3_stages_Money Laundering
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Three stages of the money laundering process – Placement
PLACEMENT
Cash generated by crime is paid into bank accounts, usually on some pretext that appears legitimate. In the Placement stage, depositing a large sum in cash into a bank account is dangerous. Bank staff are aware of money laundering, and the client is likely to be the subject of a suspicion report. A retail business in which much of the income is in favourite cover for such deposits is a cash - for example, garages, shops, restaurants, art and antiques businesses, fairground operators, etc. If cash from criminal activities is mingled with receipts from normal business, bank staff are unlikely to suspect its origin. Another favourite method of placing criminal money in bank accounts is to divide it into amounts small enough not to attract suspicion, and hand them out to agents, known as "smurfs". The smurfs pay the money in at a designated shop rather than a bank, and use the money to buy certain expensive items. The shop can then pay its takings into the bank as usual without attracting suspicion. Usually the goods are hugely overpriced, and are "re-cycled" by the "customers". Once the money is in a bank account, the criminals have completed the most risky stage of the laundering operation. Money launderers often need a collecting point (Client's Company) for all the money that has been placed in accounts, so that they can move it on to the next stage of laundering. A failing company that can be taken over is ideal for the purpose. The company may also be used for receiving cash, and receiving payments from front companies that have no other purpose than to act as channels for criminal money. A front company acting as a channel for criminal money might accept fake or inflated invoices from the client's company. No goods or services to the equivalent value would be delivered. The invoices would serve only as a pretext for paying money into the client's company's account.
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Three stages of the money laundering process – Integration
INTEGRATION
The objective of Integration is to move the money into the legitimate economy, so that no-one will suspect its origin. A popular method of integrating criminal money into the legitimate economy is to buy property perhaps an office block, warehouses or city flats. Even though the enterprise is financed by criminal money, any income from it in the form of rents will appear to be entirely legitimate. We have mentioned the use of offshore accounts before, but this time the intention is not to provide a base for further laundering, but to integrate money from crime into the normal economy. Even though the capital on which the fund is based came from crime, the interest and dividends from the investment fund will appear to be entirely legitimate.
Hale Waihona Puke 3.4.Page 1/3
Three stages of the money laundering process – Layering
LAYERING
Once the money is in an account, anything goes, provided it obscures the origin of the money. Insurance policies, loans, valuable goods, works of art, stocks and shares, unit trusts, foreign exchange, futures & options - and many other methods - have been used in layering operations. An offshore account for an investment trust or a pension fund is a suitable base from which to launch a Layering operation. As a pretext for moving money overseas in a way that will not attract attention, money launderers often set up a foreign company that poses as a supplier. In this case, the foreign "supplier" sends fake or inflated invoices to the client's company. No goods or services change hands, only money, which is transferred overseas in an apparently innocuous way. At this stage, the money is put through numerous transactions in order to frustrate any subsequent investigation. A multitude of transactions criss-crosses the globe. Individually many of these transactions are irrational, and without any commercial justification. Their true purpose is, of course, to obscure the audit trail and to create difficulties and delays for anyone who tries to investigate the whereabouts of the money.
Examples: 1. 2. Banking criminal money under cover of the normal takings of a cash business Setting up fake businesses which do not trade and exist solely to channel cash into their bank accounts Setting up genuine businesses (e.g. pizza takeaways) whose main business is actually the placing of criminal money "Smurfing": dividing up large sums among accomplices who place it in amounts small enough not to attract suspicion
Examples: 1. Fake invoices. Usually a foreign company invoices the money launderer for goods received. No goods (or low value goods) change hands, since the aim is to use the invoices as a cover for international payments. Investing in a large, single-premium insurance policy, then surrendering it shortly afterwards. The aim is to get a "clean" cheque from the insurance company, to be used in further transactions. Running up debts on credit cards. When the card company demands payment, funds are offered from a foreign account (containing criminal money), which the company accepts in order to clear the debt.
PLACEMENT
Cash generated by crime is paid into bank accounts, usually on some pretext that appears legitimate. In the Placement stage, depositing a large sum in cash into a bank account is dangerous. Bank staff are aware of money laundering, and the client is likely to be the subject of a suspicion report. A retail business in which much of the income is in favourite cover for such deposits is a cash - for example, garages, shops, restaurants, art and antiques businesses, fairground operators, etc. If cash from criminal activities is mingled with receipts from normal business, bank staff are unlikely to suspect its origin. Another favourite method of placing criminal money in bank accounts is to divide it into amounts small enough not to attract suspicion, and hand them out to agents, known as "smurfs". The smurfs pay the money in at a designated shop rather than a bank, and use the money to buy certain expensive items. The shop can then pay its takings into the bank as usual without attracting suspicion. Usually the goods are hugely overpriced, and are "re-cycled" by the "customers". Once the money is in a bank account, the criminals have completed the most risky stage of the laundering operation. Money launderers often need a collecting point (Client's Company) for all the money that has been placed in accounts, so that they can move it on to the next stage of laundering. A failing company that can be taken over is ideal for the purpose. The company may also be used for receiving cash, and receiving payments from front companies that have no other purpose than to act as channels for criminal money. A front company acting as a channel for criminal money might accept fake or inflated invoices from the client's company. No goods or services to the equivalent value would be delivered. The invoices would serve only as a pretext for paying money into the client's company's account.
2.
3.
Page 2/3
Three stages of the money laundering process – Integration
INTEGRATION
The objective of Integration is to move the money into the legitimate economy, so that no-one will suspect its origin. A popular method of integrating criminal money into the legitimate economy is to buy property perhaps an office block, warehouses or city flats. Even though the enterprise is financed by criminal money, any income from it in the form of rents will appear to be entirely legitimate. We have mentioned the use of offshore accounts before, but this time the intention is not to provide a base for further laundering, but to integrate money from crime into the normal economy. Even though the capital on which the fund is based came from crime, the interest and dividends from the investment fund will appear to be entirely legitimate.
Hale Waihona Puke 3.4.Page 1/3
Three stages of the money laundering process – Layering
LAYERING
Once the money is in an account, anything goes, provided it obscures the origin of the money. Insurance policies, loans, valuable goods, works of art, stocks and shares, unit trusts, foreign exchange, futures & options - and many other methods - have been used in layering operations. An offshore account for an investment trust or a pension fund is a suitable base from which to launch a Layering operation. As a pretext for moving money overseas in a way that will not attract attention, money launderers often set up a foreign company that poses as a supplier. In this case, the foreign "supplier" sends fake or inflated invoices to the client's company. No goods or services change hands, only money, which is transferred overseas in an apparently innocuous way. At this stage, the money is put through numerous transactions in order to frustrate any subsequent investigation. A multitude of transactions criss-crosses the globe. Individually many of these transactions are irrational, and without any commercial justification. Their true purpose is, of course, to obscure the audit trail and to create difficulties and delays for anyone who tries to investigate the whereabouts of the money.
Examples: 1. 2. Banking criminal money under cover of the normal takings of a cash business Setting up fake businesses which do not trade and exist solely to channel cash into their bank accounts Setting up genuine businesses (e.g. pizza takeaways) whose main business is actually the placing of criminal money "Smurfing": dividing up large sums among accomplices who place it in amounts small enough not to attract suspicion
Examples: 1. Fake invoices. Usually a foreign company invoices the money launderer for goods received. No goods (or low value goods) change hands, since the aim is to use the invoices as a cover for international payments. Investing in a large, single-premium insurance policy, then surrendering it shortly afterwards. The aim is to get a "clean" cheque from the insurance company, to be used in further transactions. Running up debts on credit cards. When the card company demands payment, funds are offered from a foreign account (containing criminal money), which the company accepts in order to clear the debt.