Understanding the Three Stages of Money LaunderingAugust 4, 2016 | Written by Dan Margolis
People in Ohio often hear the term money laundering, but may not have a complete comprehension of exactly what it is. There are many methods involved in the process, which is basically an act that “cleans” the money that comes from illegal activity, such as fraud or drug operations, to help legitimize that activity and avoid capture, according to the Internal Revenue Service.
There might be several different mechanisms involved that help to launder the money. This might include wire transfers, nominees, multiple bank accounts, currency, and the use of international tax havens. The typical activities utilized in money laundering include:
> Moving the money in order to reduce the risk of attention
> Altering how the proceeds were acquired
> Disguising the profits
According to Cornell University Law School’s Legal Information Institute, businesses that typically rely on cash transactions, such as plumbing companies or beauty salons, are popular tools for money laundering. This reduces the capabilities of tracking from where the money originated since many of these businesses deal in cash only transactions. To increase the appearance of legitimacy, the business typically creates fake invoices to match the amount of cash being laundered.
Although money laundering involves very complex activities that differ in each circumstance, there are generally three stages of money laundering. The above cleaning of the money is typically the second phase. The first involves the acquiring of the money through illegitimate means. The final stage is when the money returns to the initial business to be used.
This usually does not take a direct route. The money might make its way to and from multiple shell companies and bank accounts, including foreign accounts, before it is ready to be accessed by the original company or organization. This further helps to hide the proceeds from discovery by law enforcement.