Money Laundering: Background, Characteristics, Stages, Methods

Money laundering: background, characteristics, stages, methods

Introduction

We will see in this essay, a process where some people cover up, the existence of goods, which come from illegal activities and thus justify legitimate money. Here this involves the location of funds in the financial system, the structuring of transactions to argue the origin, property and some funds in society, which can apparently prove with legitimacy. In this way there are some specific crimes among other drug trafficking, prostitution, arms trafficking, which generally the society dedicated to this type of situations effect parallel activities, such as lawful businesses, and as a product of it the illegal money, the illegal money,that can thus circulate in a lawful way within the country’s financial system.

Candy laundering is a worldwide problem, since it negatively influences the economy, government and social welfare of nations leading to a danger to national and international security. Criminal actions announce an environment of insecurity in citizenship, this great problem also obstructs the socioeconomic development of the countries. Estimates on the scope of money laundering, indicate that it exceeds the gross internal product of most countries, which allows to easily understand that criminal organizations manage fortunes.

Before entering into the subject, it would be good to highlight the meaning of what an asset is. Active or: values, titles, tickets or goods of all kinds, such as, but without limiting to, movable and immovable property, tangible or intangible, natural resources, as they have been acquired, legal documents or instruments in any form, including electronics or digital, that evidence the ownership of, or participation in, such funds or other goods.

Developing

CONCEPT: Money laundering: money laundering is “It is the process by which natural or legal persons and criminal organizations, they seek to give legitimate appearance to illegal assets or assets from the preceding crimes indicated in this law."

As we had said, money laundering is a crime, which consists in giving an appearance of legitimate or lawful origin to goods, which are actually products or ‘profits’ of serious crimes such as: illicit drug trafficking, human trafficking, corruption, kidnappings and others.

The crime of money laundering is a manifestation of transnational organized crime and, therefore, makes the international community concern, expressed in the production of normative standards that seek global legal harmonization. Our country is not outside this influence that this has spread over the years, which has impacted on the local configuration of the criminal type of money laundering at different historical moments.

The money laundering includes:

• Try to give appearance of legality to resources of illicit origin.
• Acquire, protect, invest, transform, transport, guard and administer illegal goods or profits.
• Money and assets of illicit origin will never be legal like this to make many transactions with them.
• The money laundering resources not only come from drug trafficking.[Footnoteref: 3] [3:]

Background

You have to look for its birth in times when criminal activity begins to profit. It can be added that money laundering explodes when society begins to control the enrichment product of criminal activities, (when certain activities such as criminals begin to be typified). At a certain moment in history, drug trafficking was not persecuted;Therefore, it was not necessary to wash the money that this activity generated;The Corsican made by the pirates was not a crime for the country where pirates came, so it was not necessary to hide the origin of wealth by this means obtained.

When looking for the origin of money laundering, we saw that the etymology of the phrase money laundering is derived from the fact that the first evildoers invert the money from the crime in laundry, [Footnoteref: 5] If this is not the root of the phrase inYes, it is still true that the mafia of North America used to invest in laundry because this business facilitates the circulation of large amounts of cash. 

Money laundering began to be studied in 1975, in 5th. United Nations Congress on Crime Prevention and Treatment of the offender, in Geneva;In this, money laundering itself was not known, but the problem was raised. In 1988 an International Conference was made in Vienna, which approved the United Nations Convention against the illicit traffic of narcotic drugs and psychotropic substances. In this, finally, the penalty of money laundering is established.

In 1989 the Financial Action Working Group (FATF) was created, by 1990, nine of the OAS Member States had adhered to the Vienna Convention, including the Dominican Republic. In that same year, the Caribbean Financial Action Working Group (CFAFT) is created. In 1992 the Criminal and Justice Prevention Commission invited States to modify their laws to combat money laundering. On March 29, 1996, the Dominican Republic signed the Inter -American Convention against Corruption, which forces States parties to sanction money laundering originated in acts of administrative corruption. On December 15, 2000, the Dominican Republic became a signatory to the United Nations Convention against Transnational Organized Crime, being forced to adopt mechanisms and procedures that promote cooperation to prevent and combat transnational organized crime more effectively. 

Then in the Dominican Republic, Law 55-02, of April 26, 2002, which provides and sanctions money laundering from the illicit traffic of drugs and controlled substances was promulgated. In response to the failures of the aforementioned legislation, on June 7 of that same year law 72-02 was promulgated, in response to the failures of the second law, a new law was promulgated that is the law not.155-17 that repeals 72-02.

Characteristics, stages, models and objects of the money laundering process.

This process varies in attention to multiple factors;It has complex ways, and others very simple;It can be expensive or cheap. The characteristics of money laundering are only appreciable in each particular washing case, as well as it is difficult to characterize the washing process, it is difficult to characterize who makes the action of washing money, because this comes from any social state;It is not only dedicated to money laundering.

• It is considered as an economic and financial crime, usually perpetrated by criminals who handle large sums of money that give it a privileged economic and social position.
• Integrates a set of complex operations.
• Transcends international dimensions.

Most money washing machines enjoy good reputation in their society. Today, there is a tendency for many professionals to specialize in assets laundering activities. The modern washing machine conducts market studies to learn about the risks involved in its activities;specializes in economic legislation, in criminal law;develop contacts that allow the authorities responsible for pursuing crime. There are several models that doctrine uses to develop the phases or stages of money laundering.

GAFI model. (It should be noted that this is the most used model)

First stage. Placement of goods or cash. This is based on the physical reception of the goods of any origin or money, in development and that are consequences of illegal activities and place it in a way that it seems legal in the economic and financial system, this is usually the most difficult step in the processmoney laundering.

Second stage. Fractionation or transformation. Here the funds move through operations and businesses with which they emerge from their illegal origin, becoming difficult to identify their origin and their owner.

It is achieved through the following operations:

• Cash money deposit in a foreign bank;
• Create a fictitious account abroad to receive and distribute funds;
• Transfer money electronically from a national bank account to another abroad;
• Transfer money electronically through several bank accounts;
• Make loans guaranteed by the same deposited funds;Sell or exchange various types of financial instruments.

Third stage. Investment, integration or enjoyment of illicit capitals. In this step, the money that was allowed to wash returns to the economy or the financial system disguised as legitimate money, through import and export transactions, fictitious or highly high value, through payments for non -existent services, or by the contribution of interest on interest onfalse loans, and for a whole series, of other subterfuges.

It is configured with any of the following operations:

• The formation of a foreign corporation in tax havens;
• Deposits in the bank account of a business;
• Payment of salaries, commissions and fees;
• Receive money from a casino or a lottery by way of game gain.

Bernasconi model ‘Phase model ‘(German author, cited by Isidoro Blanco Cordero in his book‘ The crime of money laundering ’):

The first phase in the first degree is called Money L outdenring, that is, a set of actions with which contaminated goods are released in the short term. The second grade (Recycling) are the medium and long -term operations of already washed goods that are subsequently used to achieve an absolute disconnection of the previous crime.

ZUND model 

(Water cycle model) cited by Isidoro Blanco Cordero in his book ‘The crime of money laundering’.

First precipitation is given: money production or ticket originated in the previous crime;The second step is infiltration: here the money is to hold a wash transforming it, in high denomination tickets;The third step is the groundwater current. Money becomes other patrimonial forms;The fourth step is the drain: transfers are carried out abroad;The fifth is;new accumulation and pumping station. The money is received by the washing organization and are available for the opening of accounts in financial entities, the sixth step is the purification and use station. Testals are used and the account account is moved to cover up criminal traces and the seventh and last step is evaporation and precipitation. Wash money whose legal trail has been deleted is used for the enjoyment of the offender.

FINCEN MODEL (Treasury Department)

Begins with the production of wealth generated by serious crimes. They are then introduced to the legal economy, where they regroup and reinvote.

Teleological Model (Swiss Author Ackerman)

It is inspired by the objectives of the washing stages. It has three objects that are: main: avoid the confiscation or confiscation of the goods and ensure their enjoyment;Secondary: confusion of assets with others of legal and complementary origin: avoid the judgment of the authors of the prior crime.

Objectives

• Preserve and give security to your fortune.
• Make great transfers.
• Strict confidentiality.
• Legitimize your money.
• Form traces of complicated papers and transactions that confuse the origin of resources and their destination.

Methods and techniques for money laundering.

The United States Internal Revenue Service recognizes three main methods for money laundering: the use of legitimate businesses, purchase/sale transactions, and displacement to countries considered safe shelters.[Footnoteref: 14] [14: ..

Use of a legitimate business: Here the following operations will be done:

• Exaggeration of income;
• Exaggeration of expenses;
• Cash deposit.
• Purchase and sale transactions. Real estate transactions can be made to hide the product of illicit activities.
• Shelters abroad.- Money washer use the financial institutions and legitimate businesses of these countries to mobilize their money of illegal origin.

Techniques

• Structure or do pitufo jobs, multiple transactions are made that make large sums of money in amounts below the limit.
• Complicity of bank officials, here they avoid filling the cash transactions form.
• Facade company, legitimately incorporated entity that is commercial activity serves as a façade for washing.
• Purchase of monetary goods or instruments with cash.
• Cash of cash, the cash from one place to another is physically transported.
• Wire transfers.
• Export of goods, the goods acquired with dirty money are exported, thus the identity of the buyer is deleted.
• Fraudulent sales of real estate.
• False import-export invoices.
• Loan guarantee, they use as guarantee the deposits of illicit funds, the washer obtains loans, and acquires goods.

The crime of money laundering

On June 1, two thousand seventeen (2017) Law 155-17 on money laundering and terrorist financing in the Dominican Republic was promulgated, which provides powerful consequences against all those who violate this law. The application of this law implies more work and economic burdens for companies, with the application of this law, the Dominican Republic and the world will be very benefited, because with said law organized crime is fought.

The main task of the obliged subjects is to remain aware of all information to the Unit of Financial Analysis, UAF, and therefore it establishes some parameters to be notified the suspicious, complex, unusual, significant, also those that are notMade with patterns that are not commonly used or insignificant, but that are made in a certain period of time, that their economic or legal basis is not evident, they produce suspicions to which they are involved in money laundering, some preceding crime or financingto terrorism;all according to article 2 of said law.

The law determines as money laundering:

• Conversion, transfer or transport goods, knowing that they are the product of something illicit, with it to hide its nature, the location or the real property of goods or rights over goods;
• Hide, cover up the nature, location, or the real property of goods or rights over goods, knowing that such assets come from any of the preceding crimes;
• acquire or administer goods, knowing that they come from the preceding crimes;
• Attend or collaborate with people who are involved in money laundering to avoid prosecution, submission or criminal condemnations;
• The participation, in any of the activities in the previous numerals, the Association to commit this type of acts, the attempts to perpetuate them and the fact of helping their commission with an essential benefit to carry them out or facilitating their execution.

After this the law does not. 155-17 establishes criminal offenses associated with money laundering. As a person, an infraction allied to money laundering, is when an employee or other authorized representative of the obliged subjects who, acting in such an attribution, do not intentionally comply with the obligations of information or report established in the law established in the law. The general penalty is 3 to 20 years and fines of no less than 60,000 minimum wages.

conclusion

As we see the money laundering is an international socio -economic and cultural problem, as we have highlighted, because it is where the financial system of the countries is used as a money laundering or money laundering, affecting the conservation of the international market, for this reasonAnd a number of reasons each country must have the necessary measures to prevent this activity called bleaching or money laundering, in addition to the proper exchange of information between countries.

The Dominican Republic is not out of what is the problem of money laundering. Figure to the context raised puts the fact that the banking of this country, completely opposite to what has been considered at some time, has highlighted real compliance with all the regulations and measures that have been arranged forthe antilavado, existing, of which the regulatory authorities and of order are attest. But all these efforts, however typologies are identified that filter thousands of dollars that come from drug trafficking and other illegal activities in the Dominican economy.