Here’s how money laundering works

Money Laundering is an art. A bad one, but an art regardless. In layman words, money laundering is the transformation of ‘dirty’ money into –  – “clean” money. Whether it’s Al Capone using laundromats as a smoke screen to clean his money or Walter White cleaning up meth money through a car wash.  That’s probably where the term laundering originated from.  Launder – synonym and definition – wash and iron clothes.

The following movie compilation does a good job breaking it down.  Please do watch it now.  Click here to watch.

Money laundering is not an activity restricted to gangs or white-collar criminals.   Anyone can launder money.  From your ordinary investors, clever business woman, drug cartels and terrorist syndicates.

In simple words, money laundering is the process of making illegally-gotten money look legitimately earned; in other words, that money obtained from Illegal Source A was earned via Legal Source B. You’re taking dirty money and cleaning it.

The point of money laundering is to make the money untraceable, and launderers accomplish this, with different degrees of success.

The Money Laundering process involves three stages, though it’s often much more intensive and complicated than a three-step plan:

• Placement: This is the stage in which launderers bring the dirty money into the “real” financial world. It’s the most dangerous stage because it often involves moving large amounts of cash.  For example, Drug lords likely do not accept Credit Cards/Visa Cards for, say, illegal drugs such as cocaine, heroin, and methamphetamine. Criminals might use a legitimate, largely cash business like a car wash or strip club to merge dirty and clean funds; exchange it for foreign currency; have “smurfs” exchange illicit funds for other financial products in small amounts to avoid reporting thresholds, buy real estate, etc.
• Layering: The next stage involves moving the money around to hide its original source. For the more slick scammers, this means moving it into overseas financial products, companies, investments, etc. This usually happens multiple times and across diverse products, thus why it’s called “layering.” So theoretically, a launderer could move money to one offshore account, then transfer it to a shell company, then to another shell company, and on and on, weaving a complicated web of lies that are difficult to identify.
• Integration: At this stage, the launderer gets the money back from a legitimate source. This, too, can be done in a number of ways, including through buying art, selling property, etc.

To get a better understanding of exactly how it works, let’s look at the most recent high profile example.

Paul Manafort

President Trump’s former campaign chairman was indicted for money laundering, as well as tax and bank fraud.

How he did it, according to How Stuff Works:

Manafort has reaped millions from the former Ukrainian President Viktor Yanukovych. Instead of declaring these earnings to the Internal Revenue Services (IRS) and pay over the taxes due, Manafort placed them in offshore accounts and then used them to buy expensive property / land in the U.S.

He then used the property as collateral to take out millions of dollars in loans from U.S. banks. The money was in the form of loans and not income, he wasn’t obliged to pay taxes on it.

It works like this: The reason is that the money you’re using to buy the property is dirty, and you have to clean it, you have to get it into the legal financial system. You’ll pay for a piece of property in cash and then you’ll hold it, and whenever you sell it, the money you get from the sale is clean, it’s laundered. Even if you sell at a loss, it’s worth it to get tens of millions of rand in clean money. In fact, anonymous buyers will often offer over the asking price to make the transaction more seamless.

But Manafort didn’t stop at property. Over the course of six months, Manafort used a system of offshore bank accounts to make “transfers totaling $6.4 million for real estate and more than $12 million for personal goods and services like clothing, vehicles and home improvement, Including over $1 million for an antique rug and care related to it, and $15,000 for the now-infamous ostrich coat.

That Manafort got caught for his misdeeds means he’s, either “stupid or unlucky,” as 99.9 percent of launderers get away with their crimes.

Conclusion

It’s not just rich people trying to avoid taxes who launder money—it’s much more serious than that.  Gang violence, fraud in government programs, corruption, internet scams, identity theft and so many other crimes affect our daily lives.

And these criminals use largely the same tools as the world’s wealthiest to clean their money. There’s this legal system of anonymous shell companies that anyone can do anything with. If you are a completely legitimate business person you can use an anonymous shell company, and if you are a drug trafficker you can use an anonymous shell company. They use the legal system to continue their illegal activity.

It goes beyond shell companies—legitimate businesses can be used as well.   Pretty much anyone can open an anonymous Limited Liability Company (LLC) in South Africa.  The cost to register a LLC company may vary between R125 and R475 (R125 for a private company, R475 for a non-profit company registered without members)

You don’t need a brilliant legal mind to do this. ”Just slightly more brilliant than Paul Manafort”

Rule #1 

“Follow the money”