Basic Facts On Money Laundering

“Money laundering,” is a phrase that is becoming more common, corruption among businessmen and in some cases politicians leads to money laundering. In this blog we take a closer look at the term and explain the ramifications it has on society, governments and financial institutions.

What Is Money Laundering?

Money laundering is a term used to explain the process of making illegally gained proceeds or money appear legal or ‘clean.’ Typically, the money gained from activities such as drug trafficking, illegal gambling, or other crimes can easily be made to appear clean, i.e. derived from legal activities so that banks and other financial institutions will deal with it without questioning its legitimacy.

Money laundering involves three steps, placement, layering and integration. Placement refers to the act of presenting ‘dirty money,’ obtained by illegitimate means into the financial system. Layering involves camouflaging the illegal source of the money using a series of transactions. Finally, integration allows the individual to obtain the money from the transactions of the illicit funds.

Living In The Age of Money Laundering

The growth of the global financial markets has increased money-laundering practices making it easier than ever. Many criminal organizations direct their illegally obtained cash to banks from shoddy businesses practices. Corrupt businessmen also use a widely renowned method of money laundering called smurfing. The practice involves breaking large amounts of money and depositing them in banks over a long period of time. Smurfing can also take place when cash is smuggled across borders and deposited in offshore accounts.

Recent newspaper reports suggest that Switzerland is an attractive location for money laundering proceeds. A report by the national assessment of money laundering placed Switzerland at medium risk. This comes after recent corruption scandals surrounding Zurich’s based FIFA, the world’s soccer governing body. In light of recent events a report was issued by the State Secretariat for International Financial Matters, the report recommended strong measures to strengthen the effectiveness of the anti-money and terrorist financing system in Switzerland. The Swiss government acknowledged the report and said it will review it and make recommendations to the parliament.

The Impact Of Money Laundering

Money laundering has serious costs and risks, not only does it permit drug traffickers and smugglers to expand their crime but it also increases the cost of government expenditure to increase law enforcement and health care to combat the consequences that result.

Among the other negative impacts of money laundering is its impact on the financial market and government institutions. In one way or another money laundering moves economic power from the market, government and citizens to criminals, in extreme cases it can also lead to the take over of legitimate government, which permits criminals to have a large impact on a country.

Money laundering can have serious ramifications on the integrity of banking and financial institutions. If a financial institution is suspected of channeling illicit funds because its employees or directors have been bribed or they have turned a blind eye to the criminal nature of these funds this can have a damaging effect on institution itself, in effect making it part of the criminal network itself.

FERZ SA has a reputable experience in investigating money-laundering offences. Our team of lawyers can analyze relevant transactions and advise you on the best course of action.