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Diamond Shield Management Korea Guide: Why Are Money Laundering Rings Hard to Break?
Money laundering is a severe problem in many states across the world. Governments make consistent efforts to combat this crime. However, money laundering rings are hard to break. They often involve many individuals, companies, or even state officials. Moreover, these efforts are often costly and lengthy.
Money laundering has a negative economic impact. Furthermore, it often goes hand in hand with more severe crimes such as drug trafficking. Individuals’ rights and freedom are also at stake when it comes to this.
Money laundering involves introducing illegal money into the official financial system. For its beneficiary to use it, the money has to look legit. In other words, someone has to wash it. There are multiple methods to do this. Let’s explore some of the common money laundering techniques.
Major Money Laundering Methods
There are many ways to launder money. For this reason, money laundering is often hard to detect and stop.
Shell companies allow their owners to remain anonymous. These companies only exist in theory. They are not economically active but can perform financial transactions. These companies hold funds and have a legal personality. They serve for different financial maneuvers, including money laundering. They are often in the grey area between legal and illegal. Moreover, shell companies are usually based in tax havens. Consequently, they don’t fall under the owner’s state jurisdiction. Hence, the state can’t prosecute the owner.
Also known as structuring, this method involves dividing the money. Basically, a large amount goes into several deposits. This ensures more safety because authorities track large amounts only. Also, the money usually goes into separate accounts. Therefore, fraudsters further minimize the risks. Imagine you split $1 million into four. $250,000 is still a considerable amount. You can’t simply transfer it without acknowledging its source. But what if you split the million into 100 or 400 parts. Your money doesn’t raise suspicion.
Casinos and Online Gambling
Gambling can unlock high cash prizes. Therefore, it is a great way to legalize money. And there are countless casinos and websites for this purpose.
To launder money this way, you need to stake it. Usually, criminals use high stakes. They also bet on lots of different games. Then, they achieve a winning combination. As a result, a hefty prize becomes available. However, it is the player who funded their award.
The same happens in brick-and-mortar casinos. A player buys chips with illegal money. Then, they win and take their winnings as legal cash or checks.
This is one of the cleanest and most elegant ways to launder money. Some countries offer tax amnesty for limited periods. In these periods, companies get tax liability forgiveness. To do this, they pay a certain amount of money. This is when companies can declare unreported assets.
They can declare the money held in offshore accounts, for example. Then, they pay the agreed amount. Finally, they avoid prosecution and legalize illicit gains.
Many businesses worldwide still pay black salaries these days. However, they usually do it to evade high taxes. Yet, there are also opposite scenarios. This happens when a business has too much money. Part of it is illegal. So, it launders it through its employee.
They hire people but don’t sign a legal contract with them. Then, they pay them in cash with their illegal money. Once it gets into these people’s pockets, the money enters the system.
You might not have heard about cyber-laundering yet. But you’ve undoubtedly heard about cryptocurrencies. These are some of the most popular ways to launder money these days. Digital coins don’t depend on a centralized system. Yet, it’s possible to withdraw cash as cryptocurrency gains and pay correspondent taxes in many states.
Therefore, a money-laundering ring can invest illegal gains in crypto coins. Then, it can withdraw money in a state that accepts these transactions. Hence, the money becomes clean. Once it reaches a bank account after tax deductions, you can spend it freely.
Moreover, digital coins are not the only cyber-laundering method. Fraudsters often use crowdfunding to launder money. These projects involve donations. And donations are anonymous. So, criminals can donate money to a startup. Then, they can use it, regardless of its provenience.
All the methods above are hard to detect. Apparently, they are all legitimate. Thus, there’s no reason to suspect fraud and start an investigation. Money laundering rings are hard to break because of how they operate. After they obtain money, there are lots of ways to clean it. And criminals usually rely on experts to do it. Examples are cybersecurity experts, traders, accountants, financial consultants, and lawyers. Therefore, when fighting the phenomenon, authorities fight top-tier professionals too. This only makes it harder to detect and end money laundering.
Courtesy of Diamond Shield Management Korea.