Money Laundering - Techniques


The intent of money laundering process is to convert illicit cash to a less suspicious form, so that the true source or ownership is concealed and a legitimate source is created. This process consists of three stages: Placement, Layering and Integration. Placement involves the physical disposal of cash being the proceeds of crime by depositing it with a financial institution. The second stage of layering transfers these deposited funds among various accounts, disguising the origin of the funds through a series of complex transactions. Finally, integration shifts these funds to legitimate individuals or front companies that have tentative links to the criminals. Only upon integration can the criminals draw upon the money for legitimate spending or financing future criminal acts.

As much as $85 billion a year of this could be available for laundering and investment. One Task Force member estimated global profits at the 'main dealer' level - the level most subject to international laundering - at about $30 billion a year.
So how is laundering actually handled when such large amounts are at stake? Naturally, it requires the aid of those with a knowledge of the banking and legal system - lawyers or accountants or bankers - or those already in the business who are willing to put 'bad' money through. Not all middle-class professionals are as straight as the South Wales banker whom Howard Marks approached to launder 11 million Nigerian pounds. He had to be given a glass of water after the request was made, and was easily reassured by Marks that it had 'nothing to do with drugs'.

One way of laundering is to transport cash out of the country, put it into accounts and trusts in institutions with guaranteed secrecy. European countries like Switzerland and Luxembourg have long been renowned for the confidentiality of their banking systems - but secrecy laws have already been loosened following strong international criticism. Off-shore paradise islands like the Bahamas, Cayman Islands and Virgin Islands may experience fewer international pressures.
Transporting cash is not as easy as it may sound. Pablo Escobar, the Colombian drug dealer, supposedly lost $400 million when it rotted away in the basement of a California house. He couldn't get it out of the country. Ramon Milan Rodriguez, one of Noriega's helpers, set up his own air freight company - Consolidated Air Services - complete with uniforms, a company logo and an executive jet, to move money from Miami to Panama. Tailor-made 'courier boxes' were constructed to hold differing quantities of cash. So impressive was the service, Rodriguez was asked to handle straight business - he refused.

Detailed records, found by the US authorities after the arrest of Rodriguez, showed that in the nine months between August 1982 and May 1983 his personal Lear Jet had made 47 flights from Miami to Panama, carrying $151 million. The forty-eighth flight never made it. Customs agents raided the plane - due to leave Fort Lauderdale International Airport on May 4 1983 - moments before take off. They found on board 20 boxes containing $5,449,962.
Oscar Cuevas, another launderer, used Brinx's (the American security firm) to transfer boxes of cash from the US to London. Cuevas would then take the cash and pay it into London branches of American banks. From there it would be funnelled back into the US. At one point Cuevas was considering buying his own bank in Spain - always so much more useful to own your own financial institution.

But new initiatives on the part of the major industrial countries are now putting launderers worldwide under serious pressure. The G7 Financial Action Task Force, comprising the seven leading industrial countries, including the US, Japan and Germany, recently made proposals to crack down on drug trafficking and 'laundering havens'. These include setting up a 'white list' of countries prepared to comply with international attempts to drive out launderers. According to one expert, sanctions against those countries not on the white list might include making it impossible to secure IMF loans or push through a financial deal with whitelisted countries.

Despite G7 rigour, a cat-and-mouse game seems to be developing in which laundering is squeezed out of one area, only to reappear in another. For instance, patterns of excess cash reserves in major US federal banks in the 1980s indicate an ever-shifting trail of 'dirty money' - from Miami in the late 1970s to Los Angeles in the mid-1980s. And according to recent reports from Federal authorities in Texas, their banks are now being overloaded with unaccountable cash.

Take another example. All US banks must now report any deposit of more than $10,000. This may be a more unworkable law for the regulators than for the launderers. Congressional hearings have already heard evidence of its avoidance through the labour-intensive technique of 'smurfing'. One (hooded) professional told the hearings that team leaders who co-ordinate a group of smurfers will go to a chosen city with hundreds of thousands in dollars. Each smurfer will then make a number of separate deposits, each at below the $10,000 limit, at individual banks.
Launderers are also moving their money out of the newly regulated big banks into smaller institutions - exchange houses, cheque-cashing companies, and casinos. And in July this year, Chancellor Kohl of Germany warned that launderers were now shifting their terrain to the ex-communist countries. Dr Kohl told his cabinet that intelligence reports indicated profits from drug trading were being cleaned up and invested in East Germany. Hungary and Bulgaria, ever hungry for Western currency and with stringent bank secrecy laws, have also been named as possible targets.

International Resources,,,,
Financial Action task Force on Money laundering 
Money Laundering is a Modern Phenomenon 
Magnitude and techniques of Money Laundering 
An A_Z of Money Laundering 
Layering Techniques of Money Laundering S
Placement Techniques of Money Laundering 
Money Laundering - A Brief History 
Money Laundering techniques and Practices 
An Industry view on Money Launderin
Anti-Money Laundering Basics 
1999 Money Laundering (Prevention) Acts 18 

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