What you should know about money laundering

As part of your safe investing activity you should be careful to avoid inadvertantly getting involved in assisting in money laundering.

Money laundering is performed to thwart the enforcement of criminal law by creating a justification for controlling or possessing money or property derived from any form of criminal activity.

This includes all activities aimed at disguising or concealing the nature or source of, or entitlement to money or property derived from criminal activities. The process of money laundering comprises:

• the placement stage where the illegitimate proceeds are placed in the financial system;
• the layering stage where numerous transactions are carried out with the proceeds; and
• the integration stage where the recycled proceeds are placed at the disposal of the criminal.

Organised criminal groups need to launder their illegal profits to avoid detection of the underlying criminal activity that generates the profits, while enjoying these profits or reinvesting them in future criminal activities.

By combating money laundering, law enforcement authorities can disturb the cycle utilised by organised criminal groups to benefit from illegitimate profits. This can enable law enforcement authorities to disrupt the functioning of organised criminal groups through financial turmoil.

Money laundering is discussed in the free [SA] Institute for Securities Studies Monograph: Clean Money, Suspect Source, Turning Organised Crime Against Itself.

How to launder cash
Popular tactics for launderers:

• The criminal approaches an attorney, showing interest in buying property, and deposits cash or transfers money into the attorney’s trust account. Soon after, he changes his mind and asks the attorney to refund him with a cheque.
• Estate agents and sellers are offered cash on their properties, with the cash used as a “negotiating tool” to lower the selling price.
• Crooked purchasers of single-premium life insurance policies pay for the policy with cash, even foreign currency, then surrender it and are paid out with a legal cheque.
• Purchases of high-value goods, including antiques, jewellery and cars.

Tips for safe online banking

An important aspect of safe investing is fraud avoidance. My bank provided me with the following 10 tips for safe online banking [1]

1. Avoid using public terminals (such as Internet cafes) for Internet banking.
2. Be aware of the higher risk of interception during a wireless connection. Only do your banking via a wireless hotspot if you are certain of the integrity of the connection.
3. Ensure that you have an updated anti-virus and spyware programme and perform regular system scans. (See note 2).
4. Never access the site via a link. Rather type the address (URL) of your bank into the browser address bar or save the address as a "Favourite".
5. Do not open other websites while logged into Internet Banking; only have a single browser window open.
6. Choose a User ID and password that cannot be easily guessed and change these regularly.
7. Ensure your computer software is up-to-date.
8. Check for the padlock in the lower right of your browser window (it indicates a secure site for safe investing). You can click on this padlock to verify the site "owners".
   When you complete your online banking tasks, log off and close the browser window.
9. Never provide your password over the Internet (by email) or over the telephone to anyone (including persons identifying themselves as bank officials). (See my Blog on Phishing)
10. Don't trust a PDF payment proof unless verified by the bank - these documents can be manipulated by fraudsters.

1. First National Bank (South Africa)

2. Symantec Norton 360, MacAfee and Kaspersky are leading anti-virus prorammes. Try MacroVirus On-Call, especially if you have a less powerful PC and/or an old version of Windows.

Can you avoid Madoff (Ponzi) schemes?

An important aspect of safe investing is fraud avoidance. Madoff's recent investment fund was revealed as a classic Ponzi pyramid scheme scam in which the illusion of solvency is created by paying off early investors with capital raised from later entrants. As long as new investment continued to come in the door, the earlier adopters reaped fat rewards; once markets tumbled and investors withdrew, however, the whole thing collapsed.

Left in Madoff's wake are bankrupt investors and failed regulation. "Madoff's investors rave about his performance - even though they don't understand how he does it," wrote Barron's Erin Arvedlund, who quoted a "very satisfied investor" as conceding, "Even knowledgeable people can't really tell you what he's doing." But for investors pocketing windfalls, the lure of easy money outstripped suspicions raised by Madoff's shroud of secrecy.

In general, schemes offering high returns are not safe investments and should be avoided. However some say you can profit if they are played right, one such way of playing can be examined at Riding the Ponzi

Welcome to the safe investing blog

Hi. this blog is very new and we hope that we can serve the community by sharing unsafe and safe investing experiences. Please feel free to post your experences.
Although this blog is based in South Africa, many of the experiences are global in nature. We hope you will enjoy safe investing.

For those who are interested in finance and investment in South Africa, visit our website at http://www.finforum.co.za/

Beware of being fooled by phishing

Phishing

When thinking about safe investing, even if it is only a bank account, you have to be aware of fraud. Phishing is a form of fraud where criminals attempt to access your confidential information. This is done either by an email request for information or by luring you to a fake website.

Golden rules for safe investment:
Never access the site via a link. Rather type the address into the browser address bar or save the address as a 'Favourite'.
If you suspect that your confidential information has been compromised, please do not hesitate to contact your service provider, eg your bank

Protect your email
Any email is at risk of being intercepted, and you should never send sensitive information (passwords, etc) via email.

Tips to staying safe:

• Do not provide your email address to third party websites, without understanding how your email address will be used.
• Never send sensitive information via email.
• Avoid opening unidentified email messages with attachments, even if they profess safe investing.