Strategies to Prevent Money Laundering

Money laundering is a sneaky way criminals try to make their dirty money appear clean and legitimate. While it’s mostly used to hide cash from shady sources, sometimes it’s also used to secretly stash away legally-earned money, like in messy divorces where one partner tries to keep their assets hidden from the other.

The process usually starts with putting the illegal cash into a bank account or buying expensive stuff. Then, the goal is to confuse or hide where the money came from, often through electronic transfers or selling off those high-priced items bought with the questionable funds.

In the digital age, money laundering has skyrocketed. Criminals exploit the Internet, use foreign banks, and set up fake companies to disguise their funds. Privacy laws in various countries often help these criminals keep their activities under wraps, away from the watchful eyes of law enforcement.

A curious case is the tiny island country of Nauru, with just a few thousand residents but around 400 banks, raising suspicions about it being used to handle major criminal funds, particularly by the Russian mafia. But more often, criminals choose busy cities where they can hide among a sea of financial transactions.

Sometimes, money intended for extremist groups comes from legal sources, making it tough to spot right away. These days, banks have to report suspicious financial moves. However, figuring out what counts as ‘suspicious’ isn’t always clear-cut. If someone transfers more than $10,000 out of the country, it needs to be reported and explained.

One laundering trick called “smurfing” tries to dodge this rule by breaking up the money into smaller amounts under $10,000 and moving them bit by bit, delaying the need for reporting.

We all have a role in fighting money laundering. Banks and financial institutions are the first line of defense, but business owners need to stay sharp too. If a customer seems unusually rich or makes lots of big purchases and you find it odd, it’s important to pay attention.

Knowing your clients is crucial. Police and customs have the authority to seize money they think is part of money laundering. Reporting any odd behavior can help protect you from accidentally being involved.

An example of a big money laundering bust is with Liberty Reserve, where over $6 billion was moved for criminals, serving more than a million clients and handling 12 million transactions every year.

In the UK alone, an estimated £27 to 57 billion gets laundered yearly, highlighting the massive scale of this crime, especially with digital technology boosting it.

Burton Copeland’s team of lawyers focuses on helping with legal issues related to money laundering.