In the 1920s, when prohibition was common in the United States, money laundering occurred for the first time. As the demand for alcohol rose, the profitable black market also took a new turn. Before the 1980s, money laundering was not even considered a crime. At the time when the drug trade was considered the biggest issue, money laundering was just a miserable side effect. The 9/11 terrorist attack significantly impacted tax avoidance guidelines, explicitly concerning banks. Title III of the Patriot Act guided budgetary establishments to extend their AML projects and increment their due ingenuity to cover unfamiliar financial balances.
What is Money Laundering?
Passing money through a complex sequence of money transactions to obtain money illegally is called money laundering (ML). This overall illegal process returns black money to the launderers in an unauthorized way. The processes by which criminally derived funds are laundered at a large scale.
Most illegal tax avoidance and money laundering activities never stand out as truly newsworthy, in any event, when they’re recognized by the authorities. Numerous culprits effectively dodge responsibility. Most of them get caught. There are lots of ways adopted by fraudsters to make illegitimate money. Money launderers target online casinos and online gambling platforms to carry out illicit activities like drug trafficking, arms trafficking, and embezzlement, etc. There are many methods of money laundering. Some of them are listed below:
- Opening an account with a fake or wrong name
- Money laundering with workers
- Partnering in crime with financial institutions
- Prize money from games
Stages of Money Laundering
Money laundering is the illegal process of obtaining black money through several transactions, conducted through financial institutions. It is conducted in three stages to dodge and manipulate the authorities. Each stage of money laundering has a unique purpose.
Placement of money
In this initial stage, money launderers enter the ecosystem of the business as a regular customer. Placement of the money can be carried out in various methods, some of them are the following:
- Currency exchanges
- Blending funds
- Smuggling currency
- Asset purchases
Layering of money
In this stage of money laundering, the original source of money is concealed to manipulate authorities. Some common methods used for layering are as follow:
- Purchase and sell. In this scenario, the criminal purchases a large resource with black money. Then they sell it, locally or universally. After this purchase and sell cycle, following the resource back to the criminal’s kind of revenue gets difficult.
- Buying and selling land resources, financial assets, etc.
Extraction of money
In the third stage, laundered money is brought into the economy through the banking system. The final stage is getting the black money out so it can be utilized without attracting attention from law enforcement authorities.
- Fake representatives – a method of getting the cash back out Generally paid in real money and gathered
- Credits – to chiefs or investors, which will never be reimbursed
- Profits – paid to investors of organizations controlled by lawbreakers
Prevention of Money Laundering using AML Program
Anti-money laundering (AML) is a measure, regulation, or procedure which tends to discourage fraudulent activities. There exist many products that provide B2B services so that businesses can arm themselves with security. With the involvement of AML customer monitoring and on-screening in AML software, fraudsters can be identified. AML solutions involve:
- Identity assurance
- Customer updated risk status
- Accurate risk profiling
- Reduced cost of compliance
Money laundering can be prevented by integrating businesses with Anti Money Laundering tools and services By adopting such services, businesses can develop a relationship of trust with their clients. AML provides businesses with the ability to perform on-going customer monitoring. The latest technologies involve Artificial Intelligence (AI) and Machine Learning (ML) algorithms, which left businesses at no level of risk by conducting AML monitoring deeply.
Ongoing AML (anti-money laundering) is considered a seamless solution by global businesses for screen monitoring as it not only saves costs and resources but provides accurate authentication and verification services. Any process with the involvement of financial trading should follow the obligations of anti-money laundering.