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.