Methods of Money Laundering

Various Methods used for Money Laundering are

Structuring Deposits
Under this method large amounts of money are broken into smaller, less-suspicious amounts. Method is also called Smurfing. This is done due to following threshold limits:

  • In the United States, this smaller amount has to be below $10,000 (the dollar amount at which U.S. banks have to report the transaction to the government).
  • Similarly, in India this amount is Rs. 50,000.

Front Companies

Launderers sometimes place dirty money in otherwise legitimate businesses to clean it. They may use large businesses like brokerage firms or casinos that deal in so much money in cash form that it’s easy for the dirty stuff to blend in, or they may use small, cash-intensive businesses like bars, car washes, strip clubs or check-cashing stores.

Overseas Banks

Money launderers often send money through various “offshore accounts” in countries that have bank secrecy laws, meaning that for all intents and purposes, these countries allow anonymous banking. A complex scheme can involve hundreds of bank transfers to and from offshore banks. According to the International Monetary Fund, “major offshore centers” include the Bahamas, Bahrain, the Cayman Islands, Hong Kong, Antilles, Panama and Singapore.

Underground/alternative Banking

Some countries in Asia have well-established, illegal alternative banking systems that allow for undocumented deposits, withdrawals and transfers. These are trust-based systems, often with ancient roots, that leave no paper trail and operate outside of government control. This includes the hawala system in Pakistan and India and the Fie Chen system in China.

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