What is Money Laundering? How to Legalize Proceeds of Crime?
Black money refers to money obtained illegally or with low transparency and is associated with taxation, money laundering and financial crimes. Black money mostly originates from criminal activities such as drug trafficking, human trafficking, financing of terrorism, corruption and fraud. Black money is against the law because its source is unclear or untraceable. So, what is money laundering? How to legalize proceeds of crime?
Money Laundering is Methods that Make the Proceeds of Crime Appear Legal
Money laundering is the set of methods used to make black money appear legal. Through money laundering, criminal proceeds are disguised as legitimate income and various financial transactions and complex structures are used to conceal its source or make it difficult to trace. In this way, the impression is created that the proceeds from criminal activities have a legal origin.
What are the Money Laundering Methods?
There can be an unlimited number of money laundering methods. Different tools and methods can be used in each country and financial system. Additionally, money laundering can be done by professional individuals or institutions. These may be people who know their job very well, such as accountants, bankers, lawyers, financial advisors. The most well-known and used money laundering methods are:
- Physical smuggling of funds out of the country: It is the method of moving black money to another country in cash or transferring it secretly.
- Smurfing method: It is a method of dividing black money into small amounts and depositing it into more than one account or transferring it by more than one person.
- Structuring method: It is the method of dividing black money into pieces in order to avoid the reporting obligation by remaining below a certain amount.
- Tax havens (off-shore): It is a method of transferring black money to accounts or companies in countries where tax rates are low or non-existent.