The Scale and Impacts of Money Laundering
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The Scale and Impacts of Money Laundering

Brigitte Unger

The book gives an interdisciplinary overview of the state-of-the-art of money laundering as well as describing the legal problems of defining and fighting money laundering. It then goes on to present a number of economic models designed to measure money laundering and applies these to measuring the size of laundering in The Netherlands and Australia. The book also gives an overview of techniques and potential effects of money laundering identified and measured so far in the literature. It adds to this debate by calculating the effects of laundering on crime and economic growth.
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Chapter 5: How Money is Being Laundered with Madalina Busuioc

Brigitte Unger

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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...

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