Respond to statements
Introduction
Money Laundering is essentially the process of “cleaning money.” What I mean by “cleaning money,” is how criminals attempt to conceal the true nature of the illegally obtained money to legitimize the money and circulate it back into the economy. To combat this, the United States, as well as most of the world, made money laundering illegal. In the United States, federal statutes, 18 U.S.C 1956 and 1957, cover money laundering (Bennett & Turner, 2013). The Financial Action Task Force (FATF) was also created go establish global standards for money laundering (ACFS, 2014). They define money laundering in three different ways. The first is by converting or transferring property that comes from a criminal offense. The second is concealing the true nature of money/property when it comes from a criminal offense. And the third is receiving or possessing money or property that was obtained from a criminal offense (ACFS, 2014). In all financial crimes money laundering is taking place. The way launderers are successful is when all three stages of money laundering are successfully completed.
Stages and forms
The first stage of money laundering is Placement. This is the actual disposal of the money gained illegally into the financial system (ACFS, 2014). This can be done either via deposit into a traditional or non-traditional financial institution or smuggled out of the country where the funds were illegally obtained. Because this stage involves moving a large amount of cash, it is considered the most vulnerable stage (ACFS, 2014). An example of why it is considered most vulnerable is because of the risk of SARs or CTRs being filed against the person depositing the money into a financial institution. SARs, or suspicious activity reports, which can be filed against a person by any financial institution, for anything “suspicious” (Cummer, 1999). An example is structuring- making several deposits over time to avoid CTR reporting. SARs are confidential filings with the Financial Crimes Enforcement Network (FinCEN). The person whose account this is filed against will have no idea that an SAR was filed on them. CTRs, or Currency Transaction Reports, are filed against people who complete any transaction that exceeds $10,000 (Cummer, 1999). Those transactions are reported to FinCEN and the person completing the transaction is notified about the filing. The reason money launderers attempt to avoid these sorts of filings is because it creates a paper trail of activity that points to possible illegal activity. Therefore, many money launderers attempt to avoid filing requirements. Money Launderers also attempt bulk cash smuggling to move money outside of the United States during the Placement Stage. This issue with bulk cash smuggling for money launderers is that they risk being arrested for failing to file a CMIR (Currency and Monetary Instrument Report). When crossing into, or out of the United States with either physical money over $10,000 or items that are valued over $10,000, they must be claimed on a CMIR form (Keith, 2018). A failure to do so could result in seizure of the money/items, a fine, prison time, or all the above. All filing requirements are in place due to the Bank Secrecy Act and enforced by FinCEN.
The second stage of money laundering is Layering. This is the stage that attempts to separate the illegally obtained money from the person who completed the Placement Stage (ACFS, 2014). The goal is to complete so many transactions that the illegal money has been swapped with legitimate money and it can no longer be tracked. An example of Layering is utilizing offshore accounts, shell corporations, trusts, or a business to move the money through (ACFS, 2014). The more accounts, or “layers” that the money can move through and be disguised, the better.
The third stage of money laundering is Integration. This is the stage where the money is put back into the economy (ACFS, 2014). The money needs to appear legitimate. One example is trade-based money laundering (TBML). The Black Peso Market Exchange (BPME) is one form of TBML. An example of a BPME is a peso broker facilitating between a company in Mexico needing US products and the Mexican Cartel needing to move a large amount of money from the US to Mexico. Instead of risking being caught bulk cash smuggling, the peso broker will have the cartel purchase the items from the US with the illegal obtained drug money, the items will be shipped to the company in Mexico that needs the items, and then the Peso broker pays the cartel.
