Launder that Money-And they'll Hang you out to Dry!
My posts on this blog usually deal with immigration and family law. However, we shouldn't overlook money laundering, which takes place around the world including Latin America. You would think that with the digital age, Internet, and the US and foreign governments, money launderers would be discouraged to the point where they would not, well… launder money. But, as I have observed, as soon as a certain practice like drug trafficking has been identified and measures have been taken to eradicate it, criminals find a way to circumvent these actions. It's a bit like bacteria that becomes entirely resistant to antibiotics.
Money laundering involves 3 steps: placement, layering, and integration.
Placement: introduction of "dirty money"
(money obtained via illegitimate, criminal means) into the financial system in some manner.
Layering: the source of money through a series of complex transactions and bookkeeping tricks.
Integration: acquiring that money in purportedly legitimate means.
Monday laundering tactics
To list all the ways that money is laundered would take up a very long post indeed. And truthfully speaking, there are probably some ways that have not yet been documented. A common way is to launder the money through a legitimate cash-based business by, for instance, inflating daily receipts and funneling its illegal cash through the business and the bank. I can’t help thinking about the Colombian drug smugglers of the 1980s. Carlos Lehder ran an auto dealership in Colombia for this very purpose, and Pablo Escobar had accountants and lawyers working for him so he could hold onto the immense quantities of cash he earned from the cocaine business.
Another common form of money laundering is called smurfing: a person breaks up large chunks of cash into multiple small deposits. They are often spread out over many different accounts, thus avoiding detection. Money laundering can also be done via currency exchanges, wire transfers, and "mules" or cash smugglers, who smuggle large amounts of cash across borders to deposit them in offshore accounts where money-laundering enforcement is less strict.
There are yet other money-laundering methods that involve investing in commodities such as gems and gold that can be easily moved to other jurisdictions, and discretely investing in and selling valuable assets such as real estate, gambling, counterfeiting and creating shell companies.
Though money laundering will doubtlessly always be with us, I would like to think that we live in a stricter era where corruption is not tolerated. Corruption is no longer something to be kept under the table in international politics. Some examples I can think of are Riggs Bank, associated with Chilean dictator, Augusto Pinochet, the recently uncovered Panama Papers, and shell banks (banks that exist only on paper) in places like Nauru.
I have translated several anti-money laundering documents for banks in Uruguay, Panama, and elsewhere. These papers specifically set out how a bank officer should conduct business, mentioning terms such as:
Due diligence (DD) Audit of a potential investment or product
PEP politically exposed person
KyC know your client
As a result, there are several strict procedures to be carried out to ensure that bank customers are not engaging in money laundering, terrorist funding, or associated acts, and that the bank is not taking part in any illegal activity.