Money laundering involves taking criminal proceeds and disguising their illegal source in anticipation of ultimately using the criminal proceeds to perform legal and illegal activities. Simply put, money laundering is the process of making dirty money look clean.
Money laundering is the attempt to conceal or disguise the nature, location, source, ownership or control of illegally obtained money. Money laundering is illegal.
There are three stages to Money Laundering:
Placement, Layering, and Integration
- The first time funds derived from criminal activities are used in a legitimate money transfer is referred to as Placement.
- Creating a series of transactions to hide the first transaction is referred to as Layering.
- The return of funds to legitimate activities is referred to as Integration.
Placement poses the greatest risk to our businesses:
- Transactions may be structured to avoid recordkeeping or reporting thresholds.
- False identification and/or information may be provided.
This definition covers a wide range of activity. You need to understand how people launder money so that you can identify money laundering and know how to help prevent it.
To help prevent the laundering of cash and to obtain documentation that may be used to prosecute money launderers, the government requires businesses like yours to file specific reports and maintain records on certain cash transactions.
Examples of Money Laundering: Example 1
A group of tourists in Antigua while on vacation gambles in a local casino and have won some money. They do not want to travel with the cash they won, so they ask the casino to send the money for them to the USA
This happens often, so the casino looks for a commercial relationship with an exchange house or money remitter so that they can send the proceeds from gambling to their customers in the USA.
In order to avoid the reporting and recordkeeping requirements of the USA, an employee of the casino never sends more than US$3,000.
Did you know that it is illegal for a USA citizen to receive or send money from proceeds or for funding for gambling purposes across USA borders, and that the Federal Bureau of Investigation (FBI) is continually investigating this kind of activity?
Six persons in Mexico walk into your store and want to send money to Colombia. You have never seen these persons before and they do not seem to be related. However, each one of them sends US$2,981 to different people in Columbia. All of these persons have large rolls of twenty dollar bills which they pull out of their pockets. In Mexico, the local regulation requires that additional information is provided for all transactions above US$3,000.
The transactions are sent to Columbia where the money is possibly being used to make, distribute and sell illegal drugs.