Part 1 - AL-Tax

Chapter 13AbstractIn this chapter we will review what is considered money laundering, why it is so widespread,the different stages, its global impact, and the effects it has on the economy, the generalpopulation, and why we should all be concerned. We will finally review how countriesthroughout the world have banded together in their fight against money laundering.13.1 IntroductionAs commonly understood, money laundering is inextricably associated with drugtrafficking and the attempts to disguise the criminal character of the funds derivedfrom that activity. When a money-laundering scheme has been successfully implemented,the profits of trafficking will be made to appear legitimate and the personsinvolved in the trafficking (invariably the directing minds rather than theactual perpetrators) can freely and openly utilize those profits.While drug trafficking remains, by far, the principal source of the illegal proceedsdeployed in money-laundering schemes, money laundering plays an integralrole in other criminal activities, in particular those where the overarchingmotivation is the generation of profits (FATF, 1996, 1997; Trehan, 2004). Financialcrimes – primarily bank, credit card and investment fraud, bankruptcy fraud, extortion,illegal gambling, loan sharking, and the smuggling of alcohol, firearms andtobacco – now constitute the second largest source worldwide of illegal proceedsfor money-laundering schemes (FATF, 1996, 1997). More recently, trafficking inhuman beings and illegal migration have emerged as significant generators ofillegal proceeds (FATF, 2005).Money laundering, however, reaches far beyond profit-driven criminal activities.Many other forms of criminal activity (particularly those involving a significantelement of premeditation as opposed to opportunistic crimes, such as streetmuggings, and so-called ‘crimes of passion’) require funding for their design andimplementation. Here the money-laundering techniques developed to sanitize theproceeds of drug trafficking are equally useful in concealing the sources of fundsfor criminal enterprises. Money laundering has now been identified as a key facilitatorof what may be described as not-for-profit criminal activities, such as acts ofterrorism, where the motivating factor is not profit but a political or ideologicalgoal (Bell, 2003; FATF, 2003, 2004, 2005).Nor is money laundering confined to criminal activities. It is possible to categorizethe funds that are the subject of money-laundering schemes into ‘hot money’,‘gray money’, and ‘dirty money’, with only the latter being concerned exclusivelywith the proceeds of crime (Savla, 2001).313