What is money laundering?
Money laundering is the process used to disguise the source of money or
assets derived from criminal activity. Profit-motivated crimes span a
variety of illegal activities from drug trafficking and smuggling to
fraud, extortion and corruption. The scope of criminal proceeds is
significant — estimated at some $500 billion to $1 trillion (U.S.)
worldwide each year.
Money laundering facilitates corruption and can destabilize the
economies of susceptible countries. It also compromises the integrity of
legitimate financial systems and institutions, and gives
organized crime the funds it needs to conduct further criminal activities.
It is a global phenomenon, and the techniques used are numerous and can be
very sophisticated. Technological advances in e-commerce, the global
diversification of financial markets and new financial product
developments provide further opportunities to launder illegal profit and
obscure the money trail leading back to the underlying crime.
While the techniques for laundering funds vary considerably and are often highly intricate, there are generally three stages in the
process:
-
Placement: involves placing the proceeds of crime in the financial system;
-
Layering: involves converting the proceeds of crime into another form and creating complex layers of financial transactions to disguise the audit trail and the source and ownership of funds (e.g., the buying and selling of stocks, commodities or property);
and,
-
Integration: involves placing the laundered proceeds back in the economy under a veil of legitimacy.
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