Money laundering is the process of converting the financial proceeds, money, obtained through criminal activity, corruption and kleptomania into seemingly legitimate proceeds from seemingly legitimate investments. Money laundering is as old as the history of money itself, and dates back to ancient times, when nobility would hide their wealth in various ways to avoid taxation. Money laundering usually involves large amounts of cash from illegal activity such as drugs sales and terrorism into legitimately usable cash. The processes through which money laundering can take place are wide ranging and often involve a financial institution. Globally, billions of dollars are laundered through various financial institutions worldwide annually. The very nature of activity untaken at financial institutions leaves them vulnerable to deft money laundering activity. Money laundering offences have been found to display two main characteristics globally. The first is the act of laundering, where the proceeds from criminal activity are aided through the financial system by the provision of services beginning with acceptance of deposits. The second is the degree of suspicion or knowledge that the funds in question are proceeds of criminal activity. The rationale behind the illegality of money laundering is that it is wrong for organisations to assist criminals with the proceeds of their illicit activity by providing them with the necessary financial services to benefit and wholeheartedly enjoy such proceeds.
Who Are Money Launderers?
Essentially criminals, ranging from petty thieves or drug dealers, all the way up to kingpins of international crime. The most common types are drug traffickers, who deal strictly in cash. This poses logistical problems, an easy to follow paper trail being chief of those. Drug traffickers are always on the lookout for a “front”, a business through which they may funnel the proceeds of their activity, appearing on the businesses’ books as genuine customer generated revenue. Other common money launderers are mobsters, embezzlers, con artists and terrorists.
How Is Money Laundered?
The process of money laundering almost always follows three basic steps. These are as follows:
- Placement- This is the first stage of the money laundering process and the most risky. The high risk is due to the usually high amounts of cash that must be moved through the financial system. This involves injecting the criminal or dirty money into the financial system via a financial institution such as a bank. Placement can be further broken down into various methods, each with its own associated risks. The easiest placement method is via bank deposits. Often accompanying this, the money launder will employ “smurfing” which is breaking up large amounts into smaller innocuous amounts. This defeats anti money laundering regulations regarding declarations and usually always suspicions over sources of funding.
- Layering- The next stage in money laundering is the layering stage. At this point the criminals will spread the dirty money out, hidden in a number of transactions, sending amounts back and forth between up to three or four different financial institutions or instruments. Money Launderers will utilise any method possible to change the state of the money, buying high value items such as houses and boats, purchase businesses as front for dirty money laundering operations. Bank accounts may be set up at varying offshore banks, with different business names, subject to varying jurisdictional ordinances. Other types of layering include bank capture, casinos/gambling, round tripping, bulk cash smuggling, black salaries, fictitious loans, tax amnesties, shell companies/trusts and real estate. Layering is the most complex of the three steps involved in money laundering, as it involves creative ways of moving dirty money through the financial system without leaving firstly a suspicion that the money might be dirty, then a trail back to its original owners. The goal of layering is to make the origin of the dirty money as hard to trace as possible, in preparation for the next and final step in the money laundering process.
- Integration- This is the final stage in the money laundering process. This involves the re-entry of the criminal funds into the mainstream economy as legitimate funds, from a legitimate source. At this point, the criminals may finalize a sale of a house, through a shell real estate company; provide legitimate “investment” into a business in exchange for shares or any other method which allows for one final lump sum payment into an account controlled by the criminals. This deposit is seemingly legitimate and stands up to all the rigorous testing financial institutions require for anti money laundering procedure. It is exceedingly difficult to catch criminals or money laundering at this stage, if there has been no proof in earlier stages. After this stage the criminals are free to dispose of their now legitimate funds as they see fit, reinvesting in further crime, or pampering themselves with life’s finer things.
Why is Money Laundering Bad?
Money laundering has a number of negative effects on the socioeconomic climate of a country. First is that money laundering activities tend to provide finds for further criminal activity. Activities that require money laundering tend to generate large amounts of cash. When these vast amounts are kept out of circulation due to being dirty money, this wrecks havoc on the economy of a country and may be a factor to drive inflation very high.
What is Anti-Money Laundering (AML)?
Anti money laundering refers to the legal framework that financial institutions must adhere to regarding the reporting, prevention and detection of money laundering activities. While anti money laundering laws and regulations may not cover the myriad of methods that money launderers use, the scope is nonetheless far reaching. All banks exercise due diligence when taking on new customers, as they are required to by anti money laundering laws. Heavy fines are placed on financial intuitions found to be slack and culpable in their anti money laundering practices. Anti money laundering regulations came to being after the formation of the Financial Action Task Force (FATF). To have effective anti money laundering frameworks in place, a jurisdiction must have criminalised the act of money laundering, give relevant authorities and regulators the powers necessary to pursue money launderers, share information with other agencies/jurisdictions as appropriate, require financial institutions to profile their customers, establish controls for risk, report suspicious activity and keep records.
Cathedral Investment Bank Anti Money Laundering
Cathedral Investment Bank is committed to an ongoing strategic process of anti money laundering. Since 2002 the anti money laundering procedures undertaken at Cathedral Investment bank have been continuously refined, adapted and perfected to suit the ever changing needs of the financial world. From the beginning, internal procedures were developed along the best guidelines, then passed on to global affiliates. The core values of the Cathedral Investment bank anti money laundering policy are as follows:
- Institutional support with involvement at all levels of the organisation. This enables the policy to be enacted as a standardised measure throughout Cathedral’s global enterprise. Cathedral utilise the expertise of various departments to create an anti money laundering policy that stands up regardless of the jurisdiction in which the transaction is taking place.
- A more demanding internal legislation than official standards. Cathedral Investment Bank entrusts the anti money laundering policy to the Cathedral Investment Bank Administration Council. The policy is approved by the Cathedral Investment Bank Committee of Analysis and Resolution (CAR).
- Transaction analysis by those who know the client. Cathedral Investment Bank has a customer service policy that not only seeks to ensure clients have the easiest of times while doing business, the policy is also shaped to lower risk to both client and bank to minimum. Clients are assigned to account managers who are experts at their profession and will scrutinise every detail that must be checked and rechecked.
- Strict and thorough investigation of suspicious operations. Cathedral Investment Bank will vigorously investigate the sources of funding from any transaction it deems to be of a suspicious nature.
- Systematic and permanent review of offshore branches. This ensures that all branches of Cathedral Investment Bank are offering clients the same degree of protection from money laundering activities.
- Internal Audit and formation department support. Internal checks make sure that nothing has been missed; none have snuck through into the banks funds.
- A proactive approach to handle risk solutions. Cathedral Investment Bank will seek actively to minimise risk through a variety of proactive endeavours, risk is always of paramount importance.
- Prevention as priority over any other commercial interest. Cathedral Investment bank makes prevention of money laundering their number one priority.
Cathedral Investment Bank, Leader in Anti Money Laundering
Cathedral Investment bank is committed to its policy of anti money laundering. The proceeds of crime have no place in the financial system and the systems in place via specialized units ensure that funds coming into or going out from Cathedral Investment Bank are from totally legitimate sources. Cathedral Bank’s team is well practiced and versed in varying anti money laundering regulations across varying jurisdictions and always come up with the right policy to ensure clients and the bank are not left exposed. Contact any one of Cathedral Banks seven locations worldwide.