Monday, January 18, 2021

Money Laundering as a business model

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Money Laundering is usually attached to illegal businesses, human trafficking, drug trafficking, or financial services.  However, many genuine businesses are set-up for laundering illicit funds.

Criminals are always on the lookout for ways of cleaning ill-gotten financial gains, as such legitimate businesses provide the right amount of cover for these criminals.

A common business model for laundering money is by setting up genuine businesses which allow illicit funds to be combined with legitimate business incomes.

These companies are legally registered and undertake all regulatory responsibilities, therefore they can report the illicit funds as genuine business transactions such as invoicing, cash transactions etc.

Businesses with cash payments as a primary mode of payment such as nightclubs, casinos, and restaurants are lucrative businesses for money launderers.

Cash transactions are much difficult to trace or dispute in terms of customers patronizing a business.  Businesses set-up for this purpose are rarely set up for profit purpose, rather an avenue to launder money.

“Complex Business Model of Money Laundering”

A more complex model of money laundering business could allow criminals to make double gains by setting up a public traded company with a real business purpose.

First gain, Illicit funds are mixed with business revenues to legitimise its source.  The second gain is by selling shares in the company to unknowing investors.

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Shell companies are favorites of money launderers, such that they are set up offshore with no significant assets or operations.  Shell companies have real accounts attached to them.

Funds are transferred between shell accounts with no real transactions to back up the funds, sometimes unknowing third party account till it gets to the intended purpose i.e. purchase of properties or funds.

It is difficult to identify a money laundering business at face value. Banks must be vigilant in their responsibilities to prevent money laundering.

Money laundering as a business model is a lucrative tool for criminals and a difficult model to decipher.

However, money laundering through businesses is eventually spotted by law agencies or other safeguarding means.

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