Money laundering is a serious crime involving obscuring the origin of money. Methods include black market foreign exchange, offshore banking, smurfing, and investing in fake or legitimate companies. These methods make funds untraceable and can result in heavy fines, property seizure, and prison sentences.
Money laundering is a means of storing or transporting money while obscuring its true origins. It is a serious crime in many countries, with sentences often involving heavy fines, seizure of property, and lengthy prison sentences. There are different types of money laundering, often related to drug trafficking, dirty politics and terrorist activities. Basic methods of money laundering include black market foreign exchange, offshore banking, corporate investments in fake or legitimate companies, and smurfing.
The black market of foreign exchange allows a money launderer to transform easily traceable currency from an illegal or “dirty” source into untraceable funds in another currency. This often involves a partnership between foreign exchange black market workers, who help launderers avoid government taxes by trading under the table, launderers and importers who purchase goods from black market traders. Using this partnership, a launderer can deliver dirty currency to the black market worker, who then uses it to import goods for the importers, in exchange for a payment that can be returned to the launderer in a different currency.
Money laundering methods using the offshore bank account are somewhat less manageable, thanks to increased banking information policy regulations. Traditionally, launderers would invest funds with financial institutions in countries with laws that allow banks to keep private records; the bank may have to report its total holdings to a government, but fail to provide details of which account held which funds, and from which source. With international terrorism becoming a global concern, many offshore money laundering havens have cracked down on privacy policies in the 21st century.
Smurfing, or structuring, is one of the most common money laundering methods, because it focuses on making funds untraceable through diversification. Many countries have financial regulations that require banks to file a report for any transaction over a certain amount. Launderers get around this regulation by taking dirty money and depositing it in many different accounts, investments and even physical properties, often under different names and in different countries. By keeping deposits or purchases below the reported amount, smurfing money laundering methods can sometimes drive suspects away from a money laundering scheme.
Money laundering methods sometimes involve investing in fake companies, called “shells” or legitimate companies, called “fronts”. These operations usually involve forging receipts and evidence to record profits for transactions that actually come from funneled money laundering funds. Businesses that deal primarily in cash and have a relatively low weekly or monthly deposit level are often targeted for laundering. Service-oriented businesses, as opposed to businesses that supply goods, are also commonly used, as there is less evidence of a service than a purported good.
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