Money laundering
Nature
Money laundering refers to the conversion of money (usually in cash and small bills) earned through illicit activities (such as the drug trade) into either 'clean' currency or financial instruments that betray no trace of the owner's criminal activities. Insider dealers, international fraudsters and drug dealers need to launder their money. This is often done by transferring it through several financial centres with strong bank-secrecy laws, and then back to the country of origin where it can be used to purchase property or easily transportable assets.
Incidence
In 1985, an estimate in the USA suggested that about US$60 billion a year was laundered by criminals in the USA itself and between US$ 5-15 billion outside the USA. In 1985, the Bank of Boston was fined US$ 500,000 for failing to report US$ 1.2 billion in currency dealings with foreign banks; the money belonging to the alleged head of Boston's Mafia family.
Throughout 1999 the FBI and US Congress were investigating allegations that the Bank of New York, the Republic National Bank and other Western financial institutions were involved in laundering IMF loans siphoned out of Russia by the mafia helped by top Kremlin officials. It is believed that US$10bn, nearly half the IMF's loans to Russia since 1992, were siphoned out of the country.
The Italian secret service estimated that the Mafia laundered more than £30 billion through the former East Germany in the first two years of unification alone. Italian, Sicilian and Neopolitan mafioisi and German, Russian, Yugoslav and Vietnamese gangsters had made Leipzig a centre of money laundering and related crimes because of the ineffective regulation at that time.
In 1990 it was estimated that drug trafficking generated some $85 billion a year worldwide that needed to be laundered and invested.
In 1993 it was estimated that the global traffic in illicit drugs netted as much as $500 billion annually, of which growers and low-level operatives received only a small portion whilst much of the remainder was laundered through the international banking system. Drug traffickers enlist the cooperation of banks, either knowingly or unknowingly, in accepting deposits of illicit profits. Such assets can then be laundered through diversion into another accounts or investment in legitimate businesses or front organizations.
Claim
Breaking up the large money-laundering rings is one of the most effective means to slow drug trafficking. If a big drug trafficker cannot deposit his money in a bank, much of the safety, and thus incentive, for having large amounts of money is lost.
Broader
Aggravated by
Strategy(ies)
Value(s)
Type
(E) Emanations of other problems