Essentials of Money Laundering

Fri, Jan 27. 2012

Contributed by the Financial Intelligence Unit

Money laundering is the process whereby criminal proceeds (derived from an acquisitive crime such as drug trafficking, fraud, embezzlement) are given the appearance of being legitimately derived.{{more}}

When a criminal generates substantial funds from his criminal activity, he must find a way to control the funds without attracting attention to the underlying activity. He does this by disguising the source, changing the form, or moving the funds to a place where they are less likely to attract attention.

Money laundering consists of three phases: placement, layering and integration.

In the placement stage, the criminal introduces his illegally obtained funds into the financial system. This may be done by breaking up large amounts of cash into less conspicuous smaller sums which are then deposited directly into a bank account, or by purchasing multiple monetary instruments (cheques, money orders, etc.) which are then deposited into various accounts.

After the funds have entered the financial system, layering takes place. This stage involves a series of conversions or movements of the funds aimed at distancing the criminal from their source. The may include bank-to-bank transfers, wire transfers between different accounts, multiple deposits and withdrawals which change the form of the money.

Having successfully processed his criminal proceeds through the first two stages of money laundering, the criminal then engages in integration where the funds re-enter the legitimate economy. This may involve investments in real estate, boats and other luxury assets, or business ventures.

Anyone who helps a criminal to launder the proceeds of his crime is also a money launderer. This means bankers, lawyers, accountants, car dealers, insurance companies and others can be guilty of money laundering if they allow their businesses to be used by any person to launder the proceeds of a crime.

Any person can be deemed a money launderer either by possessing the proceeds of a crime or assets that represent the proceeds of crime. A common example which pervades most societies is the wife or girl-friend of a criminal who knows or suspects that her husband or boyfriend uses proceeds of criminal conduct to buy their homes, cars, jewellery and other goods.

Another class of money launderer is the person who helps to create the scheme, even if he does not actually take part in it. For example an accountant who recommends a tax evasion can charged with money laundering.

Only increased global awareness and cooperation can curb the success of the money-laundering industry. Locally you can do your part by being aware. Financial institutions, know your customers! Be aware of unusual or suspicious transactions and make reports to the Financial Intelligence Unit, the entity responsible for investigating this offence in conjunction with the Royal St Vincent and the Grenadines’ Police Force. Help us in this fight as we seek to make St Vincent and the Grenadines a safe place for all.

For more information on money laundering and related information visit us at www.svgfiu.com.