ML Question 1

Money Laundering – Frequently Asked Questions

What is Money Laundering?

Illegal money is put through a cycle of transactions and is thereby transformed into legal money. All traces of illegality are concealed by a sequence of transfers, so that the funds may reappear as legal and legitimate income.

 

What are the 4 factors common to all Money Laundering activities?

1)     The source of the funds is concealed

2)     The form the money takes must be altered (frequently, to reduce the bulk)

3)     The (paper) trail left must be hidden

4)      Constant control must be exercised over the process (to protect the money from being stolen).

 

What are the 3 stages of Money Laundering?

1)     Immersion: At this stage, money launderers rely on bank accounts, check-cashing houses, traveler’s checks, money orders, and other negotiable instruments to funnel the cash into the world’s financial system.

2)     Layering: At this stage, the money is moved in and out of shell companies placed and positioned around the world (while mainly relying on bank secrecy and the attorney-client privilege to hide the account owner’s true identity).

3)     Repatriation: At this stage, the laundered money is returned into circulation, in the form of clean, taxable income.

 

What is it that makes Money Laundering illegal?

If a person were simply curious and wanted to understand what happens when their own money is moved through a series of transactions, in and out of different jurisdictions, in and out of shell companies, just in the interest of seeing what transpires when the money comes out the other end, there would be nothing wrong or illegal about that.

However, it is illegal if one moved money in this way, in conjunction with drug trafficking, insider trading, tax evasion, fraud or theft, then money laundering attaches.