is Money Laundering?
widespread is the Problem?
Money Laundering Process
of the Process
Can We Prevent It?
on Financial Institutions
Areas Prone To Money Laundering
HISTORY OF MONEY LAUNDERINGThe term "money laundering" is said to originate from Mafia ownership of Laundromats in the United States. Gangsters there were earning huge sums in cash from extortion, prostitution, gambling and bootleg liquor. They needed to show a legitimate source for these monies.
One of the ways in which they were able to do this was by purchasing outwardly legitimate businesses and to mix their illicit earnings with the legitimate earnings they received from these businesses. Laundromats were chosen by these gangsters because they were cash businesses and this was an undoubted advantage to people like Al Capone who purchased them.
Al Capone, however, was prosecuted and convicted in October, 1931 for tax evasion. It was this that he was sent to prison for rather than the predicate crimes which generated his illicit income and according to Robinson this tale that the term originated from this time is a myth. He states that:
"Money laundering is called what it is because that perfectly describes what takes place - illegal, or dirty, money is put through a cycle of transactions, or washed, so that it comes out the other end as legal, or clean, money. In other words, the source of illegally obtained funds is obscured through a succession of transfers and deals in order that those same funds can eventually be made to appear as legitimate income".
It would seem, however, that the conviction of Al Capone for tax evasion may have been the trigger for getting the money laundering business off the ground.
Meyer Lansky (affectionately called ‘the Mob’s Accountant’) was particularly affected by the conviction of Capone for something as obvious as tax evasion. Determined that the same fate would not befall him he set about searching for ways to hide money. Before the year was out he had discovered the benefits of numbered Swiss Bank Accounts. This is where money laundering would seem to have started and according to Lacey Lansky was one of the most influential money launderers ever. The use of the Swiss facilities gave Lansky the means to incorporate one of the first real laundering techniques, the use of the ‘loan-back’ concept, which meant that hitherto illegal money could now be disguised by ‘loans’ provided by compliant foreign banks, which could be declared to the ‘revenue’ if necessary, and a tax-deduction obtained into the bargain.
‘Money laundering’ as an expression is one of fairly recent origin. The original sighting was in newspapers reporting the Watergate scandal in the United States in 1973. The expression first appeared in a judicial or legal context in 1982 in America in the case US v $4,255,625.39 (1982) 551 F Supp.314.
Since then, the term has been widely accepted and is in popular usage throughout the world.
Money laundering as a crime only attracted interest in the 1980s, essentially within a drug trafficking context. It was from an increasing awareness of the huge profits generated from this criminal activity and a concern at the massive drug abuse problem in western society which created the impetus for governments to act against the drug dealers by creating legislation that would deprive them of their illicit gains.
Governments also recognised that criminal organisations, through the huge profits they earned from drugs, could contaminate and corrupt the structures of the state at all levels.
Money laundering is a truly global phenomenon, helped by the International financial community which is a 24hrs a day business. When one financial centre closes business for the day, another one is opening or open for business.
As a 1993 UN Report noted: The basic characteristics of the laundering of the proceeds of crime, which to a large extent also mark the operations of organised and transnational crime, are its global nature, the flexibility and adaptability of its operations, the use of the latest technological means and professional assistance, the ingenuity of its operators and the vast resources at their disposal.
In addition, a characteristic that should not be overlooked is the constant pursuit of profits and the expansion into new areas of criminal activity.
The international dimension of money laundering was evident in a study of Canadian money laundering police files. They revealed that over 80 per cent of all laundering schemes had an international dimension. More recently, "Operation Green Ice" (1992) showed the essentially transnational nature of modern money laundering.