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In times of global economic turmoil, an ever-expanding population and scarcity of resources, competition is getting tougher by the minute. Financial stability has now become the sole purpose of one’s existence, and this shift in priorities not only fuels conglomerates and promotes corporate culture, but also prompts individuals to explore illicit means to maximize their net wealth; the most common example being money laundering.
Money laundering is the concealment of money, which is obtained through illegal means. The crime is systematically pursued by both individuals and corporations seeking to evade tax or to invest the money in other illicit activities. On a global level, money laundering is one of the most widely committed white collar crimes. Two recent cases help explain the severity of this act.
In July, an American nurse was arrested in Jamaica on charges of money laundering. 39-year old Coline Brown landed at the Norman Manley International Airport with over $9 million in cash and failed to identify the source of the funds when questioned. Ms. Brown held dual nationalities and her US passport were seized. . A review of the report highlights the shortcomings in anti-money laundering measures. Despite stringent airport security checks, the woman was able to carry large sums of money in her luggage and illustrates a need to implement better money laundering check procedures.
Another prominent money laundering case was put forward by the research organization Fair Share Education Fund in August. The report highlighted how several criminal groups are using US-based shell companies to launder their illicit proceeds and how a simple legal change can enable law enforcement personnel to address this issue. The report explains the three major components of money laundering; placement (introducing illicit funds into the financial system), layering (passing of funds through numerous transactions and shell companies) and integration (re-introduction of “whitewashed” funds back into the economy). Although shell companies can be used for lawful purposes, but in this case, Latin American crime syndicates used these companies to conceal their funds from authorities. Brazil’s state oil company Petrobras relied on a Nevada-based shell company to hide funds obtained through embezzlement. Another prominent case is that of Zetas- which used a shell company in the US to purchase horses and thereby launder several million dollars worth of illegal drug sale proceeds. .
As with the previous article, this detailed finding also highlights the improper implementation of anti-money laundering reforms across the globe. With high-profile money laundering cases (such as the Panama Leaks), the need to amend laws to create severe and punitive anti-money laundering regulations and to create global watchdogs are the need of the hour.
Unlike individual money laundering, the psychological motives behind corporate money laundering are clear and evident: tax evasion. Established tax heavens (such as the Cayman Islands) are often used for offshore company incorporation (or dummy companies) not only to conceal the true wealth of the company but also to conceal profits and set up “Hive Down” structures to escape VAT regulations. .
References
Duffield, G., & Grabosky, P. (2001, March). The Psychology of Fraud. Retrieved from Australian Institute of Criminology: Trends & Issues: http://www.aic.gov.au/media_library/publications/tandi_pdf/tandi199.pdf
Jamaica Observer. (2016, July 29). American nurse facing money-laundering charges remanded. Retrieved from Jamaica Observer: http://www.jamaicaobserver.com/news/American-nurse-facing-money-laundering-charges-remanded_68593
LaSusa, M. (2016, August 04). US Shell Companies Aid Crime Groups in Latin America and Beyond. Retrieved from Insight Crime: http://www.insightcrime.org/news-analysis/us-shell-companies-aid-crime-groups-in-latin-america-and-beyond
Unger, B. (2013). The Effects of Money Laundering. In E. Elger, Research Handbook on Money Laundering (pp. 35-47). Massachusetts: Edward Elger Publishing Inc.
