Scammers are getting very smart with every passing day as they are already well equipped when it comes to concealing the source of their illegally obtained funds and making them seem to have originated from the legal sources through the intricate and illegal process of money laundering. This behavior further encourages the chances of the terrorism, organized crime, and corruption occurring in addition to undermining the stability of overall financial systems which has become a big problem as of now. Working class of the nations, businesses, official bodies and governments of the countries are obliged to have a solid understanding regarding What is money laundering with example is and how it operates in order to properly address this issue which is widespread.
The Basics of Money Laundering
Money laundering basically involves three main stages that has elucidated as follow:
Placement: Black money is more likely to first enter into the overall financial system during the stage of placement as its primary aim is to distance the cash from the point where it actually begins. Let’s take an example of the money which was obtained through drug trafficking or may be transferred into the bank account which has made little sums in frequent manner to escape from the detection at the same time. Practice of such a sort is also referred to as “structuring” or “smurfing”as well.
Layering: Scammers who are involved in money laundering tend to pass it through the multiple financial transactions during the phase of layering where the exchanges could include sending money to the offshore accounts at the same time. It might include investing into the assets or markets related to the field of real estate or artwork or wiring money between various accounts simultaneously. There are high chances that the authorities and law enforcement might find it difficult when it comes to tracking down the money due to the intricacy of such transactions.
Integration: Have you ever thought how do we get to decide if it’s the last stage of money laundering or not? The last stage is prone to take place at the point where the money that has been laundered is reintroduced into the economy as superficially like legal money. It is quite challenging for the compliance team of the finance field to distinguish between the money that is obtained illegally and revenue obtained legally at this point of cycle. Let us take an example that such sort of money might get used into the acquiring of some luxury goods, invest in businesses, or finance legal activities as well.
Examples of Money Laundering in the Real World
Money laundering schemes have increased the odds to vary in regard to the complexity and scale, ranging from the small time operations to massive international networks at the same time. Following are some of the notable examples which are explained to bring more clarity into the topic:
1. Scandal involving the Panama Papers
Panama Papers were leaked in the year of 2016 which has further revealed how offshore shell businesses were utilized through the official bodies of the nation, governments, corporations, and rich individuals around the world in order to tuck away the assets and avoid paying taxes as well. Shell corporations of such a nature were more prone to frequently served as a middlemen in the whole intricate layering schemes that ended up making it more challenging to identify the actual origin of the funds. Although we can’t negate the fact that there were multiple acts regarding the operations which got exposed in the Panama Papers that particularly included money laundering techniques. It is interesting to know that not all of them were unlawful but it was quite helpful for the purpose to show how widespread the problem actually is.
2. The Bank Case of Danske
Have you ever heard about the famous Bank Danske in the past? Well this bank has written history by making one of the biggest money laundering scandals between the time period from 2007 to 2015 where more than worth €200 billion were passed on the account of suspicious transactions. Investigation in a detailed manner further paved a path to discover that the bank was simply utilized to launder money through the shell corporations and intricate the financial operations through the non resident clients from Russia and other former Soviet governments as well.
3. Laundering of Casinos
Casinos have been an alluring spot to execute the act of money laundering since quite a while where it was thought to be easy to execute comparatively. Let us take an example where the scammers are prone to use illegal funds to buy the chips, wager a little, and then cash out the remaining chips as “winnings” to haze the path of money. Tactics of such a nature have created the impression that the money was actually won through gambling but several jurisdictions like the US, Canada, and Macau, have managed to discover such scams.
Contact us to learn which AML software is the best for protecting your firms against money laundering. The compliance risk of such software is reduced, which makes reporting rules easier. Data backed extends its engagement, and companies can remain in their position in the fight against financial crimes.
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