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The goal of a large number of criminal acts is to generate a profit for the individual or group that carries out

the act. Money laundering is the processing of these criminal proceeds to disguise their illegal origin. This process is of critical importance, as it enables the criminal to enjoy these profits without jeopardizing their source. The most common types of criminals who need to launder money are drug traffickers, embezzlers, corrupt politicians and public officials, mobsters, terrorists and con artists. How much money is laundered per year? Money laundering is an illegal activity which occurs outside of the normal range of economic and financial statistics. The United Nations Office on Drugs and Crime (UNODC) conducted a study to determine the magnitudes of illicit funds generated by drug trafficking and organized crimes and to investigate to what extent these funds are laundered. The report estimates that in 2009, criminal proceeds amounted to 3.6% of global GDP, with 2.7% (or USD 1.6 trillion) being laundered. How is money laundered? The basic money laundering process has three steps: 1. Placement - At this stage, the launderer inserts the dirty money into a legitimate financial institution. This is often in the form of cash bank deposits. This is the riskiest stage of the laundering process because large amounts of cash are pretty conspicuous, and banks are required to report high-value transactions. 2. Layering - Layering involves sending the money through various financial transactions to change its form and make it difficult to follow. Layering may consist of several bank-to-bank transfers, wire transfers between different accounts in different names in different countries, making deposits and withdrawals to continually vary the amount of money in the accounts, changing the money's currency, and purchasing high-value items (boats, houses, cars, diamonds) to change the form of the money. This is the most complex step in any laundering scheme, and it's all about making the original dirty money as hard to trace as possible. 3. Integration - At the integration stage, the money re-enters the mainstream economy in legitimatelooking form -- it appears to come from a legal transaction. At this point, the criminal can use the

money without getting caught. It's very difficult to catch a launderer during the integration stage if there is no documentation during the previous stages.

There are lots of money-laundering techniques that authorities know about and probably countless others that have yet to be uncovered. Here are some of the more popular ones: Structuring deposits Also known as smurfing, this method entails breaking up large amounts of money into smaller, less-suspicious amounts. In the United States, this smaller amount has to be below $10,000. The money is then deposited into one or more bank accounts either by multiple people (smurfs) or by a single person over an extended period of time. Overseas banks Money launderers often send money through various "offshore accounts" in countries that have bank secrecy laws. A complex scheme can involve hundreds of bank transfers to and from offshore banks. According to the International Monetary Fund, "major offshore centers" include the Bahamas, Bahrain, the Cayman Islands, Hong Kong, Antilles, Panama and Singapore. Shell companies These are fake companies that exist for no other reason than to launder money. They take in dirty money as "payment" for supposed goods or services but actually provide no goods or services; they simply create the appearance of legitimate transactions through fake invoices and balance sheets. The injection of laundered money into any economy transforms them into a productive source of working capital, but this is bad, because it corrupts banks, government officials, it contaminated legal sectors of the economy, pushes out legitimate and foreign capital, deflates and un-stabilizes the control of money and enhances a cross-the-border capital movement, which increases the volatility of the exchange rate.

Money laundering is a crucial step in the success of drug trafficking and terrorist activities, not to mention white collar crime, and there are countless organizations trying to get a handle on the problem. In the United States, the Department of Justice, the State Department, the Federal Bureau of Investigation, theInternal Revenue Service and the Drug Enforcement Agency all have

divisions investigating money laundering and the underlying financial structures that make it work. The international community is fighting money laundering through various means, including the Financial Action Task Force on Money Laundering (FATF), which as of 2005 has 33 member states and organizations. The United Nations, the World Bank and the International Monetary Fund also have anti-money-laundering divisions.