Money Laundering: Fighting a Global Problem from Home

Table of Contents

Money laundering

What is Money Laundering?

Money laundering refers to the white-collar crime of generating profits from criminal activities (e.g. drug trafficking, extortion, insider trading, etc.)  and making it appear like the money came from legal business activity.

In other words, ‘dirty money’ is getting ‘laundered,’ cleaned of its messy trail.

But not only does money laundering enable criminals to use dirty money, it also erases the identity, source, and destination of those illegal funds. Thus, once the money gets cleaned, it becomes very difficult to trace. 

Money laundering can have disastrous consequences that go well-beyond economic ones. Kleptocrats and terrorists have financed reigns of terror by passing money through a complex network of shell companies. The United Nations estimates the amount of money laundered globally in a year amounts to 2-5% of the global GDP ($800 billion-$2 trillion in current US dollars).

The Zero Theft Movement is working to eliminate the rigged parts of the U.S. economy so the ethical parts can thrive for the public and businesses. Money laundering is a global problem that significantly harms the integrity of the U.S. financial system.  

How Does Money Laundering Work? A Three-Step Process

Obviously, criminals do not want to alert law enforcement to their illegal financial practices. They must put their dirty money through a whole cleaning cycle in order to minimize the chances of their getting caught.

money laundering cycle

The money laundering cycle or process commonly occurs in three steps:

  1. Placement: Collecting the dirty money and placing it into the financial system.
  2. Layering: Separating the dirty money from the illegal activity that generated it by sending the funds through multiple shell companies and offshore bank accounts. Eventually, the money finds its way into a bank account in the criminal’s country of operation/residence.

Integration: Using the now-clean money to conduct a seemingly legitimate transaction  (e.g. real estate).

Take, for example, a company’s executives want to boost the bottom line of the business by dodging corporate taxes, thus committing tax evasion. They put the company revenues into a bank account in a tax haven. When it wants to repatriate the money, the company will have to pay taxes. Well, only if the company brings in the funds legitimately. They can send the dirty money through multiple offshore accounts to eventually retrieve it from a shell company. 

See what the Zero Theft community has discovered about corporate tax evasion…

Forms of Money Laundering

Criminals can combine a wide range of techniques and schemes to evade the watchful eye of financial authorities. Using a shell company really only scratches the surface. The following forms of money laundering does not account for all possible schemes. You can find a more comprehensive list provided by the FBI

Misuse of banks

U.S. banks, as well as other financial institutions around the world, deal with countless transactions on a daily basis. The volume of these deals alone makes banks vulnerable to money laundering. In most cases, regardless of the scheme, dirty money will pass through a bank at least once throughout the process.

Aware of their prominent, often unwanted role in money laundering schemes, banks perform regular checks and continually monitor transactions in order to keep the financial system clean. The FBI, according to the link above, views banks as “the front line in AML [anti-money laundering] efforts.” Financial institutions have the opportunity to derail a scheme before it can really get going.

Naturally, criminals must find ways to counter these security measures in order to actually generate usable profits. One common strategy is known as ‘smurfing,’ or structuring. This involves breaking up large amounts of dirty money into numerous small deposits, which in turn, go into numerous bank accounts. 

Trade-based money laundering

Trade-based money laundering (TBML) is a strategy more established and sophisticated criminal operations use. They can mix together dirty money with clean money and present the combination as all part of the profits generated by legitimate trading transactions.

Criminals execute TBML by deliberately misrepresenting the price, quantity, or quality of their imports or exports. Due to the large trading volume, as well as the complexity of the transactions, TBML can prove one of the more challenging money laundering schemes to suss out.

The Government Accountability Office (GAO) expressed this very sentiment when it publicly released a report on TBML in January 2020. The agency found that financial institutions used for these trading transactions have “limited visibility into the underlying documentation of the majority of trade transactions for which they process the payments, which makes it more difficult for them to identify suspicious activity.” 

TBML can also damage business for ethical companies. For one, criminal organizations can create significant pricing pressure for others if they decide to offload a bunch of imported goods bought with dirty money at a discounted price (in order to realize profits ASAP). Legitimate businesses might have to drop their price especially if the criminal organization is part of an oligopoly

Electronic money laundering

Despite the many benefits that come with technological advancements, online banking, anonymous payment services, and peer-to-peer (P2P) transfers have made monitoring money laundering all the more difficult. 

Criminals even use the anonymizing software you might be using to keep your online activity private. They can exploit virtual private networks (VPN), for example, to make sure the authorities cannot link their electronic money laundering to their actual IP address. But again, this represents but one single layer of the laundering process. Just think of all the measures a sophisticated, successful criminal operation can take to clean all the prints from their dirty money. 

Layer upon layer upon layer, technology can make illicit activity near-impossible to detect. Regulatory authorities have worked to keep up with the rapidly evolving world of technology, but perhaps, have fallen short in the past.

DID YOU KNOW?

In 2017, The Wall Street Journal reported that ISIS sent an alleged U.S. operative $8,700 through the e-commerce website eBay: “[The U.S. suspect] had pretended to sell computer printers on eBay as a cover to receive payments through PayPal, potentially to fund terror attacks.”

Efforts to Prevent Money Laundering

Money laundering, day by day, proves to be a global concern. Criminal operations can create a  network of offshore banks and shell companies that truly spans the globe.The countless layers concealing a financial crime obviously make it hard to unmask those actually responsible for the original criminal activity that generated the dirty money in the first place.

But that does not mean nations around the world have surrendered to criminals.  

As it pertains to the U.S. authorities, the government made its first effort to crack down on suspicious financial activity in 1970, with the  passage of the Banking Secrecy Act (BSA). The legislation mandates financial institutions to submit suspicious activity reports (SAR) to the Department of the Treasury if they doubt the legitimacy of a transaction or if the transaction meets certain criteria (e.g. above $10,000). The Department of the Treasury passes on the information to the Financial Crimes Enforcement Network (FinCen), which has the authority to share the information with local and/or foreign criminal investigatory agencies. 

The BSA, while it did get regulators monitoring suspicious transactions, did not actually outlaw money laundering. It took the enactment of the Money Laundering Control Act of 1896 for the now-illicit practice to actually be a violation of the law. 

In order to have the proper technological tools to investigate cases involving electronic money laundering, AML regulators have started to take advantage of ‘RegTech’ (short for regulatory technology). State-of-the-art artificial intelligence, along with other powerful tracking and monitoring tools, should help give regulators that long-lacking edge against criminals.

Have you ever heard of dark pools? These private exchanges allow investors to trade securities with little transparency. High-frequency trading firms, along with other financial institutions, could be manipulating markets from the shadows.

See what the Zero Theft community has discovered about dark pools…

Examples of Money Laundering

A number of high-profile money laundering cases have emerged over the years. We have covered two cases—one particularly recent one (as of March 2021) and another that might have surprised the public more than any other case.

Capital Difficulties, Capital One 

The Virginia-based financial institution Capital One came under investigation for money laundering in 2020. FinCen released a press release, detailing its findings and verdict in January 2021. 

The press release states, “Capital One…has been assessed a $390,000,000 civil money penalty for engaging in both willful and negligent violations of the Bank Secrecy Act (BSA) and its implementing regulations. Specifically, FinCEN determined and Capital One admitted to willfully failing to implement and maintain an effective Anti-Money Laundering (AML) program to guard against money laundering. Capital One also admitted that it willfully failed to file thousands of suspicious activity reports (SARs), and negligently failed to file thousands of Currency Transaction Reports (CTRs), with respect to a particular business unit known as the Check Cashing Group.  The violations occurred from at least 2008 through 2014, and caused millions of dollars in suspicious transactions to go unreported in a timely and accurate manner, including proceeds connected to organized crime, tax evasion, fraud, and other financial crimes laundered through the bank into the U.S. financial system.”

Wachovia Bank

Wachovia Bank, now a part of Wells Fargo, was the fourth-largest bank holding company in the U.S., based on total assets. In 2010, the bank settled a drug money probe for $160 million (per Reuters). 

According to a Department of Justice press release, “[Wachovia] willfully failed to establish an anti-money laundering program…Wachovia was aware, as early as 1996 and through 2004, of the high risk that drug money was being laundered through the CDCs [Mexican currency exchange houses]. Wachovia was also aware that other U.S. banks had stopped doing business with the CDCs because of these concerns. Wachovia, however, continued to expand its business with the CDCs. Indeed, from at least May 2004 through December 2007, Wachovia provided correspondent banking services to various Mexican CDCs, including wire transfer, bulk cash, and pouch and remote deposit capture services, among others.” 

What can YOU do about Money Laundering? 

As you can see by now, money laundering truly is a serious problem that’s harming nations and economies all over the world, including the U.S. Some degree of transparency is needed, otherwise, corrupt corporations and individuals can profit off of all kinds of illegal activity. From tax evasion to terrorism.

It’s really no question that we need to eradicate money laundering, but how can you help?  

We at the Zero Theft Movement, along with our growing community, strive to eradicate the rigged parts of the U.S. economy and protect the ethical parts. 

On our voting app, citizens author theft proposals, and the community decides whether that investigation has convincingly proven (1) theft is or isn’t occurring in a specific area of the economy, and (2) how much is being stolen or possibly saved. Through direct democracy, we can collectively decide where the problem areas are and start working on addressing them systematically. 

The ZTM community knows that many businesses, including some corporations, act ethically. We are trying to hold the bad actors accountable. The corrupt corporations, lobbyists, and government officials. That way, good people and businesses can properly thrive and enjoy the piece of the piece they’re all due.

Standard Disclaimer

The Zero Theft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.   

Terms like ‘steal,’ ‘theft,’ and ‘crime’ will frequently appear throughout the article. Zero Theft will NOT adhere strictly to the legal definitions of these terms (since congress sells out). We have broadly and openly defined terms like ‘steal’ and ‘theft’ to refer to the rigged economy and other debated unethical acts that can cause citizens to lose out on money they deserve to keep.  

The public has voted! See where citizens believe the economy has been rigged

Explore the Problem Hierarchy

We have primers on potential problem areas of the economy. Before you start voting, it’s important you get a basic understanding of the issues at hand, so you can be as helpful as possible to other community members. Take a few minutes and come prepared.

Serve your fellow citizens as a citizen investigator

The success of our movement rests in your hands, the leaders willing to dedicate time to conduct investigations into potentially rigged areas of the economy. Lead the movement and help create an ethical economy. 

Commitment to nonpartisanship

The rigged layer causes all of us to suffer, regardless of our political allegiances. If we wish to eliminate rigged economy theft, we have to set aside our differences and band together against crony capitalists and corrupt officials. 

Donate!

ZTM operates solely on donations. Sure, we might eventually have high-profile donors, but they do not get to control or decide what the community investigates and how they vote on reports. Everyone is welcome to participate as long as you act in good faith.

Beyond money laundering…

An educated public is an empowered public. 

We regularly publish educational articles on ZeroTheft.net, just like this one on money laundering. They teach you all about the rigged layer of the economy in short, digestible pieces.