Money Laundering

Abstract

The paper details various aspects of money laundering. Money laundering can be conceptualized as the act through which illegally acquired money is disguised to seal the source. The paper identifies the three means of the vice as layering, placing, and integration, with each means aimed at legitimizing illegal money. The research also identifies the various ways through which money laundering has impacted the practice of money laundering. Information technology has led to the development of software capable of assisting in the detection of cases of money laundering. Banks rely on the use of information technology to track and detect malicious technologies. Another aspect of the paper is the identification of successful cases of money laundering on a large scale. The Liberty Reserve cash operation is identified in the paper as a significant money laundering syndicate. With the platform offering anonymity, smugglers, traffickers, drug dealers, and other persons involved in money laundering found the platform suitable for legitimizing the money acquired illegally.

Keywords: money laundering, technologies, information.

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Money Laundering and Its Three Primary Means

Money laundering is referred to as the process through which money and wealth obtained through criminal conduct are disguised to protect its source. The assets and the proceeds obtained through crime are disguised to make them appear legitimate and avoid suspicion from law enforcement. Legitimizing their proceeds also helps criminals to eliminate the proof of their criminal activities. Criminal activities such as tax evasion, drug trafficking, market manipulation for profit, corruption, and fraud include some of the crimes with the most profits, thus requiring laundering to avoid suspicion. The traditional process for money laundering includes placement, where the money obtained is introduced or placed in the financial system (Demetis, 2010). Layering is the following process where the proceeds’ source and ownership are changed through what is regarded as ‘washing’ to disguise the trail of possession. Integration is the final process where the laundered proceeds are placed back in the economy as legitimate transactions.

Effects the Information has Had on Money Laundering

Money laundering is criminalized as its practice enables profitability through crimes as its facilities and encourages the commission of crimes, and criminals are able to continue benefiting from the proceeds. Detection and prevention of money laundering are done through investigation and application of the intelligence obtained from a financial institution as they are required to notify the enforcement authorities of any suspicious activity (Demetis, 2010). The ability of law enforcers have in determining money-laundering activities helps limit its occurrence has destabilized the operation of organized crime and corruption, which are the most predictable crimes where money laundering is involved.

The advent of technology has enabled the development of software that can detect large deposits or withdrawal of money in financial institutions. The electronic transfer of funds in financial institutions anywhere in the world enabled by technology necessitates the application of software to ease the investigation process for the authorities. The software filters unnecessary data allowing access to information that is categorized on the level of suspicion inferred from analysis of the data. The software can also detect transactions made in banks that are blacklisted for money-laundering on the globe (Demetis, 2010). In the financial institutions where the detected transactions are alerted, managers are warned by the program that looks into the information regarding the transaction to judge whether to report it to the authorities to conduct an inquiry if suspicious activity is detected.

In 2013, a popular international online cash transfer operation known as Liberty Reserve was identified as a financial hub that enabled a wide range of cybercrime activities like credit card and investment fraud, identity theft, child pornography, drug trafficking, and computer hacking. The business was run in Costa Rica but had shell accounts listed under its name in Cyprus, Hong Kong, Morocco, Australia, Russia, Spain, China, among others, where millions of dollars ran through various financial institutions to avoid getting traced (Isidore, 2013) The transactions were operated anonymously making the operation attractive to hackers, traffickers, and fraudsters for its illegal internet banking services. The founder, Arthur Budovsky, and his deputy were charged with laundering money worth $6 billion through Liberty Reserve, which had developed the reputation of processing and transferring large amounts of money on the internet. The business was never registered with the US Treasury Department as an operation involved in money transfer but had over a million users and handled over 12 million worth in their transactions annually.

 

References

Isidore, C. V. (2013). Arrests made in $6 billion cyber money-laundering case. http://money.cnn.com/2013/05/28/news/companies/money-laundering-arrests/index.html

Demetis, D. (2010). Technology and anti-money laundering: A systems theory and risk-based approach. Cheltenham, UK: MPG Books Group