MONEY

LAUNDERING
REASONS FOR SELECTING MONEY
LAUNDERING
 The crime of money laundering is becoming more and more
common in today’s world.


 Most people have the notion that money laundering and

money counterfeiting are the same thing.


 There is widespread ignorance about the process of money

laundering.


 People need to be educated about money laundering and its

process so that they can understand the effects it has on
any nation’s economy.


 If the people are educated then they can help the authorities
 MONEY
LAUNDERING
 WHAT IS MONEY LAUNDERING?

Money laundering is the practice of disguising

illegally obtained funds so that they seem legal.

It is a crime in many jurisdictions with varying

definitions. It is a key operation of the underground
economy.

In the past, the term "money laundering" was applied

only to financial transactions related to organized
crime.

Today its definition is often expanded to mean any

financial transaction which generates an asset or a
value as the result of an illegal act.
INTRODUCTION
INTRODUCTIO
N
MONEY LAUNDERING WORLDWIDE
Totally Funds Laundered Worldwide
$1,200

$1,100
US$ billions

$1,000

$900

$800
2004 2005 2006 2007 2008 2009
MONEY LAUNDERING BY ACTIVITY

Terrorist
groups
1% Drugs
Other
26%
Organized
Crime
23% Embezzle-
ment/
White
Smuggling Collar
29% Crime
21%
MONEY LAUNDERING BY INDUSTRY SECTOR

Insurance
Firms
9% Banks
Credit 55%
Cards
5%
Money
Services
4% Brokerage
&
Investment
Firms
27%
ROLE OF BANKS
MONEY LAUNDERING BY REGION
(Total = $950 Billion In 2006)

Europe Middle
26% East -
Africa
5%

Asia-
Pacific Americas
31% 38%
THREE BASIC STEPS OF MONEY
LAUNDERING
THREE STAGES OF MONEY
LAUNDERING
PLACEMENT
 PLACEMENT
This is the movement of cash from its source. On occasion the
source can be easily disguised or misrepresented.

Currency Smuggling – This is the physical illegal movement of

currency and monetary instruments out of a country.

Bank Complicity – This is when a bank, is owned or controlled

by unscrupulous individuals suspected of conniving with
organized crime groups.
The complete liberalization of the financial sector without
adequate checks also provides leeway for laundering.

Currency Exchanges – In a number of transitional economies

the liberalization of foreign exchange markets provides room
for currency movements and as such laundering schemes can
benefit from such policies.
 PLACEMENT
Securities Brokers – Brokers can facilitate the process of
money laundering through structuring large deposits of cash in
a way that disguises the original source of the funds.

Blending of Funds – The best place to hide cash is with a lot

of other cash. Therefore, financial institutions may be
vehicles for laundering.

Front companies – Front companies are set up to use the money

from illicit activities. This enables the funds from illicit
activities to be obscured in legal transactions.

Asset Purchase – The purchase of assets with cash is a classic

money laundering method.
The major purpose is to change the form of the proceeds from
conspicuous bulk cash to some equally valuable but less
conspicuous form.
LAYERING
 LAYERING
• Layering – The purpose of this stage is to make it
more difficult to detect and uncover a
laundering activity.
•
• It is meant to make the trailing of illegal proceeds
difficult for the law enforcement agencies. The
known methods are:
•
• Cash converted into Monetary Instruments – Once
the placement is successful within the financial
system by way of a bank or financial institution.
•
• The proceeds can then be converted into
INTEGRATION
 INTEGRATION
• This is the movement of previously laundered
money into the economy mainly through the
banking system
•
•
•
• Such monies then appear to be normal business
earnings.
•
•
•
• This is dissimilar to layering, for in the integration
process detection and identification of
 IN T E G R A T IO N
T h e kn o w n m e th o d s u se d a re :
P ro p e rty D e a lin g – The sale of property to integrate
la u n d e re d m o n e y b a ck in to th e e co n o m y is a co m m o n
p ra ctice a m o n g st crim in a ls.

Fo r in sta n ce , m a n y crim in a lg ro u p s u se sh e llco m p a n ie s

to b u y p ro p e rty ; h e n ce p ro ce e d s fro m th e sa le w o u ld b e
co n sid e re d le g itim a te .

Fro n t C o m p a n ie s a n d Fa lse Lo a n s – Front companies that

a re in co rp o ra te d in co u n trie s w ith co rp o ra te se cre cy
la w s.

In th e se co m p a n ie s crim in a ls le n d th e m se lve s th e ir o w n
la u n d e re d p ro ce e d s in a n a p p a re n tly le g itim a te
 INTEGRATION
Foreign Bank Complicity – Money laundering using known foreign
banks represents a higher order of sophistication and presents
a very difficult target for law enforcement.

The willing assistance of the foreign banks is frequently

protected against law enforcement scrutiny.

This is not only through criminals, but also by banking laws

and regulations of other sovereign countries.

False Import/Export Invoices – The use of false invoices by

import/export companies has proven to be a very effective way
of integrating illicit proceeds back into the economy.

This involves the overvaluation of entry documents to justify

the funds later deposited in domestic banks and/or the value of
funds received from exports.
WHITE - COLLAR LAUNDERING : EDDIE
ANTAR
HERE'S A BASIC RECOUNTING OF HOW
THE SCHEME WORKED :
MONEY LAUNDERING
THEN
M O N E Y L A U N D E R IN G
NOW
WORLD’S WORST BANKING
SCANDAL
W O R L D ’ S W O R S T B A N K IN G
SCAN D AL
 LEGISLATION IN INDIA
In India we have The Prevention of Money-Laundering Act, 2002

The Prevention of Money-Laundering Act, 2002 came into effect on 1

July 2005.

Section 3 of the Act makes the offense of money-laundering cover

those persons or entities who directly or indirectly attempt to
indulge or knowingly assist or knowingly are party or are actually
involved in any process or activity connected with the proceeds of
crime and projecting it as untainted property, such person or
entity shall be guilty of offense of money-laundering.

Section 4 of the Act prescribes punishment for money-laundering

with rigorous imprisonment

The provisions of the Act are frequently reviewed and various

amendments have been passed from time to time.
 OBLIGATIONS ON BANKS,
FINANCIAL INSTITUTIONS AND
INTERMEDIARIES U/s 12(1)
FEW LAWS WORLDWIDE

United Kingdom :
The Terrorism Act 2000
The Anti-Terrorist Crime & Security Act 2001
The Proceeds of Crime Act 2002
Serious Organized Crime and Police Act 2005
Money Laundering Regulations 2003 and 2007

United States of America :

The Bank Secrecy Act of 1970
The Money Laundering Control Act of 1986
The USA PATRIOT Act of 2001

Bangladesh :
Prevention of Money Laundering Act, 2002 (Act No. VII of 2002)
We must thank the
institute to
have given us an