Money laundering


Money laundering or money laundering is made up of those procedures and mechanisms in charge of acquiring and hiding assets of criminal origin in order to introduce them into the market, giving them the appearance of legality.

It is a process by which the illicit trace of assets (both cash and any other type of assets) that have been integrated into the economic system with an appearance of legitimacy is erased. It is important to note that money laundering should not be confused with tax fraud (failure to comply with tax obligations).

The concept of money laundering emerged during the 1920s in the United States when some gangsters used laundries to legitimize the profits obtained in their criminal businesses. Since then, the term money laundering is officially used in English, money laundering. That is why the anti-money laundering departments in English are known as anti-money laundering (AML). In Spanish, the concept of money laundering is used more and more officially, although it is becoming more and more common to call it money laundering.

Phases or stages of money laundering

Generally, money laundering is divided into three stages that can be presented jointly or separately. See phases of money laundering in detail.

  • Placement phase: Criminals try to introduce black money (cash) or any other type of good with criminal origin into the financial system.
  • Concealment phase: In the second phase, it is about hiding the origin of the illegal funds that have previously been inserted into the financial system through a large number of financial transactions.
  • Integration phase: In the last phase it is about using these illicit profits in apparently legal operations. In this way, the funds become part of the launderer's assets with an explanation that proves it.

Methods used to launder money

There are a multitude of forms and procedures with which to bring funds of criminal origin to the market. It must be borne in mind that banks are not the only means used for money laundering and that on the contrary.

We find different methods such as:

  • In banking financial institutions: Among the most used methods is traditional banking. By structuring (also called smurfing). In this system, a transfer is divided into several parts. That is, instead of making a large transfer, it is divided into two or more transactions in order to avoid the obligations to identify yourself (and therefore to be detected).
  • In non-bank financial institutions: As examples, on the one hand we have insurance companies. Where criminals contract a policy paid with illicit money that is later canceled thus receiving a check from the insurer. On the other hand, we find the “Hawala”, an informal funds transfer system that hardly leaves any documentary traces.
  • In non-financial businesses: Here we find casinos, which is one of the most used examples (explained below). Another may be the sale of properties. Where it is agreed to buy a property for a lower value (paying the difference in secret). It is later sold for the actual price (the one stated in the agreement and the one secretly paid). Thus legitimizing benefits that become part of the offender's assets.
  • In the non-financial professions: Among the most common professions, lawyers and accountants appear that allow to give an impression of respectability.

Money laundering example

Although criminals today use fairly sophisticated methods, the basics remain the same. For this reason, the example of the casino is one of the most used to present the process in a simple way.

Suppose that a person in addition to his job is engaged in the illegal business of selling drugs. In order not to arouse suspicion, and to be able to put the profits from this drug sale into his savings account, he goes to the casino. There he exchanges the money for tokens.

Once you have the chips, you place a small bet to make the casino workers think you are actually playing. However, after a fairly limited participation, he leaves the betting tables and asks the casino to exchange chips for a check. Once you have reached this point, you can approach your bank to enter it. When asked about the origin, you can say that you won it by gambling. He could then use that money to buy a motorcycle, thus completing the laundering process.

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