Free Essay

Money Laundering

In: Business and Management

Submitted By JGeiss24
Words 1151
Pages 5
Assignment #2
Introduction
Money laundering is a complex scheme that can be very hard for fraud investigators to investigate and catch. Essentially what money launderers do is take illegal money and through a three-step process, make it look like money from legal sources. The three steps are placement (getting the money into the financial system), layering (concealment of the true source of the money), and integration (conversion of money into perpetrators possession). It is common for drug traffickers and terrorist groups to use money laundering to get the cash required to carry out their operations. It is a way for them to get illegal money to look like money from legal sources. It is very difficult for investigators to fully track the money through the process, especially now with the use of technology and the Internet (wire transfers), but there is certain types of evidence that can be looked for to see if money laundering is occurring. All of this will be discussed in more depth.
Terrorist Organizations and Money Laundering Terrorist organizations use the three-step process described above to get money from all illegal sources, which can then be used to fund their organization. The money that terrorists get usually goes towards weapons, which can also be illegal to obtain. So if they get money through money laundering and then find weapons through another system, it can all be done under the table and no one is aware that the transactions are occurring. If terrorist organizations can do this all under the radar, then no one will be anticipating what they are going to do next, which is what they want. Money laundering is a key way of funding terrorist organizations.
How to Detect Money Laundering In terms of how to detect whether money laundering is occurring or not, the biggest thing an investigator can do is to track the movement of money from bank account to bank account, or country to country. If an investigator can’t even keep tabs on where money is going to or from, then there is no effective detection. Trends or patterns need to be looked for to see if certain individuals are sending certain amounts of money to certain locations/accounts on a consistent basis. An investigator needs to keep accurate records to be sure that no details are missed and that there is fishy activity occurring to lead investigators to believe that money laundering is occurring. Foreign laws regarding privacy of bank account information make it very difficult for investigators to get the information they need, but the sheer knowing that money is getting transferred to say a specific country known for money laundering can be proof enough sometimes.
Types of Evidence to Gather in Investigating As stated above, certain evidence to be gathered should include number of transactions a certain individual or account has in a given time period, number of accounts a person has, or where a person transfers money to. If a person has many accounts in many locations, this could be a sign of money laundering. If a person makes a lot of transfers to the same person or same certain people on a regular basis, this could be a sign of money laundering. There are cases where it could be something legal, but if money is frequently moved from account to account or country to country, it could lead to money laundering. This is the type of evidence a fraud examiner should look for.
Cybercrime and Money Laundering It could be said that there is a correlation between money laundering and cybercrime. In cybercrime, criminals try to cover up what they are doing by being in remote locations and try to not be tracked. In money laundering, the idea is to hide the source of where the money comes from. In both cases, something is being hidden. But this is the underlying aspect of all fraud. By definition, fraud has the intent to deceive. Hiding a location or hiding the source of money is definitely deceiving and I think both are highly correlated to each other. Especially with the advancement of technology, more and more money laundering schemes can occur through wire transfer, which then cyber criminals can try to hack if they know they are occurring.
Real Case of Money Laundering In recent times, there was a case of money laundering perpetrated by a pastor in South Carolina. While being a pastor, the man also owned a store called Gold & Silver LLC. He would gather money from investors and the church congregation and would guarantee the investors higher interest rates than other financial institutions. The pastor quickly found himself in a Ponzi scheme. He hid the money that he lost/spent from all of the original investors by gaining new investors and using that money to pay back the original investors what was believed to be the interest owed to them. Total restitution that the pastor owes is $3,763,339. I used this case because I think it is important to realize that anyone can be involved in a money laundering scheme, even a pastor of a church. Now this man was obviously crooked, but as a fraud examiner, you always have to trust but verify and if someone would have verified his work, maybe this could have been prevented.
Conclusion
To wrap things up, money laundering is no easy scheme to detect. Through the use of placement, layering and integration, money laundering can really send investigators for a loop and through a lot of headaches trying to track down where money is being transferred. This is the primary reason that terrorist groups use money laundering as a means to fund their operations. However, if an investigator can keep close tabs on suspected individuals, there can be predictions or reasonable cause to believe that money laundering is occurring. With that said though, with the technological advances in today’s modern world, wire transfers make it very difficult to follow money as well as other means of transferring money via technology. Privacy is a big thing and with certain technology, privacy can be kept very well. In a recent case, there is proof that no individual is incapable of committing a crime such as money laundering. The fact that anyone can create and run a money-laundering scheme is what makes money laundering very, very dangerous.

Sources
"Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) - Topics." International Monetary Fund. IMF, n.d. Web. 19 July 2014. <http://www.imf.org/external/np/leg/amlcft/eng/aml1.htm>.

Kranacher, Mary-Jo, Richard Riley, and Joseph T. Wells. Forensic Accounting and Fraud Examination. Hoboken, NJ: John Wiley, 2011. Print.

"Examples of Money Laundering Investigations - Fiscal Year 2014." IRS. Internal Revenue Service, n.d. Web. 19 July 2014. <http://www.irs.gov/uac/Examples-of-Money-Laundering-Investigations-Fiscal-Year-2014>.

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