Money Laundering – a white collar crime!


By Syeda Hoor Shumail

Back in 2020, former President of Pakistan was indicted in a money laundering case. This simple word money laundering has suddenly put me in a state of shock as this case was led to court and a lot of disrespect and shameful comments were circulated across country. What was that bigger in that term? Which has also trapped a person in power so dreadfully. At that time, I was not much familiar to this; here, in this article, I will put some light on term money laundering, its ways and its repercussions.

Money laundering is illegal process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source. Money from criminal activity is considered dirty and process “launders” it to make it look clean. It is process of concealing origin of money, often obtained from illicit activities. It is a crime in many jurisdictions with varying definitions. It is usually a key operation of organised crime.

This financial crime in which source of illegally acquired money or goods is hidden from law enforcement and financial regulators by generating appearance of legitimacy for illicit gains. Money laundering disguises origins of money or goods and can be perpetrated by individuals, tax evaders, criminal organisations, corrupt government officials and even financiers of terrorism

Historically, it began in China earlier 2000BC where Chinese merchants concealed wealth acquired through trade from rulers and officials whom they feared would confiscate profits. By and by, back in 1900 century, it prevailed in USA widely. Although it would not be wrong to say that this deceptive idea has ruled USA and then travelled worldwide by time.

There are many ways to launder money, from simple to very complex. One of most common techniques is to use a legitimate, cash-based business owned by a criminal organisation. For example, if organisation owns a restaurant, it might inflate daily cash receipts to funnel illegal cash through restaurant and into restaurant’s bank account. After that, funds can be withdrawn as needed. These types of businesses are often referred to as “fronts.”

One common form of money laundering is called smurfing. This is where criminal breaks up large chunks of cash into multiple small deposits, often spreading them over many different accounts, to avoid detection. Money laundering can also be accomplished through use of currency exchanges, wire transfers and “mules” cash smugglers, who sneak large amounts of cash across borders and deposit them in foreign accounts, where money-laundering enforcement is less strict. However, some other ways are drug trafficking, arms trafficking, human trafficking, terrorism financing, white collar laundering, Gambling and laundering money at casinos, Counterfeiting etc.

These days, money laundering has also been taking place through a modern technique by using cryptocurrency. Convertible Virtual Currencies another term for cryptocurrencies have grown to become currency of choice in a wide range of online illicit activities. Apart from being preferred form of payment for buying ransomware tools and services, online exploitative material, drugs, and other illegal goods online, CVCs are increasingly used to layer transactions and obfuscate origin of money derived from criminal activity. Criminals use a number of money-laundering techniques involving cryptocurrencies, including “mixers” and “tumblers” that break connection between an address (or crypto “wallet”) sending cryptocurrency and address receiving it.

In past, term “money laundering” was applied only to financial transactions related to organised crime. Today its definition is often expanded by government and international regulators. According to office of comptroller of currency it means “any financial transaction which generates an asset or a value as result of an illegal act”, which may involve actions such as tax evasion or false accounting. In UK, it does not even need to involve money, but any economic good. Courts involve money laundering committed by private individuals, drug dealers, businesses, corrupt officials, members of criminal organisations such as Mafia and even states.

Generally, money launderers tend to seek out countries or sectors in which there is a low risk of detection due to weak or ineffective anti-money laundering programmes. Because objective of money laundering is to get illegal funds back to individual who generated them, launderers usually prefer to move funds through stable financial systems. Money laundering activity may also be concentrated geographically according to stage laundered funds have reached. At placement stage, for example, funds are usually processed relatively close to under-lying activity, often but not in every case, in country where funds originate.

Thus, to avoid this hazard, governments around world have stepped up their efforts to combat money laundering in recent decades, with regulations that require financial institutions to put systems in place to detect and report suspicious activity. Secondly, anti-money laundering policies are also being set up globally. Meanwhile, when Pakistan is facing momentous hazard of money laundering and a substantial risk of terror financing, which are seriously threatening its socioeconomic well-being. it has also set up a legal basis for financial crime by announcing an Anti-money Laundering Act in 2010. It also examines legal and procedural measures enforced as a counter-strategy for terror financing and money laundering.