Crime is a necessary evil that must be eradicated. A crime is any act that is prohibited and penalised by the law. It is difficult to define a crime generally because the meaning of the term differs from country to country, and activities that may result in incarceration and punishment in one country may not have the same consequences in another. However, there are certain types of conduct that can be classified as illegal activities in today’s world, whose definitions have been accepted by the international community, and which have a global presence regardless of their location, nature, or scale.
‘White Collar Crimes’ is the term used to describe certain forms of criminal activity. In terms of nature, traits, and types, the old definition of crime has undergone a huge transformation. Acts that harm a human being physically, such as murder, physical assault, and so on, were considered criminal acts in the past, but with technological advancements, the parameters for judging criminal activities have widened in scope, and it is no longer limited to traditional crimes like murder, theft, robbery, and physical assault.
There are numerous distinctions between conventional and white-collar crimes. The major motivation for a white-collar crime is corruption, which is the root cause of all required depravity, whereas vengeance, passion, or hatred may be the motivation for a traditional crime. A traditional crime can be committed by anyone from any social class; categorization is difficult in the case of a traditional crime, whereas white collar crime is only committed by persons from the upper and middle classes.
Let us consider how money laundering, a key component of white-collar crime, occurs in society as a whole in light of this thesis. What does a person do with a large sum of money that he has obtained illegally by various means such as drug smuggling, immoral trafficking, and so on? Does he simply keep the money in his home or does he go to a bank and declare the proceeds of crime he has accumulated? Does he simply keep the money in his home or does he go to a bank and declare the proceeds of crime he has accumulated?
If he chooses the second option, he will almost certainly be apprehended by the investigating authorities because all country’s banking institutions have a certain threshold limit for depositing money in the concerned financial institutions, and if that threshold limit exceeds the given amount, suspicion grows among the officers who are hired to keep a close eye on these people. So, the second possibility can be ruled out, and it is apparent that the individual would not dare to go to the bank and declare his assets or money gained through such means.
So, if the first alternative is considered a realistic method of money laundering, the worry of income tax investigators invading that person’s home and discovering the real source would be a walk in the park for these seasoned specialists. So, what options does this guy with a large quantity of unlawful proceeds have? Let’s take a closer look at what money laundering is.
How does the money laundering process work?
Before we get into the specifics of how to successfully launder money, let’s first define dirty or tainted money. Dirty or tainted money is money that has been obtained illegally or via dishonest means. Money gained through drug trafficking or smuggling, for example, may fall into the category of filthy or tainted money because it lacks a valid source of origin.
Laundering filthy money can be done in a variety of methods, including the following:
a) Placement – The first step in integrating illegal proceeds into the economy is placement.The ill-gotten gains are deposited in a respectable banking institution. This entails numerous hazards, as the authorities’ attention may be drawn to the fact that a huge amount of filthy money is being exchanged. The launderer divides a significant transaction into smaller ones that are often not subject to reporting. For example, suppose a criminal organisation has amassed an amount of Rs 30 lakhs after successfully committing a crime for which it was hired. To conceal the source of such a large sum of money, the full amount must now be laundered. The criminal organisation is well aware that depositing the entire quantity in one day at the same branch without breaking it up into smaller transactions will attract the attention of banking authorities, exposing the source of the funds. As a result, the organisation divides the sum into smaller amounts and deposits the funds in accordance with the financial regulatory authority’s reporting threshold.
b) Stacking: The following phase is the layering procedure, which involves the money being deposited going through a series of transactions in order to modify the structure of its origin and divert it from its true source. This could include deposits into other accounts, wire transfers, or the purchase of flashy automobiles, mansions, or jewellery, among other things. The plan was to create the transactions appear so complicated that the authorities will have trouble tracing it back to its source. Continuing with the above example, if the criminal organization divides the sum into smaller, unnoticeable denominations and deposits it in various branches, makes offshore deposits, and engages in wire transfers, making the entire transaction appear extremely difficult to comprehend its true nature and scope, the process of money laundering has been completed.
c) Money Laundering Integration: This is the final stage of the money laundering process. The money is re-introduced into the economy, concealing the true source of the dirty money and giving the impression that it came from a lawful transaction. As the money becomes clean and pure, its legality cannot be questioned. Investing a particular amount of money in a respectable firm remove the tag of dirty money totally, masking its true character.
Now, a key topic that comes at this point is how money laundering should be combated, because if this continues, catching a criminal will be difficult for the authorities involved. The regulatory authorities and financial institutions in a country are doing everything they can to combat such a crime by enacting regulations and mechanisms. The respective financial institutions are continuously monitoring suspicious transaction activities, upgrading their know your customer data bases, and carrying out other reporting activities including such financial transaction reporting, counterfeit notes reporting, consumer due diligence, customer identification procedures, and so on in order to meet the country’s reporting obligations. However, despite such progress, another concern that arises is if combating money laundering is such a simple process.
The answer is a resounding NO, since if money laundering is compared to an ocean, and catching whales to money laundering criminals, the situation is fairly gloomy, for spotting a whale in an ocean is tough enough, let alone catching them. Money laundering, in practice, can never be completely eliminated from society; it can only be reduced to a certain amount because this system is a series of complex processes that have been in operation for a long time, but, as they say, each cloud has a silver lining. There are rays of hope as well; each country’s government is working hard in partnership with banking institutions to combat money laundering. The global community is more conscious of the impact of money laundering these days, and is working harder than ever to combat it, which is a constructive attitude.
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