Money Laundering Regulations Essay Example | Topics and Well Written Essays - 3000 words

Money Laundering Regulations - Essay Example Money laundering transactions generate assets that are a result of some illegal act such as drug deals or tax evasion. If a money launderer is able to achieve this goal then the criminal will be able to keep the property obtained from their illegal activity and have an apparent legal source for their newly acquired wealth. The purpose of laundering money is to disguise the assets obtained from the criminal activity as assets obtained through legal sources in an attempt to avoid imprisonment. Money that is laundered starts out as cash or as assets that are already in the banking system. Money is laundered through companies that handle large amounts of cash and investments like banks and other business firms that handle investments. Businesses that deal across international boundaries that handle "high valued goods" are prime targets for money launders. Some examples of businesses relevant to this situation are accountants, tax advisors, estate agents, and antique dealers. Terrorist, t ax evaders, arms dealers, and drug dealers among other criminals involve themselves in money laundering. Overseas accounts and electronic funds transfers can be disguised to look like legitimate company transactions and make money laundering disguise easier for criminals. Money launderers also employ experts to help them launder money. For example, a launderer could simply ask someone for permission to use that person's account for deposits in return for a fee. Another scenario is for the money launderer to approach a business and ask them to set up transactions in which a sum of money is regularly deposited in the company's account. The businesses will then send the money back as a fictitious payment for non-existent goods. Although this method is very popular amongst the criminal underworld, there are other ways of laundering money without a business becoming aware of being involved in a crime. For example, the money launderer could place an order for a robot to be manufactured to a specific standard. The company may ask for a 60% deposit with the understanding that the order won't be put through for three months. Before the three months are up the money launderer cancels the order and gets the deposit refunded minus a penalty. The money launderer will always be willing to pay the penalty because although the criminal will want to get as much back as possible, what the criminal really wants is the money back clean. It is important to bear in mind that money laundering is a process rather than a single act. In an effort to expose and analyze this phenomenon it has become common to use a three-stage model, which encompasses an ideal money-laundering scheme. The three stages are as follows: The Placement Stage, which is when cash is received directly from criminal activity, like from sales of drugs. It is first placed either in a financial institution or used to purchase an asset. At this stage the criminal disposes of the physical cash deposits. The Layering Stage is the stage at which the first attempt at concealment or disguise of the source of the ownership of funds takes place. This stage is called the layering stage because it is where the criminals "layer" financial transactions in an attempt to hid the criminal activity.