Money laundering is a method used to make money obtained illegally appear to originate from legitimate sources (Madinger, 2016). The process is termed as “laundering” since money from the illicit activities is considered as “dirty.” The most commonly used strategies of laundering money include utilizing legitimate cash-based businesses, shell companies, smurfing, and cryptocurrencies. Regardless of the methods used by criminals, there are various weaknesses involved.
Money Laundering Weaknesses
In most cases, criminals deposit their illegal money in banks that are less likely to be investigated by the authorities (Madinger, 2016). These criminals consider factors such as the management, deposit limit, and the location. In some cases, drug lords may own a bank to ensure they effectively cover up their operations from government auditors (Madinger, 2016). However, using the bank to launder money has significant weaknesses.
In 2013, a Dutch bank known as Rabobank pleaded guilty to assisting Mexican drug lords to launder over $300 million between 2009 and 2012 (Spagat, 2018). Criminals used Rabobank’s Calexico and Tecate branches after the Mexican government imposed new limits on cash deposits for the local banks. Drug lords chose to deposit their money in Rabobank since it is not a Mexican bank and the branches are strategically located at the US-Mexican border. However, the authorities discovered that Rabobank’s deposits had soared significantly, which led to investigations.
Using shell companies to launder money also has significant weaknesses. For instance, Nauru, a small island off the coast of Australia, engaged in money laundering schemes after its natural resources were depleted (Fox, 2016). Shell companies hide the identity of the beneficiary or the originator of the transfer. Thus, authorities can use this information to impose sanctions on the country or location, which results in illegal activities being crippled or reduced.
References
Fox, L., 2016. Westpac bank to exit Nauru. ABC News. [Online] Available at: www.abc.net.au/news/2016-04-14/westpac-set-to-exit-nauru/7326892 [Accessed Oct. 20, 2018].
Madinger, J., 2016. Money Laundering. Third ed. Boca Raton: CRC Press.
Spagat, E., 2018. Rabobank to pay $369 million in money-laundering case. AP NEWS. [Online] Available at: www.apnews.com/25204f3ee9fa4e948ea74a0e82249258 [Accessed Oct. 20, 2018].
