New trends in money laundering ‐ from the real world to cyberspace
| Published date | 01 January 2005 |
| Date | 01 January 2005 |
| Pages | 48-55 |
| DOI | https://doi.org/10.1108/13685200510621253 |
| Author | He Ping |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control Ð Vol. 8 No. 1
New Trends in Money Laundering Ð From the
Real World to Cyberspace
He Ping
TRADITIONAL METHODS OF MONEY
LAUNDERING
Money laundering is a process through which crim-
inals legitimise proceeds derived from illegal activity.
One complete money laundering process includes
three stages: placement, layering and integration.
1
Money laundering is often a highly complex process,
rather than a single act. Due to its complicated charac-
teristics, money laundering methods will be diverse.
Generally speaking, the common methods, widely
used by criminals, include smuggling currency and
laundering money through ®nancial institutions and
non-®nancial institutions. With the enhancement of
anti-money laundering measures, however, the draw-
backs of traditional approaches to money laundering
are evident.
Currency smuggling means that money launderers
transfer illegal proceeds in secret to any other country
or territory. In May 1988, inspectors at Miami Airport
in America found $30m, which was demonstrated to
be the proceeds of drug tracking, hidden in luggage,
TV sets, deodorant cans and even in tennis balls.
2
Another example, in September 2001, was when
Hong Kong uncovered the biggest transboundary
money laundering criminal gang throughout its his-
tory, which involved HK$50bn. It is surprising that
for almost six years money launderers carried suitcases
®lled with HK$10m from Luo Hu Custom in Shen
Zhen to Hong Kong and then transferred these
funds to 1,300 accounts every day. They also trans-
ferred 29 kinds of currency from Guang Zhou to
Hong Kong by vans and sedans three times daily.
The largest sum of dirty money transferred to Hong
Kong on some days amounts to HK$50m.
3
Currency smuggling, as one means of money laun-
dering, is still not out of date. Currency is still the pri-
mary form of illegal proceeds. Furthermore, once
successful, it is possible to conceal the criminal origin
of these currencies and achieve what the criminal
wishes. However, currency smuggling may not be
the wisest method of money laundering at present,
considering economic globalisation and ®nancial elec-
tronics. Currency smuggling runs a bigger risk of
being discovered due to its bulk. The more there is
of it, the bigger the space required. In addition, it
needs time and resources to take large amounts of
money through customs and then to transfer them
to other countries and territories.
The most common way to launder money is to
make use of ®nancial institutions. Financial insti-
tutions can provide multiple services, such as deposits,
loans, acceptances, discounts, foreign exchange, settle-
ments and the like. Financial institutions have diversi-
®ed ®nancial instruments and provide various ways
for ®nancial resources transition. With the global
economy and integrated ®nancial markets, transfer-
ring funds across international borders is convenient
and prompt. Moreover, the principle of banking
secrecy is similar in almost every country. For these
reasons, ®nancial institutions are the most vulnerable
sectors for money launderers.
Since the ®ght against money laundering in the
1980s, the most important international anti-money
laundering documents focused on the ®nancial insti-
tutions to take the necessary measures in the ®ght
against money laundering. `Measures Against the
Transfer and Safekeeping of Funds of Criminal
Origin', adopted by the Committee of Ministers of
the Council of Europe on 27th June, 1980; the Basel
Committee Statement, adopted by the Basel Com-
mittee on Banking Regulations and Supervisory
Practices in December 1988; the Recommendations
of the Financial Action Task Force (FATF); the Coun-
cil Directive of 10th June, 1991 on Prevention of the
Use of the Financial System for the Purpose of
Money Laundering, and the Directive 2001/97/EC
of the European Parliament and of the Council,
amending Council Directive 91/308/EEC, all empha-
sise that ®nancial institutions should assume anti-
money laundering obligations such as client identi®-
cation, record keeping and suspicious transactions
reporting. In 2000, the voluntary code of conduct
agreed by 11 world ®nancial central banks known as
the Wolfsberg Principles came into being, which
decided to take uniform action to prevent money
laundering spreading worldwide. The preventive
measures insisted that banks should ascertain the iden-
tity of depositor and the source of the savings; they
Page 48
Journalof Money Laundering Control
Vol.8, No. 1, 2004, pp. 48± 55
#HenryStewart Publications
ISSN1368-5201
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