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Money Laundering And lts Prevention LESSON-1 Presented By ROMAN SAINI
In This Lesson Money Laundering: Definition and Characteristics Steps Of Money Laundering
Introduction Definition Money laundering is the process by which large amounts of illegally obtained money from drug trafficking, illegal arms sale, insider trading, bribery, computer fraud schemes, terrorist activity or other serious crimes is given the appearance of having originated from a legitimate source. .If done successfully, it allows the criminals to maintain control over their proceeds and ultimately to provide a legitimate cover for their source of income. Money laundering helps the drug trafficker, the terrorist, the organised criminal, the insider dealer and many others who need to convert their illegal money into a legal one and escape from the legal consequences.
Introduction Characteristics of Money Laundering According to a U.N. report, the basic characteristics of the laundering of the proceeds of crime, which to a large extent also mark the operations of organised and transactional crime, are its global nature, the flexibility and adaptability of its operations, the use of the latest technological means and professional assistance It is a truly global phenomenon, helped by the international finance community, which is twenty-four hours a day business. It is a group activity in that it is carried out often by more than one person. It is a criminal activity which is long-term and continuing and is carried out irrespective of national boundaries.
Introduction It is large scale and generates proceeds which are often made available for licit use . It is a very particular kind of criminal activity which is most developed, highly sophisticated and complex. By its very nature, money laundering occurs outside of the normal range of economic statistics. .The International Monetary Fund, for example, has stated that the aggregate size of money laundering in the world could be somewhere between two and five percent of the world's gross domestic product. The degree of organisation that is displayed in money laundering is therefore of much concern because of its scale, its capacity to exploit and influence the legitimate business world and its capacity for internationalisation. .
Steps Of Money Laundering The basic steps contain three stages: Placement, Layering and Integration. Placement . This is the first stage. Money laundering is a cash-intensive business, generating vast amounts of cash from illegal activities in small denominations. .The monies are placed into the financial system or retail economy or are smuggled out of the country .The aims of the launderer are to remove the cash from the location of acquisition to avoid detection from the authorities and then to transform it into other asset forms like travellers cheques, postal orders, etc.
Steps Of Money Laundering Placement Techniques of Money Laundering Smurfing/ Structuring : It is the practice of executing financial transaction such as making bank deposits in a specific pattern, calculated to avoid triggering financial institutions to file reports required by law. .He or she could also buy expensive assets, such as cars, antiques, or jewelry with cash Crossing the national borders with dirty cash without declaring it to the customs authorities could also be considered as the first stage of money laundering although there is no injection into the financial system yet. Placement Using Electronic Wire Transfers and Non-Bank Financial Services.
Steps Of Money Laundering Layering The purpose of layering is to disassociate the illegal monies from the source of the crime by purposely creating a complex web of financial transactions or movement of funds within the financial or banking system by way of numerous accounts to hide their true origin and to distance them from their criminal source. The layers are created typically by moving monies in and out of the offshore bank accounts through electronics funds' transfer. . .The purpose of this stage is to make it more difficult to trace these funds to the illegal source. Considering the volume of daily transactions and the high degree of anonymity available, the chances of locating the illegal transactions become insignificant.
Steps Of Money Laundering Layering Techniques of Money Laundering .Tax Havens and Offshore Banks . The launderer may buy or sell securities, precious metals, or other expensive assets. Use of Trusts as a Layering Tool in different banks, possibly by several shell companies operating under his control. He or she may also wire the funds across the world through various accounts held . Other forms used by launderers are complex stock dealings, commodity dealings and futures brokers.
Steps Of Money Laundering Integration The final stage in a money laundering operation involves injecting the illegal funds into the legitimate economy. The funds now appear as clean and legitimate assets. The purpose of the integration of the fund is to allow the criminal to use the funds . . without raising suspicion that might trigger investigation and prosecution. The integration stage is the culmination of a successful money-laundering scheme . By this stage, it is exceedingly difficult to distinguish legal and illegal wealth.