4 Common Modes of Money Laundering

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The fraudsters or criminals certainly do not want their dirty money tracked by the authority, which is why they launder the money. The money laundering has actually been carried out since 2000 years ago. As time passes by, the fundamentals of money laundering remain the same, but the methods are in constant change. The perpetrators always find new ways to keep their dirty money. The followings are four modes of money laundering practices that are usually carried out by the perpetrators.

 

1. Put money in a legal company

Mixing illegal funds with legitimate income from legitimate companies is one of the ways. Basically, money that has been through a long transaction line and mixed with the company’s legitimate income will be difficult to trace. The perpetrators establish companies legally with business operations in general as a shell company. The shell companies that are established without clear assets or operations are commonly found as a means of money laundering. Therefore, Indonesia government has issued Presidential Regulation No. 13 of 2018 which regulates the transparency of the company’s beneficial owners. Every company is now required to report its beneficial owners. The effort is expected to minimize money laundering practice.

 

2. Transfer of funds to the tax haven region

Tax haven regions or countries are the countries that apply loose tax rules or have no tax at all, strict information secrecy on banks and easy company establishment procedures. Tax haven countries include Cayman Islands, British Virgin Islands, and Panama. These countries deliberately “sell” these services to attract taxpayers from other countries to transfer their money to them. The perpetrators usually save money in financial institutions or invest it in companies in the region.

 

3. Purchase and sell property assets

Another popular method used by the perpetrators is investing it in property assets. For example, a corruptor ‘entrust’ their dirty money by transferring it to an account of a friend, household assistant, or cousin. From these accounts, money is spent on the property. Alternatively, the corruptor purchases property assets from brokers at prices above the market price. He agreed to purchase it with a condition that he paid the market price with clean money, and the excess price was paid with dirty money. Yet, both parties agreed to reduce the transaction value on paper. A month later, the property is sold to someone else worth the purchase price. The margin between the reduced value on paper and the purchase price is the laundered money.

 

4. Online transactions

Online transactions are attractive launder machine for perpetrators because of its global reach, speed, practical, and inexpensive. In any corner of the world, as long as there is internet access, the perpetrators can take advantage of online transactions. Basically, money laundering through online transactions is utilizing a legal payment processor to obscure the origin of money. The perpetrators can use e-commerce, crowdfunding, cryptocurrency, even online games. For example, the perpetrator can create a fictitious account complete with display of products traded on an e-commerce. Then, he buys and transfers some money to buy products as a pretext to move the dirty money. The money is then cashed and the bank records as a legal payment from the e-commerce.

 

 

Sources:

https://www.pymnts.com/news/security-and-risk/2018/trulioo-ecommerce-onboarding-fake-merchants-money-laundering/

https://loanstreet.com.my/learning-centre/money-laundering

http://www.simulasikredit.com/contoh-contoh-kasus-money-laundering-atau-pencucian-uang/

 

 

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