What is money laundering?
What is money laundering? Money laundering is the process whereby a person or company will transfer money obtained through illegal means, such as depositing the money in another account under a completely different name or entity and then withdrawing the funds to make it seem as if it came from another source.
Here’s an example. A well-known congressman “took part in an alleged scheme to bypass election code rules by hiding the corporate origins of money that ended up in the hands of Republican candidates in Texas. The alleged laundering scheme involved sending corporate donations from Texas to the Republican National Committee headquarters in Washington D.C., and the RNC then sending an equal amount of money back to Texas for use in campaigning.”
Most money laundering schemes are conducted by “criminals who are trying to disguise the origins of money obtained through illegal activities so it looks like it was obtained from legal sources. They can’t use the money because it would connect them to the criminal activity, and law-enforcement officials would seize it.”
There are other reasons why money laundering is utilized, especially in third-world countries where the government has enormous debt. Here is one example cited in Africa:
“Money laundering schemes in an underdeveloped economy may include physical movement of cash or property. For example, the gem tanzanite is physically transferred from its source to a destination where it is processed (cut) or sold. In the case of currency transfers, the informal exchange system known as the hawala system is often used. In the sending country, the sender pays in local currency into the informal processing organisation and the money is credited or paid in cash to the recipient in a foreign country, without physical cash necessarily being transferred.
Tanzania experienced large-scale money laundering in the early 1990s when foreign banks were allowed to open branches in Tanzania. The amount of money deposited into the bank is estimated at $285 million - deposits from government departments and construction projects. Huge amounts of money deposited were siphoned off outside the country illegally and within a short time the bank was declared insolvent.”
Who participates in money laundering? Local and foreign organised crime groups, businessmen, politicians, hotels, government officials, and casinos.
How is money laundering caused by debt? Take the case of an American citizen who went to Tanzania and purchased eight plantations under a debt-swapping scheme, which is “acquiring unpaid debt at a discounted rate” and paid by a prospective buyer. The local bank gave him money, in advance, to develop the farms. He didn’t do anything and was later deemed “persona non grata”. The money was never traced and subsequently it was determined that he invested the money overseas to utilize at a later date.
