Corruption is a long-standing problem that has harmed the economies of many developing countries. This is exacerbated by the constant activity of some people who launder money through various unlawful means.
The damaging impact of such illegal inflows and outflows of large sums of money on the economy cannot be exaggerated.
Yet, these illicit financial transfers are only feasible because some financial professionals participated.
This, in turn, threatens economic progress by dragging the wheel of government and development. Here are ways some rich and powerful people launder money.
Used car business
This is classified as trade-based money laundering. Here, a legal business conceals an illicit money flow. This way, they avoid unwanted attention and make illegal money legal.
The ‘used car business’ is one of the most commonly used fronts. Augustine Osemwegie, a Nigerian residing in the United States, was charged with money laundering. He launders the money he got from scamming people by selling used cars.
Osemwegie uses the money from payroll operations and romance scams to buy cars at the Massachusetts auctions. He ships them to Nigeria, where car dealers buy the vehicles in Nigerian cash.
The money becomes legitimised through vehicle sales. Osemwegie deposits the cash into different Nigerian bank accounts.
Bitcoin is virtual money that enables peer-to-peer financial transactions without using a mediator. The US Treasury Department classified it as “decentralised digital money”.
Bitcoin transactions are explicit and recorded on a “blockchain”, a public ledger. Despite this, cybercriminals discovered methods to take advantage of it.
In 2014, Charlie Shrem, the CEO of BitInstant, helped a client launder millions of dollars in bitcoins to known criminals on Silk Road.
This was made possible with the aid of some programs. Dark Wallet and Samourai Wallet are two applications that allow bitcoin users to keep their identities hidden. This enables anonymous transactions, making money laundering secure and simple.
It is a type of financial structure that divides huge amounts of money into smaller ones. These smaller funds are put in numerous banks by different persons.
Alberto Barrera, called Papa Smurf, pioneered this approach in 1980. It is widely known that many wealthy individuals use it.
He hired a dozen Colombian henchmen to make cash deposits at different banks around the United States, then buy cashier’s checks and money orders for roughly $5,000.
Barrera then deposits the cheques into his Colombian, Panamanian, or other accounts when they return. Using this method, he laundered a total of $12 million.
A shell corporation is a legal entity that only exists in name. A shell corporation does not provide any services or create anything.
The main goal is to create the appearance of legality through forged invoices and balance sheets, allowing it to receive money and disguise it as legitimate earnings.
Also, fraudsters use shell companies to mask illicit activity and avoid paying taxes, hide money, and steal money. Apart from these, some countries use shell companies for other things.
China borrowed a large sum of money using shell companies. This way, the government disguises the actual level of public debt as a proportion of GDP by classifying it as “private debt.”
Mules are people employed by money launderers to assist them in carrying out their plans. Just like drug peddlers, these people only help the launders to smuggle money.
Opening bank accounts and depositing money into them is one of the tasks of a mule. They use wire transfers and currency conversions to shift the funds throughout the banking system to prevent discovery.
Hiding in legal business
Money launders use legitimate enterprises as safe havens for laundering their money. This strategy works well, especially with businesses like restaurants, bars, casinos, check-cashing establishments, and car washes.
This is accomplished using invoice accounting techniques. The company adjusts an invoice amount for a product or service to effortless move money back and forth.