Airing out dirty cash

Money Laundering

By I. B. Gashinbaki, CFE

Criminals will always have to clean dirty money but fraud examiners need to be aware of the common ways many launderers infiltrate financial institutions worldwide.  

Sammy, a drug dealer, has a large load of cash coming in from a sale but he first has to wash the soiled money. One of his agents, Mike, transports, redenominates, and stores the money at a bank at the country's border. Mike later transfers the money to another agent, Hans, across the border through another bank. Yet another agent, Sarah, transfers the cash back across the border to the launderer's account in a third bank.1 

This scheme, the cross-border cash movement, is just one of the several that money launderers use to bleach the stains out of dirty cash. Fraud examiners should know as many as possible.

No one is sure when the concept of laundering dirty money first started, but according to the International Monetary Fund, "the aggregate size of money laundering in the world could be somewhere between 2 and 5 percent of the world's gross domestic product. Using 1996 statistics, these percentages would indicate that money laundering ranged between US Dollar (USD) 590 billion and USD 1.5 trillion. The lower figure (USD 590 billion) is roughly equivalent to the value of the total output of an economy the size of Spain."

The possible social and political costs caused by the infiltration of dirty money or proceeds from illicit sources are almost endless: illegal arms sales, smuggling, drug trafficking, prostitution rings, embezzlement, insider trading, bribery, tax-related economic crimes, cyber crimes, and other fraudulent businesses. Money launderers, who infiltrate financial institutions with dirty money, acquire control of large sectors of the economy through investments and can destroy the functioning of a financial system and undermine its integrity. Following is a review of the most common methods of money laundering techniques that all fraud examiners should study.

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