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MoneyLaunderingPP.pptxMONEY LAUNDERING
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Introduction
Money laundering: A crime that involves devising measures that makes the proceeds of illegal activities to be legit with large amounts of money.
Main process involves a series of bank transfers or financial transactions
Processes involved are to prevent detection and identification by law enforcement
Research: Investigate across a money laundering activity to cover up money obtained from the restaurant.
Participants: Owner, Restaurant staff
Key Words: Money, Money Laundering, Crime, Drug Dealing, Fraud
Money laundering is a crime that involves devising measures that will make money obtained from illegal activities to be legit. The main reason behind money laundering is usually to avoid the long arm of the law that seeks to prevent criminals from benefiting from their proceedings by following up on suspicious accounts which are suspected for illegal activity. Another legit business will cover the money that has been acquired illegally. This provision is normally achieved through a series of bank transfers or financial transactions so as to portray the money as legally acquired. As a result, is hard to discover the source of the money. This paper tries to put across a money laundering activity to cover up money obtained from drug dealing. I own a restaurant, and I have stricken a deal with the drug dealers that I will receive a huge commission on every transaction that the money is delivered in cash. The restaurant's responsibility is overpriced its invoices so that it can help the drug dealers deposit the money into their bank accounts without being noticed. Controls that would have prevented the crime from taking place will also be evaluated. Detection techniques that would have helped the anti-money laundering officials to detect the crime are also discussed. Finally, the laws that could be used to prosecute such crimes are discussed.
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Scenario Overview
Involvement of the participant with drug trafficking as a key player in the trade
Increased need to clean the huge amounts of money received from the drug trade
I want to be involved in a drug trafficking deal, but since the money involved will raise flags about its source, there is a need to work out the business under extra caution so that I am not caught. To ensure the source of the money is not questioned, there is a need to devise a safe process to transact this money without being suspected, and ultimately being considered as clean money. Because the whole process will involve criminal activities, and to ensure the money obtained in the business is received without suspicion, there is a need to ensure extra caution is taken to prevent the detection of the processes. The whole process will generate more than $1million within a period of five months, during which the business will be in operation. The process of laundering the money will be quite risky, so there is a need to ensure there is another organization that will help me out in harboring the transactions. This will help in depositing the money in a bank without suspicion, and for this to happen, there is a need to have an intermediary organization that will help deposit the money into the bank (Gilmour, 2016).
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Money laundering scheme within Restaurant
Coordination between two organizations, a restaurant, and a bank
Restaurant involved In cash collection. Bank processes deposits from restaurants.
Restaurant collection tactics
Inflation of customer invoices
Virtualized transactions to increase credibility of the financial information
The scheme will involve the coordination between two organizations, a restaurant, and a bank. The restaurant will be helpful because it will be involved in the collection of cash and then take the money to a bank. The restaurant will carry out the criminal activity by ensuring that all transactions by the customer are inflated and also using virtual transactions so that the money will end up in the bank without much suspicion from the institution. By so doing, the money will be received by the bank as legit and it will not raise the issue of investigation to establish the source of the cash. As a result, the process over which money is gained will not be questioned because it will be attributed to the restaurant proceeds.
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Organization of Crime
The money will mainly be used by using false billing for the restaurant. This can involve restaurant supplies such as food, furniture, renovation in which each of the transactions will be inflated. This will buffer all the transaction because the money will be treated as legit right from the source all the way to the type of transactions being carried out using the obtained cash. This type of fraud will be classified as billing, although it has many other criminal activities carried out at the same time. The money received from the drug dealing will be directly taken to the restaurants where the cashiers will be required to inflate the invoices once a customer makes payment. The restaurant will report this money as revenues over its transactions. The crime will be highly classified as a result because the money received will be transferred to the bank little by little until the whole amount is deposited in the restaurant’s bank account. As a result, the detection of this type of fraud will be impossible and will require serious investigation, which will be more expensive in terms of time and money (Cassella, 2018).
The following is a visual framework that will be used to organize the crime. The money will be received from the drug traffickers and then channeled to the restaurant in cash. The transactions at the restaurant will be inflated to accommodate the money until the whole amount is deposited into this account over time. Once deposited into the restaurant's account, the money can be wired to any other account, and that is how the money will be used for transactions.
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Drug Dealers
Money is recieved in cash from the drug dealers.
The obtained money is channeled to the restaurant in cash
Restaurant
At the restaurant customer invoices will be overpriced.
The money will then be recorded as revenue for the restuarant.
Bank
The money will be deposited in the restaurant's account.
The money can be transferred to any account at the discretion of the restaurant.
Possible Controls that could have prevented the crime
Anti-money laundering laws and regulations
Serious state and federal legal penalties
Higher regulation on businesses
Checks and balances of their financial records to detect a mistake within any pattern for example over profitability at one time.
The money laundering process is very complex to detect. However, there are many regulations and legal requirements that would have prevented the commission of the crime. There are many security procedures that would prevent the occurrence of the crime. To start with, drug dealing is an illegal activity, and anybody found involving themselves in such activities face serious legal consequences. Money laundering is a serious crime, and penalties for the suspects range from a minimum of $8 million or a life sentence or both. Getting involved in such activities is proof that the business is quite dangerous and requires a high degree of intelligence when conducting it. Any involvement in the transaction or possession of illegal drugs is subject to serious state and federal legal penalties, as outlined in the constitution (Jamshidi et al., 2019).
Besides, the crime has aspects of money laundering because it will involve disguising money that has been obtained illegally as legitimate incomes. Money laundering laws have serious and far-reaching consequences when they are detected. The customers that open deposit accounts are required by the bank to disclose all information in case they are hiding information that can help money laundering to take place. In this case, the restaurant's involvement in the whole process means that it will be hard for the bank to detect such transactions. The restaurant is responsible for the financial transactions, and since the business is legit, it will be easier to run away without the crime being detected. However, in case the bank becomes suspicious about the surging incomes from the restaurant, it will start investigations that would have probably prevented the crime from happening. However, because the restaurant is owned by the launderer, it might continue reporting the same level of business as long as the drug business is running normally. The bank's imposition of the holding period will not have a significant impact on crime prevention. However, if the legal officers are involved, the crime will be contained. Another legal policy that would have prevented the crime is the presence of the anti-money laundering officers at the bank, who have high chances of questioning the source of the money from the restaurant (Zhou et al., 2017). Besides, the anti-money laundering officers can be involved in scrutinizing financial records when they detect some inconsistencies within the financial statement.
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Irregular amounts of deposits
Huge, unexplained deposits
Questionable transactions
Buying and selling of property at throw away prices
Irregular changes in management of company
Heightened politics within a suspected company leading to redundancy
When large cash amounts are detected from such businesses, information can be used to detect any irregular amounts of money that have the possibility of coming from laundering. Another technique that can be used to detect money laundering is investigating money that comes from unregulated sources such as bitcoin.
Questionable transactions
Moreover, money laundering can be detected through transactions that do not make sense. A person can purchase an asset and later sell them at a price that appears to be ridiculous, which raises the alarm for a potential source of money to come from illegal activities, and such transactions are carried out as cover-up. Besides, a company that has a complicated corporate structure can be another way through which transactions without disclosing who the beneficiaries are executed.
Irregular changes in management of company
If important persons related to financial transactions of a company are frequently changed, they can be means through which to conceal unregulated transactions. These processes activities can also involve politically exposed persons, who can manipulate their powers of influence management of an organization in order to implement their money laundering and financing of illegal activities. These activities are some of the techniques that can be used in the identification of criminal activities.
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Detection techniques to identify the crime
Lifestyle changes
Rapid change in status from poor to rich
Investigation of unexplained sources of funds for investment
Speculating for attempts to hide identity
Multiple related bank accounts
One of the traditional methods used to detect fraudulent activities such as money laundering is the sudden change in lifestyle. The neighbors can report these changes to the IRS, who will ensure they have every detail about the source of money. IRS is experienced in carrying out an investigation involving money, and they will investigate every detail regarding the source of money until they establish its source (Colladon & Remondi, 2017).
Investigation of unexplained sources of funds for investment
Many other approaches can be used to detect money laundering. This can involve the investigation of unexplained third party investments for sources of funds that cannot be explained. This involves identifying amounts of money that are inconsistent with the individual economic status of the person or the organization, without a justified source of their finances.
Speculating for attempts to hide identity
Besides, it is possible to identify hidden identity within a business when some people try to hide their information or individuals that avoiding personal contacts without apparent reason. For businesses that operate in high risk, areas can as well be havens of money laundering. A transaction involving persons in such countries requires due diligence in order to mitigate risks that can arise. Restaurants and other archetypal businesses are prone to money laundering because of the many cash transactions that take place in such businesses. The cash collected can be mixed up with dirty money with the aim of covering such money.
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Anti-money laundering laws
Established through Bank Secrecy Act.
Financial fraud suspicion reporting
Suspicious transaction of money is required to be reported by the financial).
Recommendations & Effects
Trade-based money laundering is a critical problem in many countries of the world, which result in huge sums of money transaction in financial institutions and other international banks. As a result, countries have formulated laws that are aimed at combating money laundering. Laws have been enacted to prevent money laundering in many countries of the world.
Anti-money laundering laws
In the United States, financial institutions are required to establish Anti-money laundering laws through the Bank Secrecy Act. The main role of the Bank Secrecy Act is top empower the measures aimed at preventing, detecting, and consequential prosecuting money laundering activities.
Financial fraud suspicion reporting
A bank or financial institution that comes across a suspicious transaction of money is required to file a Suspicious Activity Report with the Financial Crimes Enforcement Network (FinCEN). FinCEN is the United States Financial Intelligence Unit, which requires all banks to have strict customer identification programs that are required to verify the true identity of customers and reduce the chances of committing a crime (Wilkes, 2020).
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Due diligence on audit forensics of suspected companies
Audit forensics
Implementation of more rigid and affirmed policies and regulations to manage financial crimes
Drug Trafficking
Safe Harbor Elimination act
Due diligence on audit forensics of suspected companies
The enforcement of anti-money laundering laws has far-reaching effects on both the criminal and those facilitating the crime. Organizations operating in the regulated sector must observe due diligence checks, follow the reporting obligations, and collaborate with the legal systems when instances of money laundering are detected. Besides, Anti-Money laundering agents need to cooperate with law enforcement officers who help in the identification of criminal activities and support the efforts of the AML officials (Keesoony, 2016).
Crimes such as money laundering have proven to be very costly to society. Besides, many of the terror activities have used a lot of money, all of which were donated by people. AML laws are aimed at ending such crimes by ensuring that financial institutions are not used as platforms for money laundering from activities such as drug trafficking. This has called all the players in the financial sector to protect the global; financial system from bad acts such as money laundering through strict adherence to Anti-Money Laundering laws. Any violation of these rules by financial institutions calls for strict and penalties because they usually keep a lot of money out of the economic system. Many institutions have found themselves in a serious crisis after they default on the rules laid by FinCEN.
Implementation of more rigid and affirmed policies and regulations to manage financial crimes
The Drug Trafficking and Safe Harbor Elimination act is another law that could be used to prosecute the crime. These laws were implemented with the aim of closing gaps that were used by the traffickers to run from prosecution by the federal justice system. These laws prevent any crime regarding drug trafficking that involves themselves directly or indirectly in drug trafficking either within or outside the United States borders. As a result, the laws were applicable to punish criminals who got involved in drug trafficking both within and outside the borders of the United States.
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Implementation of more rigid and affirmed policies and regulations to manage financial crimes
Supportive enforcement of the policies.
One of the recommendations is the increase in the level of monitoring of the level of exposure of the employees. It is worth noting that taking preventive measures and time conscious actions might help mitigate the risks of such exposure. This provision stands to increase the general well being of the workforce. The organization should also improve on the provision of protective clothing such as face masks to the employees so as to prevent the risks of exposure to toxic substances.
The effects of research based decision making is seen in the accuracy and validity of information used in decision making as well as the increased credibility of the decision. Research based decisions are most likely to succeed since they are chosen based on the relationship between the two events and how the previous one was handled. The decisions also stand to gain more support from the organization mainly because the suggested cause of action is not debatable as evidence already lies in the open. In the long run, the organizational practices are changed towards application of the best solutions to problems which are based on prior research hence reducing the chances for errors within the organization.
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Summary
Money that was received from inflated invoices from the customers in the hotel would mean that such transactions would have been detected
Enactment of these measures would have meant that the bank in which the money that was received from inflated invoices from the customers in the hotel would mean that such transactions would have been detected, and the relevant agencies notified to investigate the claim. As a result, my business would have been cut off, and I would not have succeeded in carrying out the business.
On the other hand, I would have feared being involved in such high profile crimes, those results in high and severe penalties for those who get involved. Besides, there are serious laws that discourage drug trafficking, and I would have feared to be put in the system in case I was caught conducting the business. Drug Trafficking and Safe Harbor Elimination laws would have made it hard to get involved in a crime, which means that the whole mission would not have been accomplished. As a result, the restaurant would not have supported my money laundering efforts because they would have been directly involved in support of drug trafficking, and my efforts of conducting the business will be barred.
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References
Cassella, S. D. (2018). Toward a new model of money laundering. Journal of Money Laundering Control.
Colladon, A. F., & Remondi, E. (2017). Using social network analysis to prevent money laundering. Expert Systems with Applications, 67, 49-58.
Gilmour, N. (2016). Understanding the practices behind money laundering–A rational choice interpretation. International Journal of Law, Crime and Justice, 44, 1-13.
Jamshidi, M. B., Gorjiankhanzad, M., Lalbakhsh, A., & Rosanna, S. (2019, May). A novel multiobjective approach for detecting money laundering with a neuro-fuzzy technique. In 2019 IEEE 16th International Conference on Networking, Sensing and Control (ICNSC) (pp. 454-458). IEEE.
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Keesoony, S. (2016). International anti-money laundering laws: the problems with enforcement. Journal of Money Laundering Control.
Wilkes, C. J. (2020). A Case for Reforming the Anti-Money Laundering Regulatory Regime: How Financial Institutions' Criminal Reporting Duties Have Created an Unfunded Private Police Force. Ind. LJ, 95, 649.
Zhou, Y., Wang, X., Zhang, J., Zhang, P., Liu, L., Jin, H., & Jin, H. (2017). Analyzing and detecting money-laundering accounts in online social networks. IEEE Network, 32(3), 115-121.
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