Photo courtesy of Images Money via Flickr.
Profits from criminal activity are often funneled and concealed through a process known as money laundering.
This activity disguises illegal revenue as legitimate income, and the ways criminals go about it can be very inventive.
Walter White from the TV show Breaking Bad demonstrated just one of many ways criminals disguise their ill-conceived gains: a car wash, in this case, turned illegal cash from meth sales into legitimate cash that could be deposited in a bank.
The reality requires a similar amount of creativity, craft, and audacity, so to speak: making large sums of money untraceable.
Money laundering: Methods to madness
Some of the main methods include:
- Structuring: breaking up large amounts of money into smaller deposits, either in multiple accounts at different banks or in a single bank over a long period of time.
- Offshore: sending money overseas to countries that have bank secrecy laws — major centers include Bahamas, Bahrain, the Cayman Islands, Hong Kong, Antilles, Panama and Singapore
- Underground: some countries have alternative banking systems that leave no paper trail, through which criminals can withdraw and transfer money without a trace
- Shells: fake companies that exist only to disguise illegal payments as legitimate profits from goods and services
- Front companies: using legitimate businesses that either make enough money to blend dirty funds in with, like a casino, or smaller cash-intensive businesses, like a bar, to clean a launderers’ money
- Purchases: laundering money through a expensive purchases, such as art or real estate, integrating dirty funds into legitimate payments and clean assets
- Currency exchange: dirty money can be exchanged for pesos, for example, by special brokers, who use it to purchase goods, sell them, and hand back the equivalent in pesos with a small commission
Emerging trends[contextly_auto_sidebar id=”VxEwjsMf0jlHVZvVtZ7UztSePu1MBKwf”]As government agencies and international ones like the IMF attempt to crack down on dirty dealings, criminals move as well to get around regulations and scrutiny.
Recently, it’s come to light that criminals have been increasingly turning to the art market as an alternative to the usual methods. It’s a perfect disguise, the New York Times writes:
“It is hard to imagine a business more custom-made for money laundering, with million-dollar sales conducted in secrecy and with virtually no oversight.”
Laundering money through the purchase and sale of art is as simple as listing buyer and seller as “private collection” and raising your price. Since prices for art are difficult to gauge and names often guarded, legal oversight is limited and suspicious activity tough to spot.
Another way criminals are getting around regulations? Bitcoin.
The digital currency, being both anonymous and borderless, may seem to be a criminal’s dream for exchanging murky money without suspicion. But it’s not perfect: transactions are public, so launders need tools to hide and disguise coins, and there have been several public arrests already.
Luckily for criminals and not-so-lucky for those attempting oversight, there are various tools used to layer transactions with encryption, mix dirty coins with clean ones, swapping coins to clean them, and various other methods.
But when it comes to laundering, analysts find, newfangled solutions are only part of the story. The rest of it is a tale as old as time: cash. As long as cash is king in terms of ubiquity, it’ll remain the laundering vehicle of choice, officials say.