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Money Laundering

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Introduction :
There are different types of cyber-attacks that could cause a lot of damage. An intruder can gain access to your network or computer system that is unauthorized. Through cyberattacks, the data in your systems can be damaged/ destroyed/stolen/blocked/manipulated. Money Laundering is a type of cyber attack.

Money Laundering :
Creating a huge amount of money from criminal activities such as terrorist activity, drug trafficking started from a legitimate source is known as money laundering.
The criminals try to cover the origin of that money obtained illegally so that it can look legal. If they do not do so, that illegal money can link them to criminal activity. So, we can say that the money from the illegal activity is considered dirty, and to make it look to clean the process launders.

To bypass the legal consequences of this action, the conversion/transfer of property for the purpose of concealing/disguising the illicit origin of the property, etc. is done.
Criminals can maintain control over their proceeds & provide a legitimate cover for their source of income if money laundering is done successfully.
To bypass the currency transactions report (CTR) filing requirement, money launderers have developed ways to structure large amounts of currencies.

Money laundering takes place in several countries around the world, and a common scheme entails moving funds across many countries to conceal their source. It’s known as cyber laundering when it’s done via cyber.
Our traditional money transfer methods that rely on the banking system, but cyber-laundering relies on a wide range of transactions and financial service providers, including wire transfers, cash deposits/withdrawals, and e-money transactions and remittance services.
Suppose the chosen payment system includes online payment features. In that case, the money can be converted to electronic cash before being transferred immediately and almost secretly overseas, rendering law enforcement’s task of detecting and tracking illicit funds extremely difficult.

Prevention : 
The aim of which is to prevent the financial system from being used for the purpose of money laundering , especially through a general requirement to precisely identify originators, as well as placing and limitations on certain transactions that serve as a medium for money laundering.

Detection :
Laundering is detected by legislation that allows for the centralization of information by agencies tasked with countering such operations, as well as the introduction of advanced investigative measures.

Suppression of money laundering activities & associated crimes, as well as confiscation measures that are complements to enforcement, & preventive measures such as freezing & seizing assets.

From simple to complex, many ways can be used for money laundering. One of the common ways is through a legitimate cash-based business owned by a criminal organization.

Example –
If an organization owns a restaurant, it can inflate the daily cash receipts to funnel its illegal cash through restaurants and into the bank. They will distribute the funds from the restaurant’s bank account to the owners. These types of business are referred to as “fronts”.

The common methods used for money laundering are :

  1. Smurfing
    It is a method of avoiding reporting said transactions to approved entities in the context of providing continuous information or identification by conducting transactions within the country’s legal limits.
  2. Creating an Account with an Incorrect name & Details.
  3. Getting benefits from various non-functional/ shell corporations or companies.
  4. Bulk Cash Smuggling – 
    It entails physically smuggling banknotes to another jurisdiction and depositing them in a financial institution with greater bank confidentiality or less stringent money laundering enforcement, such as an offshore bank.
  5. Trade-based laundering – 
    It entails undervaluing or overvaluing invoices in order to conceal money movement. This is often chastised for being a convenient conduit for money laundering. Money launderers can easily clean their money thanks to the subjective nature of art and the confidential norms of auction houses regarding buyers and sellers.
  6. Bank capture – 
    When money launderers own or operate a financial institution, this happens. The money in this situation can travel freely inside the bank and is legally transferable to other banks. This form of laundering is difficult to detect since the money travels without being investigated.
  7. Casino Laundering
    Winnings from gambling are entirely legal and are usually paid out in cash. Someone could potentially assert all of the money as gambling winnings by buying chips with the dirty funds, gambling a small sum, and then turning the total chips back in for cash. As a result, banks often accuse these winnings of money laundering and may suspect you of doing so.
  8. Real Estate Laundering – 
    Real estate is another way to launder money. Someone might theoretically buy a piece of real estate with cash and then immediately sell it. Profits from the sale would be linked with it and would be fully legitimate. 
  9. Black Salaries – 
    Many unregistered employees can work for a company without written contracts and be paid in cash. They are paid with dirty cash.
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Last Updated : 22 Jun, 2022
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