how money laundering works
money laundering is essential for criminal organizations that use illegally obtained money criminals deposit money in legitimate financial institutions to appear as if it comes from legitimate sources laundering money typically involves three steps although some stages may be combined or repeated 1the bank secrecy act bsa requires financial institutions to keep records of cash purchases of negotiable instruments file reports of cash transactions exceeding 10 000 and report suspicious activity that might signal money laundering 2types of transactionselectronic money launderingthe rise of online banking institutions anonymous online payment services and peer to peer p2p transfers with mobile phones have made detecting the illegal transfer of money increasingly difficult proxy servers and anonymous software make the third component of money laundering integration difficult to detect as money can be transferred or withdrawn with little or no trace of an internet protocol ip address money can be laundered through online auctions and sales gambling websites and virtual gaming sites where ill gotten money is converted into gaming currency then back into real usable and untraceable clean money money laundering may involve cryptocurrencies such as bitcoin while not completely anonymous they can be used in blackmail schemes the drug trade and other criminal activities due to their relative anonymity compared with fiat currency aml laws have been slow to catch up to cybercrime since most laws are still based on detecting dirty money as it passes through traditional banking institutions and channels 3preventionaccording to the united nations office on drugs and crime global money laundering transactions account for roughly 800 billion to 2 trillion annually or 2 to 5 of global gross domestic product gdp 1in 1989 the group of seven g 7 formed an international committee called the financial action task force fatf to fight money laundering on an international scale in the early 2000s its purview was expanded to include terrorist activity 4the united states passed the bank secrecy act in 1970 requiring financial institutions to report cash transactions above 10 000 or unusual activity on a suspicious activity report sar to the department of the treasury 32 this information is used by the financial crimes enforcement network fincen to be shared with domestic criminal investigators international bodies or foreign financial intelligence units 5money laundering was deemed illegal in the united states in 1986 with the passage of the money laundering control act after sept 11 2001 the usa patriot act expanded money laundering efforts the association of certified anti money laundering specialists acams offers a professional designation known as a certified anti money laundering specialist cams these individuals work as brokerage compliance managers bank secrecy act officers financial intelligence unit managers surveillance analysts and financial crimes investigative analysts 6