Money Laundering

MONEY LAUNDERING is an old business, as old as any other illicit business. Not until recently has money laundering been seen as the problem that it really is.

The effects of terrorism have brought money laundering to the public's attention as terrorists are funded usually through laundered money, one way or another. Money laundering is a pervasive problem in the United States, and throughout the world. Over the past couple of decades it has become clear that money laundering is a robust, corrosive, allconsuming and dynamic activity that has far reaching consequences and effects.

In order to understand the issue of money laundering one must first understand what it is: Money laundering is the process by which someone conceals the existence, illegal source, or illegal application of income, and disguises that income to make it appear legitimate. Money laundering is the process of converting quantities of cash to a form that can be used more conveniently in commerce and ideally conceals the origin of converted funds.

According to the Financial Crimes Enforcement Network (FinCEN) money laundering involves disguising financial assets so they can be used without detection of the illegal activity that produced them. Money laundering covers a vast array of illegal conduct. Anyone who gains money illegally must find a way to “clean” the money in order to use it in society. There are variations among the many different definitions; people view the crime of money laundering in several different ways.

Money laundering is basically the means used to convert funds that proceed from illegal activities, such as narcotics trafficking, prostitution, casino gambling, skimming, and many others, into financial uses that involve legal instruments. These instruments include bank deposits, investments in stocks and bonds, real estate, and others. Money gets into the banking system in a variety of ways: cash deposits over the counter, wire transfers from one bank to another, and letters of credit from legitimate businesses.

The laundering of money becomes effective when it penetrates the legitimate business world. Once money laundering infects the banking system, it opens the way for all kinds of illegal activities. The process of money laundering has devastating social consequences, as well as economic consequences. According to FinCEN, money laundering provides the fuel for drug dealers, terrorists, arms dealers, and other criminals to operate and expand their criminal enterprises. money laundering has the potential of eroding the integrity of financial institutions.

The term money laundering appears to have begun in the United States. It may have been Al Capone who began the using the term. During Capone's era, criminals were trying to hide the proceeds of their illicit businesses. In order to accomplish this task, launderettes and car washes were often purchased in order to mix dirty money with clean money. Capone used a string of coin-operated laundromats in Chicago to disguise his profits from gambling, prostitution, racketeering, and violation of the Prohibition laws. The cash businesses provided a perfect opportunity to combine the proceeds of legal and illegal activity.

There appear to be four factors common in money laundering. First, the ownership and source of the money must be concealed. Second, the form [Page 543]of the currency itself is changed. Third, the trail of the money laundering process must be hidden from beginning to end. Lastly, constant control must be maintained over the money laundering process itself. There are three distinct stages to the money laundering cycle. Initially there is immersion, which is consolidation and placement. The second step involves layering. Here, the money is separated from its original source. Money may be moved from account to account creating a diverse web of transactions, which are not easy to follow. Finally, the focus is on repatriation and integration. Here, the cleansed funds are brought back into circulation. Obviously the smaller the amount of money to be laundered, the quicker and easier the process.

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