Common money laundering techniques hair
Review the definition of money laundering and examine the common techniques utilized by money launderers. We'll look at several examples of this illegal activity and then test your learning with a quiz.
Definition of Money Laundering
Have you ever played the classic shell game with three cups and a ball where someone hides the ball, and you have to guess where the ball is hiding? After the cups are shuffled around, it is difficult to identify which cup has the ball underneath it. It can always be a surprise when you realize you are wrong! Money laundering is a criminal scheme that can operate in a similar way, but it involves the hiding of money rather than a ball.
Money laundering is a way to conceal illegally obtained funds. Money laundering works by transferring money in elaborate and complicated financial transactions which mislead anyone who may seek to trace and review the transactions. The objective is to make it difficult to identify the original party to the transaction, known as the launderer. However, at the end of the convoluted scheme, the funds ultimately return back to the launderer.
There are many different ways that money laundering can occur. One way is the use of shell companies. Shell companies are businesses set up as typical companies, but they do not have any assets or perform any real business activities. However, the company will appear like a legitimate business to an outsider in order to avoid suspicion. In addition, shell companies are funded with monies generated by illegal activities. For instance, drug dealing could be the source of funding for a shell pizza restaurant business. The financial records of the restaurant would have inflated entries that reflect money gained by the drug dealing as opposed to the pizza business. The restaurant therefore would serve to launder the illegal monies.
Another way money laundering is done is by fraudulent record keeping. Similar to the example with the shell company, fraudulent record keeping involves making a second set of financial records which do not accurately demonstrate the current state of a business. Whenever a third party seeks to examine the financial records, the false set of documents is produced to mislead the third party as to the source and location of the funds.
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