Money Laundering - Methods

Methods

Money laundering often occurs in three steps: first, cash is introduced into the financial system by some means ("placement"), the second involves carrying out complex financial transactions in order to camouflage the illegal source ("layering"), and the final step entails acquiring wealth generated from the transactions of the illicit funds ("integration"). Some of these steps may be omitted, depending on the circumstances; for example, non-cash proceeds that are already in the financial system would have no need for placement.

Money laundering takes several different forms although most methods can be categorized into one of a few types. These include "bank methods, smurfing, currency exchanges, and double-invoicing".

• Structuring: Often known as "smurfing", is a method of placement by which cash is broken into smaller deposits of money, used to defeat suspicion of money laundering and to avoid anti-money laundering reporting requirements. A sub-component of this is to use smaller amounts of cash to purchase bearer instruments, such as money orders, and then ultimately deposit those, again in small amounts.
• Bulk cash smuggling: Physically smuggling cash to another jurisdiction, where it will be deposited in a financial institution, such as an offshore bank, with greater bank secrecy or less rigorous money laundering enforcement.
• Cash-intensive businesses: A business typically involved in receiving cash will use its accounts to deposit both legitimate and criminally derived cash, claiming all of it as legitimate earnings. Best suited is a service business. As such business has no variable costs, it is hard to detect revenues-costs discrepancies. Examples are parking buildings, tanning beds or a casino.
• Trade-based laundering: Under- or over-valuing invoices in order to disguise the movement of money.
• Shell companies and trusts: Trusts and shell companies disguise the true owner of money. Trusts and corporate vehicles, depending on the jurisdiction, need not disclose their true, beneficial, owner.
• Round-tripping: Money is deposited in a controlled foreign corporation offshore, preferably in a Tax haven where minimal records are kept, and then shipped back as a Foreign Direct Investment, exempt from taxation.
• Bank capture: Money launderers or criminals buy a controlling interest in a bank, preferably in a jurisdiction with weak money laundering controls, and then move money through the bank without scrutiny.
• Casinos: An individual will walk in to a casino with cash and buy chips, play for a while and then cash in his or her chips, for which he or she will be issued a check. The money launderer will then be able to deposit the cheque into his or her bank account, and claim it as gambling winnings.
• Real estate: Real estate may be purchased with illegal proceeds, then sold. The proceeds from the sale appear to outsiders to be legitimate income. Alternatively, the price of the property is manipulated; the seller will agree to a contract that under-represents the value of the property, and will receive criminal proceeds to make up the difference.
• Black salaries: Companies might have unregistered employees without a written contract who are given cash salaries. Black cash might be used to pay them.
• Fictional loans