is the process of concealing the source of money obtained by illicit means. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount of money laundered, either worldwide or within their national economy. In 1996, the International Monetary Fund estimated that two to five percent of the worldwide global economy involved laundered money. However, the Financial Action Task Force on Money Laundering (FATF), an intergovernmental body set up to combat money laundering, stated that "overall it is absolutely impossible to produce a reliable estimate of the amount of money laundered and therefore the FATF does not publish any figures in this regard". Academic commentators have likewise been unable to estimate the volume of money with any degree of assurance.
MethodsRegardless of the difficulty in measurement, the amount of money laundered each year is in the billions (US dollars) and poses a significant policy concern for governments. As a result, governments and international bodies have undertaken efforts to deter, prevent and apprehend money launderers. Financial institutions have likewise undertaken efforts to prevent and detect transactions involving dirty money, both as a result of government requirements and to avoid the reputational risk involved.
Money laundering often occurs in three steps: first, cash is introduced into the financial system by some means ("placement"); the second involves carrying out complex financial transactions in order to camouflage the illegal source ("layering"); and, the final step entails acquiring wealth generated from the transactions of the illicit funds ("integration"). Some of these steps may be omitted, depending on the circumstances; for example, non-cash proceeds that are already in the financial system would have no need for placement.
Money laundering takes several different forms, although most methods can be categorized into one of a few types. These include "bank methods, smurfing [also known as structuring], currency exchanges, and double-invoicing".
- Structuring: Often known as "smurfing", is a method of placement by which cash is broken into smaller deposits of money, used to defeat suspicion of money laundering and to avoid anti-money laundering reporting requirements. A sub-component of this is to use smaller amounts of cash to purchase bearer instruments, such as money orders, and then ultimately deposit those, again in small amounts.
- Bulk cash smuggling: Physically smuggling cash to another jurisdiction, where it will be deposited in a financial institution, such as an offshore bank, with greater bank secrecy or less rigorous money laundering enforcement.
- Cash-intensive businesses: A business typically involved in receiving cash will use its accounts to deposit both legitimate and criminally derived cash, claiming all of it as legitimate earnings. Best suited is a service business. As such business has no variable costs, it is hard to detect revenues-costs discrepancies. Examples are parking buildings, strip clubs, tanning beds or a casino.
- Trade-based laundering: Under- or over-valuing invoices in order to disguise the movement of money.
- Shell companies and trusts: Trusts and shell companies disguise the true owner of money. Trusts and corporate vehicles, depending on the jurisdiction, need not disclose their true, beneficial, owner.
- Round-tripping: Money is deposited in a controlled foreign corporation offshore, preferably in a tax haven where minimal records are kept, and then shipped back as a Foreign Direct Investment, exempt from taxation.
- Bank capture: Money launderers or criminals buy a controlling interest in a bank, preferably in a jurisdiction with weak money laundering controls, and then move money through the bank without scrutiny.
- Casinos: An individual will walk into a casino with cash and buy chips, play for a while and then cash in his or her chips, for which he or she will be issued a check. The money launderer will then be able to deposit the check into his or her bank account, and claim it as gambling winnings.
- Real estate: Real estate may be purchased with illegal proceeds, then sold. The proceeds from the sale appear to outsiders to be legitimate income. Alternatively, the price of the property is manipulated; the seller will agree to a contract that under-represents the value of the property, and will receive criminal proceeds to make up the difference.
- Black salaries: Companies might have unregistered employees without a written contract who are given cash salaries. Black cash might be used to pay them.
- Fictional loans
Money laundering has been criminalized in the United States since the Money Laundering Control Act of 1986. That legislation, contained at section 1956 of Title 18 of the United States Code, prohibits individuals from engaging in a financial transaction with proceeds that were generated from certain specific crimes, known as "specified unlawful activities" (SUAs). Additionally, the law requires that an individual specifically intend in making the transaction to conceal the source, ownership or control of the funds. There is no minimum threshold of money, nor is there the requirement that the transaction succeed in actually disguising the money. Moreover, a "financial transaction" has been broadly defined, and need not involve a financial institution, or even a business. Merely passing money from one person to another, so long as it is done with the intent to disguise the source, ownership, location or control of the money, has been deemed a financial transaction under the law. However, the lone possession of money without either a financial transaction or an intent to conceal is not a crime in the United States.In addition to money laundering, the law, contained in section 1957 of Title 18 of the United States Code, prohibits spending in excess of US$10,000 derived from an SUA, regardless of whether the individual wishes to disguise it. This carries a lesser penalty than money laundering, and unlike the money laundering statute, requires that the money pass through a financial institution.According to the records compiled by the United States Sentencing Commission, in 2009, the United States Department of Justice typically convicted a little over 81,000 people; of this, approximately 800 are convicted of money laundering as the primary or most serious charge. READ MORE : HERE
April 30, 2013
Flashback: NBC Report
CONFIRMS BANKERS REALLY DO FUND DRUG CARTELS & TERRORISM
Still think it’s a ‘conspiracy theory’ that the largest mega banks are profiting off of the drug trade, or even the activity of terror groups? A little-known NBC report from 2012 actually confirms it.
In fact, one 2012 NBC report details how HSBC bank helped to finance everything from Mexican drug cartels to Syrian terror cells. Thanks to a United States Senate report, which centers around the role of Mexican drug cartel funds travelling through HSBC, NBC and a few other outlets actually covered the breaking news — albeit to a small degree.
And it’s this report that reveals how the United States branch of HSBC directly aided backers of Al-Qaeda and Mexican drug cartels through both finances and overall banking services. From terror-linked groups out of Saudi Arabia and Bangladesh, HSBC was tied up with numerous terror groups andfinancially empowering them for quite some time.
For around a decade or more, in fact.
Yet HSBC has managed to get away without much of a hitch. Even the 2012 Senate Report we’re discussing was simply a ‘probe’ that documents the events themselves. Even the major United States bank regulatory group the Office of the Comptroller of the Currency was deemed to have improperly looked into the situation — instead turning a blind eye to the entire operation. The investigative group at the Senate even reports on how the very culture of HSBC has been ‘polluted’ during the lengthy time period of terror and drug funding:
“The culture at HSBC was pervasively polluted for a long time,” said Senator Carl Levin.
MULTIPLE MEGA BANKS CAUGHT FUNDING DRUG CARTELS, TERROR GROUPS
But HSBC isn’t the only bank associated with the Mexican drug trade or the financial support of known terror groups. While HSBC was funding Iran and Mexican drug cartels according to the report, Wachovia was also getting in on the Mexican drug trade financial game. It was actually back in 2010 when Wachovia forfeited $160 million (chump change to them) in order to settle a Justice Department probe into their financial support of Mexican drug cartels. This was all broken down by the Guardian in an article entitled “How a big US bank laundered billions from Mexico’s murderous drug gangs.”
ING also decided to get in on the action, however, and ultimately settled a bit higher at $619 million after violating US sanctions against Iran and Cuba in shadowy financial trades.
February 16, 2013So what is to be done to these banks at the end of the day? Are executives being jailed, companies being dissolved, and funds being withdrawn from Mexican drug cartels and terror groups? Well, no. Instead,taxpayers are helping to fund the megabanks with $83 billion per year – far more than any minor settlements paid out by the banks.
5 Outrageous Revelations From HSBC’s $1,900,000,000 Drug Money Laundering Hustle
In the latest issue of Rolling Stone, Taibbi takes on the most criminal bank yet.
By Steven Hsieh
Matt Taibbi’s most recent Rolling Stone article unpacks one of last year’s most shocking bank cases in our era of “ Too Big to Jail.”
In December, HSBC was punished with a $1.9 billion settlement on drug laundering charges, the largest in American history, yet only five weeks worth of profits for the world’s third largest bank.
U.S. Assistant Attorney Lanny Breuer was uncharacteristically candid when explaining why he refused to pursue criminal charges:
“HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized.”
People were rightfully outraged when not a single HSBC banker went to jail for a decades’ worth of federal crimes, including money-laundering linked to drug cartels, terrorists and oppressive regimes.
Taibbi dove deep into HSBC’s case and history, revealing that the bank’s crimes were even worst than we thought. Here are five shockers from his article:
1. By HSBC’s December settlement, the bank had already received two cease-and-desist letters.First, in 2003, the Federal Reserve sent a cease-and-desist letter to HSBC demanding the bank take strict precaution not to do business with criminals and terrorists. The letter came after revelations that HSBC had opened accounts for shady characters like Sulaiman bin Abdul Aziz Al Rajhi, one of the “20 early financiers of Al Qaeda.”Essentially, the Feds caught HSBC engaged in criminal activity and told the bank to stop. But they didn’t. After the first cease-and-desist letter, the bank received dozens of warnings from the OCC, which they continued to ignore.The second cease-and-desist order came in 2010, after the OCC determined HSBC’s money-laundering controls to be weak. Instead of prosecuting the bank after it had ignored countless warnings, the OCC gave HSBC a second chance.Taibbi compares the leniency given to HSBC compared to victims of the outrageous “three-strikes” rule: “Three-time losers doing life in California prisons for street felonies might be surprised to learn that the no-jail settlement Lanny Breuer worked out for HSBC was already the bank’s third strike.”2. HSBC covered its tracks when helping oppressive regimes avoid sanctionsTaibbi reports that HSBC used a technique called “stripping” to avoid detection when they did business with countries under U.S. sanction. In particular, HSBC sought to increase its profits by laundering cash for Iran. The author quotes a memo from HSBC’s Middle East subsidiary, HBME:“It is anticipated that Iran will become a source of increasing income for the group going forward,” the memo says, “and if we are to achieve this goal we must adopt a positive stance when encountering difficulties.”To do this, the “bank would remove references to Iran in wire transactions to and from the United States, often putting themselves in place of the actual client name to avoid triggering OFAC alerts,” explains Taibbi.Taibbi further reports that there is evidence linking HSBC to a slew of other sanctioned countries like, Sudan, Cuba, Burma and North Korea. HERE3. HSBC ran offshore branches designed specifically for money launderingIn what Taibbi calls the “pinnacle innovation in the history of sleazy banking practices,” HSBC created a so-called “Cayman islands” branch in Mexico that let customers sidestep routine screening when opening accounts. The writer says clients “barely had to submit a real name and address, much less explain the legitimate origins of their deposits.” A 2002 audit revealed that 41 percent of accounts didn’t have complete client information.When it turned out that American companies used these accounts to sell aircraft to drug cartels, HSBC Mexico finally shutout some of the “Cayman islands branch” clients—but not all of them. Taibbi notes that, “As late as 2012, when HSBC executives were being dragged before the U.S. Senate, the bank still had 20,000 such accounts worth some $670 million.”4. HSBC did direct business with “the worst trafficking organizations imaginable.”A part of a major narcotics investigation, federal agents discovered a ton of evidence that implicated HSBC in widespread money laundering. For example, Taibbi reports the bank “played a key role in the so-called Black Market Peso Exchange, which allowed drug cartels inboth Mexico and Colombia to convert U.S. dollars from drug sales into pesos to be used back home.” And the dealers HSBC did business with were some of the most violent in the world.Former federal prosecutor Neil Barofsky told Rolling Stone HSBC worked for Colombia's Norte del Valle and Mexico's Sinaloa cartels — “groups that don't just commit murder on a mass scale but are known for beheadings, torture videos and other atrocities, none of which happens without money launderers.”Barofsky says he once put a Notre del Valle cartel member behind bars for 10 years on money laundering charges far smaller than what HSBC was involved with.5. An entire HSBC department was tasked with quickly clearing suspicious behaviorAfter the OCC sent HSBC its second cease-and-desist letter, the bank hired a bunch of unqualified workers to “investigate” suspicious alerts. In reality, the Delaware-based department was tasked with clearing out skeletons from HSBC’s closet. Taibbi quotes damning emails from HSBC bosses pressuring workers to clear as many alerts as possible, and praising the entire Delaware office when it erased 60 suspicious transactions in a week.Taibbi interviewed one of these “investigators,” Everett Stern, who described laughably low criteria for clearing an alert."Basically, if a company had a website, you could clear them," he told Rolling Stone.Stern found a slew of suspicious transactions that he was hired to scrub away, including exchanges tied to Hezbollah, Iran and the Muslim Brotherhood. He decided to turn whistleblower and alert the FBI.After that, Lanny Breur slapped HSBC with a deferred prosecution agreement."I thought, 'All that, for nothing?' " Stern told Rolling Stone. "I couldn't believe it."