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Money laundering is a process used to conceal the criminal source of money. Governments are deploying many solutions to combat the phenomenon at the global level.

What is money laundering?

Money laundering or money laundering involves hiding the origin of a sum of money that has been acquired through illegal activity by reinjecting it into legal activities. The term money laundering originates from the fact that we speak of black finance to designate money acquired illegally.

Money laundering consists in making clean the money acquired illegally, that is to say in reinjecting the dirty money in the traditional economic circuit, via real estate or trade for example. The goal is to use a substantial amount of money without arousing suspicion and without being unmasked.

Money laundering is not a new phenomenon, but it gained momentum in the 1970s and the advent of the globalization of financial flows.  

The stages of money laundering

Money laundering or money laundering generally takes place in three stages. First, the money of criminal origin enters the financial system, it is the investment.

The second step is to use this money in many transactions to hide its origin, it is stacking. Finally, money laundering consists of investing funds in various and legal activities, it is the final phase.  

 

Types of money laundering

There are different types of money laundering. We distinguish :

  • Smurfing, or smurfing, is probably the most common method of money laundering. Several people must deposit cash in bank accounts or obtain bank drafts of less than ten thousand units of the country's currency in order to avoid the reporting threshold.

  • Compensation consists of laundering money while allowing people with undeclared assets abroad to be able to withdraw them in cash. The money to be laundered is brought directly to the person who needs cash against a transfer to an account abroad. 

  • Banking complicity via money transfer companies and exchange bureaus

  • Buying goods for cash

  • Electronic funds transfer or wire transfer

  • Money orders 

  • Casinos 

  • Sports betting

  • The lottery scam

  • Refining

  • Self-loan

  • Life insurance

  • The purchase of prepaid services

  • Exchanging vouchers or gift cards for dirty money

  • The use of Bitcoin-type cryptocurrencies 

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Football is used for money laundering

Football is used as a means of laundering dirty money, according to a report by the  Financial Action Task Force (FATF) , an agency that tracks money from banditry. Football is reportedly targeted by criminals who buy clubs, transfer players and place match bets

The means to fight against money laundering

The Financial Action Task Force (Gafi) and the Penal Code of each country define the actions that lead to dirty money or black finance and financial offenses. The Gafi was created at the initiative of the G7 in 1989 to provide an international solution to the problem of money laundering.

 

The organization collaborates with international bodies and organizations such as the IMF, Interpol, the  European Central Bank  or the OECD to fight against this financial crime.  In France, the Ministry of the Economy and Finance set up in 1990, the system for processing intelligence and action against clandestine financial circuits (Tracfin) which requires professionals concerned by capital movements (financial institutions, banks , etc.) to report suspicious behavior spotted among their customers.  

To prevent money laundering, the French legislator has implemented cash payment ceilings (1,000 euros for payments to professionals, 1,500 euros for a  salary , 10,000 euros for a real estate purchase but also  obligations  declaration of transfer of cash to customs authorities above 10,000 euros.  

As for transfers of sums of money of more than 50,000 euros from or to a State of the European Union, other documents must be provided to justify the source of the funds. These supporting documents may involve a sales contract, proof of game winnings, a document from the bank attesting to the completion of cash transactions, etc.

 

The conviction for money laundering by the court can lead to a fine of up to 375,000 euros and 5 years' imprisonment. These measures can be doubled in the case of aggravated money laundering.  Similar organizations exist in the United States (OFAC), Monaco (Siccfin), Switzerland (CDB), etc., because the fight against money laundering is a collective struggle. Dirty money comes mainly from drug trafficking,  smuggling, extortion, corruption, theft, scams, arms sales and tax evasion.  

The impacts of money laundering on the economy

Money laundering contributes to the development of corruption and jeopardizes the integrity of financial institutions and systems within countries. The technical progress made in the field of electronic commerce, the globalization of  markets  financial and new financial products promote the recycling of the proceeds of criminal activity and the concealment of the path of the money derived from these activities.

JDN

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