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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.

Private School Cheaper Than You Think

While public schools are subsidized by the state, private schools receive their funding through tuition, donations, private grants, and fund raising events.  Thus, private schools are cheaper than you think.

According to the Cato Institute, “Statistics from the Education Department show that the average private elementary school tuition in America is less than $2,500.  The average tuition for all private schools, elementary and secondary, is $3,116 or less than half of the cost per pupil in the average public school, $6,857.”

Although there are private schools that cost more than usual, this is restricted to the most well-known schools.  For example, in one state, a highly acclaimed private school can cost as much as $13,000 a year - but this is the exception.  Private schools around the country may average between $2,300 and $3,500.

In fact, most families can send their kids to private school for about $2,000 a year or less.  The Cato Institute’s research reveals that, “The average private school cost is significantly less than the amount spent for each student in public schools.  A voucher or tax credit worth the same amount spent per student in public schools would easily give parents access to the bulk of private schools available in their communities.  With more parents able to afford private schools, new schools would open to accommodate the increased number of students.”

One example is in the state of Florida, where there have been over 350 new private schools built to accommodate students utilizing several programs offering programs to make it even more affordable to attend.  In Milwaukee and other states, there has been an influx of private donations to offset the cost of attending private schools.

Surveys have indicated that in those states that offer programs allowing for school choice, private schools offer an alternative to the public school system which, as we know, has not produced significant test scores over the last several years.

This, above all, has been the catalyst that has driven more students to private schools than ever before.  The general consensus is that most public schools which are subsidized by Federal and State governments have not produced the kind of results that were anticipated through the “No Child Left Behind” Program.

Therefore, families do have a choice to send their children to private schools using vouchers or other programs that would afford their children a quality education.  Since this is the foundation upon which families choose the best available school in their state, private schools offer a higher quality of education that is both affordable and accessible.

Are we in a recession?  Considering the news today that Lehman Brothers has just filed for bankruptcy and Bank of America is buying Merrill Lynch, combined with the bail-out of Fannie Mae and Freddie Mac by the government, one can say with confidence we are indeed in a recession.

Not too long ago, a financial expert predicted that only two major banks would be left after the housing crisis and the economy returned to normal.  It was a prophetic prediction.

What does this recession mean for you and me?  It means we have to tighten our bootstraps (if we haven’t already) and begin planning for any eventuality.

While economists comment that the last two recessions lasted for eight months respectively, it is no comfort to learn that the housing crisis has not yet reached bottom, fuel prices are continuing to rise in light of recent events, and more and more companies are closing down leaving thousands of people unemployed.

Wages have decreased, more families are in debt than ever before, health-care costs continue to rise, and our grocery bills have eaten into our household budgets significantly.

In order to alleviate the burden of all these factors, the best advice economists can offer is to take a fiscally conservative stance on our spending habits.  Here are some additional suggestions:

* Stick to a monthly budget
* Refrain from buying expensive items on credit
* Set up a fund for emergencies (at least two months’ income)
* Try to add the maximum amount allowed to your pension/retirement fund
* Stay healthy with a proper diet and exercise program (This is a preventative measure that will reduce the cost of prescription drugs and other health-related costs)
* Pay down debts
* Purchase with cash
* Buy groceries in bulk utilizing coupons whenever you can
* If you have teenage children who are receiving an allowance, determine if they can apply for a part-time job after school
* Increase your deductibles on car and homeowner’s insurance
* Keep your automobile well-maintained
* Winterize your home and use energy-efficient appliances and light bulbs
* Walk whenever possible instead of driving to a local store

Anything you can do to reduce the amount of expenditures can only help you through this economic downturn.  In the meantime, stay calm, focus on your budget, and save as much as you can.

FDIC:  Is Your Savings Account Secure?

With the current financial crisis affecting banks and the stock market, in addition to reports that many more banks may be in financial trouble, the question many of you may ask is:  What about my savings account?  Is it secure?

In answer to your question, we have to look to the Federal Deposit Insurance Corporation (FDIC) for answers.

What money is insured?  According to the FDIC, the following accounts are secured “up to the legal limit of $100,000, and possibly more for special accounts.”  The insured accounts include:  checking, savings, trust, certificates of deposit, and IRA retirement accounts.

What isn’t insured?  The FDIC states that “institutions who offer consumers a broad array of investment products that are not deposits, such as mutual funds, annuities, life insurance policies, and stocks and bonds are non-deposit investment products and are not insured by the FDIC.”

To determine the amount your bank is insured for, it may be a good idea to contact them and ask about your accounts.

The FDIC also advises that “You can - and should - obtain definitive information about any mutual fund before investing in it by reading a prospectus, which is available at the bank or brokerage where you plan to do business.  The key point to remember when you contemplate purchasing mutual funds, stocks, bonds or other investment products, whether at a bank or elsewhere are that:  Funds so invested are not deposits, and therefore are not insured by the FDIC - or any other agency of the federal government.”

In addition, if you own securities or mutual funds, FDIC states that they “are held for your account by a broker or a bank’s brokerage subsidiary and are not insured against loss in value.  The value of your investments can go up or down depending on the demand for them in the market.  The Securities Investors Protection Corporation (SIPC), a non-government entity, replaces missing stocks and other securities in customer accounts held by its members up to $500,000, including up to $100,000 in cash, if a member brokerage or bank brokerage subsidiary fails.”

This is critical information considering the recent bail-out of AIG and other well-known banks in recent days.

In these troubling economic times, the more you know about your bank and its affiliation with FDIC, the more prepared you will be for any eventuality.

Copyright © 2008 Daniel Lamaute

The credit crunch coupled with a recession means that access to capital has become scarce for most businesses and individuals alike. The crashing home prices have wiped away the ability of most individuals and small business owners to obtain cash from home equity withdrawals or in refinancing their house.

Credit cards are convenient but have never made sense for long term borrowing. Most of them have fees and interest rates that can strangle or trap the user in perpetual debt. An added consideration is that the bankruptcy rules have credit card debts next to impossible for one to shake off and start afresh.

It is a truism that the worst time to look for a loan is when you need one. So how does one find cash in a crunch? The most sensible way of course is to over time build a store of emergency cash fund by spending less than your income. For those who have not accumulated a stash of cash, an alternative might be to look at your other assets such as an IRA or 401(k).

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The easiest way to shop without hassle and stress is to shop early.  Most of us use shopping as a way to get into the Christmas spirit, but it also promotes a stressful holiday season.

What types of gifts do we buy? Mostly, items that we think someone would like to have based on our tastes.  The most meaningful gift is one that meets that person’s desire or need.  If Cousin Susie is always running out of stamps or envelopes to write letters, a thoughtful gift would be a personal mail center complete with stamps, envelopes, and writing tools.

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What can I say about eating around the holidays? The main reason for Christmas may not be food but all of the good times we seem to have center around it.  Food brings people together.  It may be a wedding, funeral, reunion, or holiday and you will see families laughing and playing over some sort of vittles.

But, food can get pretty expensive at that time of the year.  If you are a holiday baker and a party host, getting the menus together ahead of time will save lots of money.  A comprehensive list of ingredients for family dinners, desserts, and party foods allows things to be marked off as they are bought.

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