As you’ve probably guessed we are not going to talk about involving strangers in your relationships or family affairs. We are going to talk about money laundering. More exactly, how is money laundered? Before thinking “Oh no, this is illegal”, it is important to understand this article is for educational purposes only and does not encourage any illegal activity. A similar public source of information is the first episode of the series “The Giant Beast that is the Global Economy”. Now, let’s proceed with the article.
Usually, the main sources of income for criminals or leaders of criminal organizations are illegal activities such as producing or selling drugs, liquidating individuals or theft. The problem for criminals is that nobody will ever pay them by card when acquiring illegal items, thus the income they make cannot be used safely in the financial system. It is considered to be dirty and any suspicious cash deposit will be reported by the banks. But don’t worry about the bad guys…there are many ways in which they can launder their hard-earned money.
Firstly, they need to “place” the sum into the legitimate system. Generally, that is done through cash-based businesses such as taxi services, restaurants, carwashes or nightclubs. Basically, the criminal buys one of these types of enterprises through a loan or clean money and then inflates the bills monthly with the money they need to launder (e.g.: billing fictive customers with fictive services). Secondly, the clean money should be difficult to trace for investigators. This is why layering is a very important part. Layering involves a series of transactions and accounting tricks such as splitting the money into smaller amounts, investing in gems that can be easily moved to other countries, gambling and using shell corporations(companies that only exist on paper). The final step of our money laundering scheme is simple. Criminals can now enjoy their now-clean money is considered legitimate and can be used to buy a new yacht.
It’s important to note that technology, as in any other industry, has alternated the old-school style of money laundering. Now software engineering tricks such as changing IP addresses using proxy servers and the usage of cryptocurrencies of gaming currency have eased the launder of money.
Fortunately, anti-money laundering laws all over the world are evolving every year to keep up with this illegal industry. In fact, in recent years, many banks and influential companies or individuals have been sued for contributing to the phenomenon. Some noticeable names are Fortnite(that’s right), Deutsche Bank, HSBC(laundered hundreds of millions of dollars for terrorists and drug traffickers), Al Capone or Jose Franklin Jurado-Rodriguez, a Harvard College and Columbia University alumnus who laundered for the cartel.
Disclaimer: “Phase Learning” magazine, its staff and its writers do not encourage any type of illegal activity. This is not financial advice. The content is for educational and entertainment purposes only.
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