country, which causes the financial gap to widen and cause national capitals to seek refuge in foreign banks, together with turning to unproductive investments because money launderers focus on how to conceal their dubious operations and the source of money (Al-Omari). <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%; line-height: 200%;"> The two different types of money laundering are classic money laundering and modern money laundering. Classic money launderers try to make it seem as if they don’t have as much money as they do, so they find ways to pretend they have a job in which they make a lot of money so that certain people do not find out about all of the money they have laundered. In classic money laundering, the launderer is trying to make the tax man notice the money (Brewer). Modern money laundering is the opposite of classic money laundering; the launderer tries to hide the money from the tax man (Brewer). The two steps in modern money laundering are disappearing the money and then reappearing the money. <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%; line-height: 200%;"> There are many methods to money laundering. The most common methods are Black Market Colombian Peso Exchange, Smurfing or Structuring deposits, Overseas banks, Underground/alternative banking, Shell companies, and Investing in legitimate businesses. The many tools that money launderers have in their possession make it difficult for authorities to stop this organized crime. Structuring deposits is when the launderer breaks down the large amount of money in their possession to a smaller amount of money to make it less suspicious. Overseas banks are what money launderers use to send money to other countries that have bank secrecy laws, meaning that these countries allow anonymous banking. Underground/alternative banking is used by money launderers who choose to put their money in some countries in Asia that allow undocumented deposits, <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%; line-height: 200%;"> to clean the dirty money. <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%; line-height: 200%;"> In conclusion, money laundering has many causes. The effects of these causes are bad when you get caught. “Money laundering causes interest rates to increase” (Al-Omari). “Money laundering also causes economic instability and hinders the implementation of financial policies and affects the privatization efforts” (Al-Omari).

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 120%;"> **<span style="font-family: Arial,Helvetica,sans-serif; font-size: 180%;">Effects of Money Laundering **

<span style="font-family: 'Times New Roman',Times,serif; font-size: 18pt; line-height: 200%;">There are many effects of money laundering that follow after the task is administered. “On the socio-cultural end of the spectrum, successfully laundering money means the criminal activity actually does pay off.” (Layton) When a successful money launder is accomplished the criminal will feel the need to try this again or eventually different crimes other than this one. <span style="font-family: 'Times New Roman',Times,serif; font-size: 18pt; line-height: 200%;"> “Financial institutions are at the forefront of the battle against the money launderers. It is not only their institutions that the money launderers target to use in their various nefarious schemes but under current legislation they are responsible for policing the financial dealings and reporting any suspicious transactions”(Steel) <span style="font-family: 'Times New Roman',Times,serif; font-size: 150%;"><span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 200%;">Money Laundering needs to end so that we can put an end to one of the major crimes in this world. “Criminsfals who moneyd launder are usually drug traffickers, corrupt politicians, public officials, mobsters, and terrorists.” (Layton) <span style="font-family: 'Times New Roman',Times,serif; font-size: 150%;"><span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 200%;"> Although we are making an attempt to stop this major crime there are still lots of money techniques that authorities know about and probably countless others that have yet to be uncovered. Criminals usually disguise themselves so that they won’t be discovered when they commit this crime. “Criminals often send money through various offshore accounts in countries that have bank secrecy laws which means for all intents and purposes, these countries allow banking.” (Layton) They are actually procedures that institutions and businesses should follow to help prevent money laundering. These procedures include: “ <span style="font-family: 'Times New Roman',Times,serif; font-size: 202.5%;"><span style="color: black; font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 200%;">To set up procedures for verifying the identity of clients, to set up record-keeping procedures for evidence of identity and transactions, to set up internal reporting procedures for suspicions, including the appointment of a Money Laundering Reporting Officer, to train relevant employees in their legal obligations, and to train those employees in the procedures for recognizing and reporting suspicions of money laundering.”(Steel) And if an employer fails to do this <span style="font-family: 'Verdana','sans-serif'; font-size: 10pt; line-height: 200%;">, <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 200%;">they are committing an offense, which is punishable by a maximum of 2 years’ imprisonment, a fine, or both. <span style="color: black; font-family: 'Times New Roman',Times,serif; font-size: 18pt; line-height: 200%;">With all these precautionary guidelines and steps to help prevent money laundering it would seem that there was a heavily built system to prevent this crime from happening. WRONG. Money launderers are some of the top criminals out there and these prevention tasks are not great enough to stop these guys. <span style="color: #000000; font-family: 'Times New Roman',Times,serif; font-size: 150%; line-height: 200%;">Personally, I think Money Laundering as a highly overlooked crime in the modern world today. According to the International Monetary Fund, Money Laundering is a huge issue facing the International Financial Community. To stop a crime on all scales such as this one we need to enforce even stricter rules. These criminals are not going to give up and People need to realize how easy things can change. <span style="color: #000000; font-family: 'Times New Roman',Times,serif; font-size: 225%; line-height: 200%;">Money laundering protection is also not that cheap to a business. “ <span style="font-family: 'Times New Roman',Times,serif; font-size: 202.5%;"><span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 200%;">The Regulations require that financial institutions put in place systems to deter money laundering, and to assist the relevant authorities to detect money laundering activities. In order to do this, it has meant that financial institutions have had to incur additional costs and these costs are most likely to increase in the areas of administration, training and provision of storage space for records.” (Steel) <span style="font-family: 'Times New Roman',Times,serif; font-size: 202.5%;"> <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">Money laundering overall is a crime taken lightly and more people should be concerned about it and more importantly, Aware. People need to know, well especially businesses how to prevent this from happening and what to look for because it happens everywhere. Criminals are not going to stop anytime soon.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 210.6%;">**<span style="font-family: 'Times New Roman',Times,serif; font-size: 150%;">Solutions for Money Laundering **

<span style="font-family: 'Times New Roman',Times,serif; font-size: 150%;">With nearly 700,000 global wire transfers daily, money laundering can be hard to trace, but governments do know about it and are working to prevent it (Layton). Most countries are creating and/or have laws to prevent money laundering from taking place. The majority of these laws does not directly mention money laundering, but instead works to prevent activities commonly associated with money laundering such as anonymous banking. <span style="font-family: 'Times New Roman',Times,serif; font-size: 150%;"> On a smaller scale, specific companies are being created to protect banks and businesses from money laundering activity. To combat money laundering many programs have been created to help banks and businesses protect themselves from money laundering. Such programs include LexisNexis which says you can rely on them for “the leading provider of content and information for anti-money laundering (AML) compliance, risk mitigation and enhanced due diligence for KYC, CIP and BSA” (“Anti-Money Laundering Solutions.”) Though programs like LexisNexis offer protection from money laundering these programs alone will not stop money laundering. To impede money laundering at the source will require cooperation from every level of society, from local to state to federal and especially global cooperation. <span style="font-family: 'Times New Roman',Times,serif; font-size: 150%;"> Some laws that the United States have enacted include the Bank Secrecy Act in 1970, the 1986 Money Laundering Control Act, the 1994 Money Laundering Suppression Act, and the 2001 U.S Patriot Act. The main purpose of the Bank Secrecy Act was to eradicate any forms of anonymous banking in the United States. This means that every banking account has to have a matching I.D or federal identification number to prevent anonymous banking. Now, because of the Bank Secrecy Act, the Treasury Dept. has the power to make all banks keep records that will make catching money laundering schemes easier. Money laundering itself became a crime in 1986 with the 1986 Money Laundering Control Act. Banks are now required to create their own task forces for money laundering and to check the identity of U.S bank customers thanks to the 1994 Money Laundering Suppression Act and the 2001 U.S Patriot Act, respectively (Layton). The U.S has enacted many laws to control money laundering, but money laundering cannot be stopped without global participation. <span style="font-family: 'Times New Roman',Times,serif; font-size: 150%;"> Created in 1989, FATF (Financial Action Task Force) is an international organization committed to stopping money laundering. The Financial Action Task Force has 40 recommendations and 9 special recommendations to prevent and stop money laundering. These recommendations are recognized worldwide as the standards for anti-money laundering and counter terrorist financing (another facet of money laundering). FAFT makes its recommendations based on the continuing research of terrorist financing and money laundering methods. FAFT also tries to identify new threats associated with money laundering. This international money laundering prevention group focuses on three principal areas: <span style="font-family: 'Times New Roman',Times,serif; font-size: 150%;"> (1) Setting standards for national anti-money laundering and counter terrorist financing programmer; (2) evaluating the degree to which countries have implemented measures that meet those standards; and (3) identifying and studying money laundering and terrorist financing methods and trends. (Financial) <span style="font-family: 'Times New Roman',Times,serif; font-size: 150%;"> Although, the 40 recommendations and 9 special recommendations of FAFT are accepted world wide as the standards for anti-money laundering and counter terrorist financing FAFT cannot do it alone. <span style="font-family: 'Times New Roman',Times,serif; font-size: 150%;"> Another international group working closely with FAFT is the International Monetary Fund (IMF). The International Monetary Fund has a key role in stopping money laundering and terrorist financing. IMF is an organization that assesses a country’s fulfillment of international standards for anti-money laundering and counter terrorist financing. It does this by keeping surveillance on the economy of its member nations, “conducting financial sector assessments,” and “providing <span style="color: black; font-family: 'Times New Roman',Times,serif; font-size: 195%;">[|technical assistance] in the financial sector”. The International Monetary Fund also created a “donor-supported trust fund to finance technical assistance in AML/CFT.” Over five years the members of the International Monetary Fund have donated more than twenty-five million dollars in U.S money. (“International Monetary Fund”) <span style="font-family: 'Times New Roman',Times,serif; font-size: 150%; line-height: 115%;">Money laundering, the act or process of making money obtained through illicit activities seem legit, is a severe problem that occurs in many levels and degrees. It can be as simple as the local drug dealer to the drug cartels who haul drugs all across the world. It is essentially destroying countries’ economies and stability and needs to be stopped. The programs created to help banks and businesses protect themselves from money laundering are good for that specific business or bank but do little to help stop the global effects and trends of money laundering. Local and federal laws are a start, but in reality, without global participation from groups such as the Financial Action Task Force and the International Monetary Fund global money laundering will be virtually impossible to bring to an end.

<span style="font-family: 'Times New Roman',Times,serif; font-size: 162%;">** Future of Money Laundering ** <span style="font-family: Arial,Helvetica,sans-serif; font-size: 90%;">It is predicted, that in the future, money laundering will become and even larger problem than what it already is. With organized crime being in control of banks, and launderers being able to launder large sums of money, the future will be a complete nightmare.

<span style="font-family: Arial,Helvetica,sans-serif; font-size: 120%;">Works Cited: “Anti-Money Laundering Solutions.” LexisNexis. Web. 21 Jan 2010. <[].> Financial Action Task Force (FATF) “40 Recommendations.” Web. 22 Jan. 2010. <span style="font-family: 'Times New Roman','serif'; font-size: 12pt; line-height: 200%;">Barlett, Brent. “THE NEGATIVE EFFECTS OF MONEY LAUNDERING,” //www.adb.org.// 5 2002. International Economics Group, Web. 21 Jan 2010. <http://www.adb.org/documents/Others/OGC-Toolkits/Anti-Money-Laundering/documents/money_laundering_neg_effects.pdf>. "The IMF and the Fight Against Money Laundering and the Financing of Terrorism." International Monetary Fund. 01 Sept 2001. International Monetary Fund, Web. 7 Feb 2010. <[]>. Brewer, Phillip. "How to Launder Money." 01 September 2007. Wisebread.com. <[]> 21 January 2010 <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">Dadoo, Abhishek. “Money Laundering.” //Global Organizations.// 2 21 2008. Global Politician, Web. 20 Jan 2010 <http://www.globalpolitician.com/24153-finance-crime>. Layton, Julia. "How Money Laundering Works." 01 June 2006. HowStuffWorks.com. <[]> 20 January 2010. <span style="font-family: 'Times New Roman','serif'; font-size: 12pt;">Steel, Billy. "Money Laundering - Effects On Financial Institutions." //Billy's Money Laundering and Info Website// (1998/2006): 1. Web. 09 Feb 2010. [].