Do you ever imagine how criminals can cover the money they get in unlawful ways by using legal resources?
Money laundering is one of the few processes they need to cover “dirty” money via “clean” methods.
A finance expert said that It is an act of stealing money and then processing it to assume a proper channel.
Money laundering is defined as the process whereby such proceeds are given a clean or legitimate appearance.
Some strategies that perpetrators employ in an attempt to conceal where the money originates from.
For example, a money laundering operation can create the appearance of generating cash from a business from sources that are tainted.
These methods are used to deceive other banks or governments, and they have no cases against the money.
In this article, we will discuss “what is money laundering with example” and its most common methods.
How Does Money Laundering Work?
Money laundering involves a number of steps to hide the source of the funds. First, it goes into the financial system, commonly through financial institutions.
Layering then moves the money around so as not to be associated with its source, which is another technique of money laundering.
One of the simplest examples of money laundering is when the offender moves his money from one account to another or from one country to another.
Then, the money is laundered when it gets out of the cycle, and it becomes very difficult to link it to crime.
This is because these money laundering schemes give the people behind the illegitimate operations a hard time being caught by the authorities.
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Popular techniques of money laundering
Anti money laundering is a critical focus in addressing the complex procedure of money laundering, which allows criminals to use money obtained through unlawful activities.
They include multiple-step affairs and different methods such as transferring the money through various accounts, applying it to faux companies, or manipulating the trade and properties.
Knowledge of money laundering techniques will be key to the early detection and prevention of fraud.
Layering
Layering means placing money in various transactions so that its origin cannot easily be traced.
For example, cash is remitted across different accounts or borders. This makes it challenging to know the sources of the funds.
A money laundering example can be a person who takes embezzled funds and moves them from one account to various other accounts with the intention of obscuring identity.
An estimated $800 billion, or two to five times the global GDP, is spent on money laundering annually, according to the United Nations Office.
Structuring
Another methodology of money laundering is structuring. This is a process of dividing big figures into small figures.
For example, $ 10,000 is a large amount of money. When it is divided into $100 each, that’s $100 per every figure, so it’s easier to handle.
These quantities are being paid over time without any alert being raised. This is typical of money laundering exercises, which are followed by an attempt to remove the linked money.
Use of Shell companies
Money laundering is found to be associated with Shell companies. These are fictitious enterprises that are used to conceal illicit money.
In this money laundering scheme, the money is from legal business transactions. That is why a shell company can buy and sell goods, but its main activity is laundering money.
Trade-based money laundering
Trade-based money laundering includes manipulation of the price of goods exported or imported across international borders.
The objective is always to transfer funds across borders while ensuring it will appear like a normal transaction.
For example, a person might sell a car for a much higher price than that car is actually worth. Trade-related money laundering got up to $ 60 billion internationally between 2011 and 2023.
Casino laundering
Money transfer through casinos is also employed in cases that relate to money laundering.
This is mainly where criminals use the establishment of casinos to pass clean money through gambling.
They can use the proceeds of criminal activity to buy chips, play to some extent, and cash out that looks legitimate.
NCA authorities had difficulties in tracking the money, particularly when it circulates in the form of chips and wins.
The financial loss in 2023 for the casino to commit a money laundering violation was over $ 264 million, and they were all penalized by the regulators.
Real estate transactions
Criminals invest in real estate because they change it for illicit purposes. They can also purchase a house at a price higher than the cost of the house.
They can resell the same house at a standard price. This gives the notion of real money with all the features of false money.
More than $2.6 billion of illegitimate or suspicious money has flown into commercial real estate across the United States of America during the last two decades.
Discover on our website how financial frauds affect your money by detailing various kinds of money laundering schemes.