White Collar Crime

Money Laundering

There are many different types of white-collar crimes. These crimes involve illegal conduct in a business setting. The main objective of most white-collar crimes is to produce money. Criminals need to be able to hide and use the stolen money without being caught.

Money laundering is the process of concealing illegally gained money so that it appears to be legitimate. This process is considered itself a white-collar crime. Money laundering is very common. It's estimated that hundreds of billions of dollars are laundered around the world every year.

Stages of Money Laundering

The main goal of money laundering is take "dirty" money and make it "clean." This "cleaning" disguises the true source of the funds. The process allows criminals to freely spend the money in an open setting. There are three main stages of money laundering:

  • Placement
  • Layering
  • Integration

The first stage of money laundering is placement. Illegal activities can produce a large amount of cash. This cash needs to be removed from the illegal activity to avoid detection. It can be deposited in a legitimate business, such as a bank or brokerage account. The cash can be converted into money orders or traveler's checks. It can also be used to buy property or other assets.

The second stage of money laundering is layering. This means that the money is moved and transferred to different areas. The goal is to create multiple layers so that the original source is untraceable. The cash may be moved to different financial accounts or other banks. It may be put into trusts or other businesses. The money may travel to different countries and jurisdictions. Property and other goods bought with the money may be sold or exchanged.

The last stage of money laundering is integration. The money is placed back into the economy or financial system. The "cleaned" money can be used to purchase legitimate assets or services. The criminal appears to have legally earned the money. It can be difficult for authorities to trace the money back to the original crime.

The Problem with Money Laundering

The banking and financial systems depend on having a reputation of integrity. Customers and other businesses need to be able to rely on them. The success of money laundering through a particular institution can make it an accomplice to criminal activities. These criminal activities increase the risk of fraud and corruption.

The success of money laundering also has an impact on the amount of crime. Many crimes that involve violence depend on money laundering to work. Two examples include drug trafficking and terrorist activities.

Preventing Money Laundering

The federal government has passed many laws to help prevent money laundering. Most financial institutions are required to report suspicious financial transactions. Examples of anti-money laundering laws include:

  • Bank Secrecy Act (1970)
  • Money Laundering Control Act (1986)
  • Anti-Drug Abuse Act of 1988
  • Annunzio-Wylie Anti-Money Laundering Act (1992)
  • Money Laundering Suppression Act (1994)
  • Money Laundering and Financial Crimes Strategy Act (1998)
  • Uniting and Strengthening America by Providing Appropriate Tools to Restrict, Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act)
  • Intelligence Reform & Terrorism Prevention Act of 2004

There are many organizations and governmental agencies that attempt to stop money laundering. Some examples include the US Drug Enforcement Administration (DEA), the Treasury Department, Financial Crimes Enforcement Network (FinCEN), and the Treasury Department, Office of Foreign Assets Control (OFAC). The Financial Action Task Force (FATF) is an international organization that combats money laundering. It has issued recommendations for banks to help them in this fight. Some examples of bank recommendations include:

  • Have an internal taskforce that attempts to identify money laundering clues
  • Make sure to know the identities and backgrounds of all depositors
  • Be aware of any suspicious behavior and report it to the appropriate authorities

Questions for Your Attorney

  • I think a depositor is committing money laundering. Whom should I report this information to?
  • Can I get in trouble if my money laundering suspicions turn out to be incorrect?
  • Am I legally required to report a money laundering crime even though I don't work in a financial institution?
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