How many of you readers have watched Breaking Bad on the telly?
So quick trivia question:
What was Walter White’s biggest issue?
……what to do with all the money he made off an illegal product….
You need to launder the money, make it clean. And it was very interesting how he and his wife did that, via a car wash. Quite poetic in a way.
The issue and concerns are that is you make money via illegal means, selling drugs is just one way, how do you make that money clean to the government??
You begin making deposits or paying in large sums of money to a bank account, it can raise flags. Especially if you are not working and earning a regular wage.
Bank Manager: Why is Bob Smith always paying in cash to his account each week? He pays in £3,000 every few days. Odd…. No wages from an employer, but cash? Is he self-employed??
And this is just the tip of the iceberg! Suppose you pay in tens of thousands of pounds each week.
A huge red flag pops up!
You need clean money going into the bank, not “dirty” as they say. The money needs to be laundered, come from a legitimate source…..like a company.
Yeah, that’s the ticket… a real company, legit, making huge deposits or paying in receipts from the business.
A business man!
Money from illegal means needs to be cleaned or launder in order to be spent. Large amounts of cash being spent raises questions.
Methods of Money Laundering
There are many ways to launder dirty money and make it clean, but the basic idea is to have the money run through some legitimate system and it comes out clean on the other side.
Dirty money in, clean money out.
The best way to do this is to use a financial institution, such as a bank. Money in the bank can be spent, and usually there are no questions or flags. However, in order to do this, you need to in most instances, have a business and make deposits or pay in the money. This is where is gets tricky.
Especially in these pandemic times, paying in cash means a visit to a local bank branch, and large cash deposits can be a flag. However, there are businesses that deal in cash, even though more and more we are moving to a “cashless society”.
So laundering money through a company can still be done, but it is getting much more difficult.
Buy Bearer Instruments: This is where you take the illegal cash and buy bonds or money orders or securities that cannot be traced back to you. You can then spend or use the instruments.
This works, but usually only for smaller amounts of money that needs to be cleaned.
Money Mules: This laundering method is also for smaller amounts of money to be laundered. It also has been found to be used targeting university students.
Money is paid into a bank account of a third party, and then the money is transferred to another account. An example is this:
Illegal money is paid into person A’s bank account, say £4,000.
Person A then transfers £3,500 to person B’s bank account, keeping £500 for their troubles.
The £3,500 is now clean in person B’s bank account having come from another banking source.
Bitcoin/Cryptocurrency: This laundering technique is similar to buying bonds or money orders, but can be used on a larger scale, you buy bitcoins, which cannot be traced. Obviously there are some issues that need to be addressed first, such as having a digital wallet, and where to spend the digital currency. However, more and more people are using cryptocurrency to make purchases around the world.
There are also more and more non-fiduciary items being valued and sold, such as art and music. These in the future or possibly now, can be used to launder money.
Demonetisation: This is a very harsh and huge way to stop the use of illegally gained cash, and one that was used in India in 2016.
Basically it is the ending of one currency, and creating a new currency.
Old notes no longer have value and can be used after a set-date, and old notes can be traded for new notes or the new currency up to that set date.
Anyone exchanging a large amount of money/cash is noted, and if you do not exchange the old notes, then once the date for the new money passes, the old notes become worthless; worthless on the main market or economy.
Demonetisation does two (2) things: It brings out cash that was gained through illegal means. It also brings out cash that was earned through whatever means, legal or illegal, and taxes were not paid on the money.
In reading this you can see, laundering money can be a simple or complex process depending on the amounts that need to be cleaned. And by now criminals have already figured out new and ingenious ways to wash the cash, as they say.