Money Laundering

 

Money Laundering is taking dirty money, i.e., the proceeds of a crime, until nobody can trace the origin of the money.

It was used at the beginning to repress drug trafficking, then corruption of foreign politicians & now for terrorism.

It is becoming the Al Capone solution of today. In a perfect world, you want Milosevic to be convicted of genocide, but in an imperfect world you content with money laundering.

Placement

Layering

Integration

Law enforcement

The best is to police the placement stage. But this is policed by low level cops that have to deal with real crimes.

Once the money is placed in the layering phased is virtually untraceable. Most of the money that gets to the layering stage is usually safe.

The most active policing activity takes place in the integration phase –banks. Banks want to stay in business, so if the government says now you have to do this to help us with money laundering they will comply.

It is as if one someone kills another one, the law enforcement emphasis is put on the cemetery where the victim is buried.

Bank Secrecy Act

 

SMURFS

Gargamel: SARS report

No limit. Any activity

Teller: High School degree with a salary barely over minimum wage.

 

UN Convention against drug trafficking: adoption of US like laws

Task Force: G-7 Convince Switzerland

Specific UN Convention

Canada

 

MONEY LAUNDERING FIGURES

 

·    US$ 300 Billion laundered into US five years ago

·    US$ 1 trillion laundered into US now

·    2/3 of US bills laundered by street drug dealers

·    125 countries have money laundered through their economies. The greatest offshore location is London, Miami, Los Angeles and New York city.

·        For every dollar laundered the US government may only confiscate half a penny.

 

1)                     Placement (pre-wash)

a.                        You put the money in a store (called front of operation). This front may be legitimate or it may be set up specifically to launder money and they do no legitimate business at all. Example: San Francisco restaurant.

 

 


2)                     Layering Stage (Wash)

a.                        Many layers of transactions.

b.                       Shell corporations: the only one who needs to appear is the name of the lawyer that set up the corporation. ABC Export consulting.

c.       They are in offshore jurisdictions. Shell corporations can occur everywhere, like in the state of Montana. The worst problems in London.

 

 


3)                     Integration (Dry)

Deposited in a bank

 

 

 

 

 

 

US Measures

 

Bank Secrecy Act (1st Money laundering act in the US in the 1970’s).

 

·    The government tries to make banks to work as partners with the government.

·    No more secrets: The Act obliges banks to tell the government about their customers.

 

 

How do money launderers circumvent the Act and avoid the filing?

SMURFS

 

 

 

 

 

 

 


US RESPONSE TO SMURFS

 

 

 

 

 

Gargamel

 

 

 

 

 

 

 

 

 

 

 

SAR (Suspicious activity report).

 

There is no amount limit. They decide if you are suspicious and don’t tell you. Banks may be prosecuted if they don’t.

Transnational control efforts:

 

1)          1988 UN CONVENTION AGAINST ILLICIT TRAFFIC IN
NARCOTIC DRUGS

a.                        Each Party shall adopt such measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally

b.                       The conversion or transfer of property, knowing that such property is derived from any offence under the Convention

 

2)          Specific Convention dealing with Money Laundering

a.                        For the first time, an international convention will also hold companies and corporations liable for taking part in serious crimes involving organized criminal groups.

 

b.                       The new convention will require governments to criminalize money laundering, corruption, and obstruction of justice; take measures to establish the liability of corporations when they are involved in organized crime

 

 

 

 

3)          Financial Action Task Force on Money Laundering (FATF)

a.                        It urges countries to enact Money Laundering legislation.

b.                       Recommendations, like US measures (know your customer well otherwise file SAR report). 

c.                      Now FTAF publishes a blacklist of countries that don’t comply with recommendations. There is even a gray list.

 

4)          Inter-American System

a.                     The international conventions authorize sting (undercover operations) like in the US model.