Money laundering is an illegal activity that criminals use to make their dirty money look clean. Usually, it involves hiding money from illegal activities, but sometimes it’s used to hide legitimate money, such as during wealthy divorce cases where one spouse wants to conceal money from the other.
The process starts by putting the illegal money into a bank account or spending it on things. Then, the goal is to hide where the money came from, using methods like electronic transfers or reselling expensive items bought with the dirty money.
With the rise of the digital age, money laundering has become more common. Criminals use the internet, foreign banks, and fake companies to hide their money. Strict national privacy laws often help them keep their illegal activities hidden from law enforcement.
In the tiny island nation of Nauru, which has only a few thousand residents, there are about 400 registered banks, leading to suspicions that it’s used to hide mafia money, especially from Russia. However, criminals usually prefer big cities where the high volume of financial transactions makes it easier to stay anonymous.
Interestingly, money sent to extremist groups often comes from legal sources, making it hard to detect at first. Banks are now required to report any suspicious activity. However, defining what’s “suspicious” isn’t easy. For instance, transferring more than $10,000 abroad requires reporting and an explanation. A tactic called “smurfing” avoids this by making multiple smaller transfers just under the $10,000 limit to delay reporting.
We all have a role in fighting money laundering. Banks and financial institutions are the first line of defense, but business owners should also stay alert. If a customer seems unusually wealthy or makes several large purchases and you aren’t sure how they can afford them, be cautious.
Knowing your customer well is important. Police and customs officials can seize money they suspect is from money laundering. Reporting any suspicious behavior can protect you from being accused of helping launder money.
One big money laundering case involved Liberty Reserve, where more than $6 billion was funneled to criminals, serving over one million clients and processing 12 million transactions each year.
In the UK, it’s estimated that £27 to 57 billion is laundered every year, showing the huge scale of this crime, which has grown even more with digital advancements. The team of money laundering attorneys at Burton Copeland specializes in providing legal help in these cases.