Found at: http://www.anguillaguide.com/article/articleprint/3195/-1/133/
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LEGAL NOTES - Money Laundering
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The process of money laundering has been around for centuries, as criminals have always been faced with the problem of what to do with their ill-gotten gains.
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Alex Richardson
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Spending large amounts of cash can cause suspicion, so they have to come up with ways of “cleaning” or “washing” the money. This has given rise to the development of extremely sophisticated methods of money laundering, as the criminals try to keep one step ahead of law enforcement authorities.
Money laundering can be defined as the process of concealing money obtained from illegal means (crimes) by making its source appear to be from legitimate and legal transactions. The money laundering process is vital in cleaning illegal money derived from drug syndicate funds, organized crime groups and terror financing groups. In recent years, there has been a tremendous effort to form international alliances to combat this growing transnational crime.
The origins of money laundering can be traced back to the activities of pirates in European seas. But it was only in the 1920s that the term “money laundering” came into common usage. The term was first coined in the United States, referring to criminal gangs who used business establishments such as car washes and laundry shops to conceal and hide their illegal activities.
Money laundering involves three stages: placement, layering and integration. The placement stage refers to the methods used by money launderers to put the illegal money into banks or invest them in legitimate business transactions. Some criminals use the money to buy goods, services and properties, which they can later resell to other innocent persons.
The next stage is layering, where money launderers will try to disguise the origin of the funds by leaving a complicated paper trail. Often, once the money is deposited in a bank it will be wired or transferred to a series of offshore accounts, thus making it very hard to trace. Money launderers deliberately choose offshore jurisdictions with lax due diligence standards. Some choose to deposit the money in banks in countries that severely limit foreign legal intervention or have strict bank secrecy laws.
The final stage is integration. Once the money has safely entered the legitimate banking system due to successful concealment, it is now difficult to differentiate whether the source is legal or not. The criminals therefore end up with a supply of “clean” money which they can use for their enjoyment.
The term money laundering used to be applied only to financial transactions related to criminal acts and criminal activities. But as money laundering schemes and techniques evolved, its definition and scope broadened. It now encompasses many financial transaction that generates income as the result of an illegal act, such as tax evasion and false accounting.
Banks are often on the frontline of financial institutions that are used by money launderers. To combat this growing problem, many countries have already adopted policies and laws that require banks, company managers, trust companies, insurance companies and others to exercise extreme vigilance in dealing with large sums of money and with persons not known to them.
In particular, our laws and “know your customer” policies in Anguilla have been updated in recent years, along with our level of cooperation with other countries. It is now extremely difficult for money launderers to use Anguilla successfully. However, constant vigilance is necessary in order to maintain Anguilla’s pristine image as an upscale financial services centre.
Alex Richardson is Managing Partner of the law firm Alex Richardson & Associates, P O Box 371, Babrow Building, The Valley, Anguilla, Tel: 264 498 4224, Fax: 264 498 4220, email: arichardson@anguillanet.com. He is also Managing Director of Paragon Corporate Services Ltd.