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D2.2: Set of use cases and scenarios

Introduction  Title:
MONEY LAUNDERING: DEFINITION AND METHODS
 Tools for Anti Money Laundering

 

Money laundering: definition and methods

Money laundering refers to the processing of the financial proceeds resulting from criminal activity. It includes any type of predicate crime ranging from tax evasion and forgery, to drug- and people-trafficking. It is assumed that the criminal will want to disguise the illegal source of the money, while trying to maximize profit.

In practice, the money launderer tends to commit various forms of crime – for instance, smuggling and tax evasion will occur simultaneously because the person who brings goods to a country without declaring them to customs is also unlikely to pay taxes on the profits of such activity. 

The cast of characters in the world of money laundering is varied, and ranges from individual criminals that launder the money themselves, to the highly sophisticated organised crime group that has its own “financial director”. The type of launderer will be determined by a number of factors, such as the volume of money to be processed or the type of predicate crime committed.

Regardless of who intervenes in the actual task of laundering the proceeds of crime, the underlying principle is, in the words of the National Crime Intelligence Service (the British Financial Intelligence Unit): “Most organised crime is not worth anything to a criminal unless they can launder the money. A high percentage of criminal gangs has money laundering as a secondary activity.

Being an illegal activity, there are no official measures of its size – but, estimates from the International Monetary Fund suggest that the volume of funds being laundered every year is in the range £500 billion to £1 trillion worldwide. 

 

Money launderers will use both the financial and the non-financial system to launder their money. The method involves three stages: 

  1. Placement – When the money is introduced into the system. It will involve, for instance, the breaking up of large amounts of cash into smaller sums that, being less conspicuous, are less likely to draw the attention of the intermediary. Another possibility is the recycling of cash as revenues of a ‘front’ business;

  2. Layering – A series of transactions to distance the funds from their source or destiny. This may be achieved through the purchase and sale of investment titles, for instance, or simply by transferring funds through a series of accounts or intermediaries across the globe. In some instances, these transfers may be disguised as payments for goods or services to give them a legitimate appearance;

  3. Integration – When the funds re-enter the legitimate economy. For instance, through business ventures and the payment of tax.

 

Money laundering causes major economic and social disruption, which is why national governments and international organizations alike invest considerable resources in tackling the problem. 

 

 

Introduction  fidis-wp2-del2.2.Cases_stories_and_Scenario_04.sxw  Tools for Anti Money Laundering
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