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Introduction to Financial Compliance
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The Typical Money Laundering Flowchart
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Typically, money laundering proceeds along a three-part itinerary:
- Placement of illegally earned cash into the banking system – be careful because
this is the point where the launderer is most likely to be detected.
- Layering by setting up multiple transactions that confuse the audit trail and separate
the money from its criminal origins – and note that often these transactions have
no particular economic purpose.
- Integration and repatriation of the laundered money into the legitimate economy
– so that it appears as normal legally earned funds.
Normally to constitute an act of money laundering there must be an offence. Where
no offence has been committed, no money laundering can normally arise.
An element of intent is required before many criminal offences can be committed.
It may be that criminal intent is suspected where, for example, there is a pattern
of suspect behaviour, or where the act giving rise to the proceeds is clearly criminal.
Nevertheless, in some cases, where the monetary proceeds of a suspected theft or
tax fraud are small, it may be that the perpetrators were acting in error, or in
the mistaken impression that they had permission to act as they did.
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The Ugly Face of Money Laundering
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Most often, money launderer acquires or enters into transactions involving criminal
property or becomes concerned in an arrangement which the launderer facilitates
(by whatever means) the criminal property by or on behalf of another person. Normally
the launderer knows or suspects that the property in question represents a benefit
from criminal conduct.
Thus the launderer’s targets are:
To enjoy the proceeds of crime
To direct terrorist funds
To obtain control over criminal property
To disguise criminal property
To convert criminal property
To transfer or remove criminal property
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Turning a Big Buck
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The International Monetary Fund has estimated the amount of money laundered worldwide
at somewhere between $500 billion and $1.5 trillion each year; that is, 1.5 – 4.5%
of gross world product.
In the UK, the National Criminal Investigation Service (‘NCIS’) estimates that drug
money could account for as much as 1% of GDP, or around £8.5 billion a year.
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World without Frontiers
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Money laundering knows no frontiers. Money laundering is ubiquitous. Money laundering
is an evolving activity.
Unlike many of the world’s largest industries, crime is recession-proof, war-proof,
terrorist-proof and independent of the price of oil and interest rates. Against
this backdrop, the forces of globalisation have created new opportunities that criminals
have been quick to seize, with the result that the scale of global criminal activity
has grown to staggering proportions.
Money laundering allows criminals to maintain control over the proceeds of their
activities. It allows a criminal to spend the money safely, avoid suspicion and
thus detection, and avoid confiscation or forfeiture. Ultimately, then, it provides
a legitimate cover for the illicit funds.
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