Money Laundering: What You Need to Know

Money Laundering is often viewed as a victimless crime that brings in over $500 billion each year. This crime is often overlooked but that does not decrease the seriousness of the crime. Without money laundering, organized crime would not be able to function properly.

A Deeper Definition

Money laundering can be defined as the legitimization of illegally obtained money to hide its true nature or source. It is affected by passing it surreptitiously through legitimate business channels by means of bank deposits, investment, or transfers from one place or person to another.

If it is completed correctly, it will allow criminals to successfully maintain control over their proceeds as well as provide a legitimate cover for their source of income.  It plays a fundamental role in fulfilling the ambitions of drug traffickers, terrorists, organized criminals, inside dealers, tax evaders and many others who need to avoid attention from authorities. When engaging in this type of activity, money launders attempt to place the proceeds beyond the reach of any asset forfeiture laws.

Recent Case Study

Liberty Reserve, a company based in Costa Rica that had ties with the US, was recently caught committing a costly money-laundering scheme. They dealt with digital currency, a form of online currency made up of transferable units that can be exchanged with cash. Through this digital currency they allowed transitional online payments and money transfers to take place.

They accomplished this scheme by charging an enticingly low 1% fee on transactions. Users simply had to open an account. After that the currency could be redeemed for cash in any part of the world using third-party exchange companies.

This system was very similar to a global banking system; however, users only needed a valid email address to move money across borders. No full details or personal information was needed which in turn made it impossible to trace the accounts.

Liberty Reserve had 1 million users world wide, with 200,000 being specifically from the US. Through the 1 million users, a shocking $6 billion was transferred.

By looking at this study, we can see how easy it is for criminals to illegally obtain money while hiding the true nature and source of it. Money laundering is something that everyone should be aware of. Stay connected with Balarsky and Associates, CPA’s to learn more about the topic, specifically the steps that are involved and why it is done.



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