Chapter 5: How Money is Being Laundered with Madalina Busuioc
As mentioned in earlier chapters, money laundering can take place in different phases. In the first phase the criminal money that was collected, for example, through drug sales on the street is placed in a financial institution. This first phase, of bringing cash to some financial institution, is called the placement phase (or the pre-wash phase). After the dirty money is integrated into the financial system, the second phase, the layering or main wash, starts. The money gets transferred to the bank account of company X, is then sent via wire transfer to an offshore centre correspondent bank at, say, the Seychelles. The Seychelles bank gives company Y a loan, which pays for a false invoice from company X. Company X now has a legal receipt from company Y. So now the origin of this money, namely company X itself, is not traceable anymore. The more often the money gets transferred around the globe in the layering phase, the less traceable its criminal origins are. The third phase consists of integrating the now clean money. This after wash phase includes purchasing of luxury commodities, assets, making financial investments or buying companies (see Figure 5.1). In the following discussion, a variety of techniques used during these three phases will be described. We describe the techniques and give empirical examples from different countries for them. Quite a lot of techniques are not easily attributed to one laundering phase alone. They might be used in different phases of laundering. If this is the...
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