CRIMINAL JUSTICE 6
Moneylaundering refers to a process through which an illegal source ofassets generated or obtained by engaging in criminal activity becomescovered to hide the relationship amid the funds and the initialcriminal activities (Hopton, 2009). Terrorists have been involved inthis financial crime in an attempt to support their operations. Theaim of this report is to delve the issue of money laundering,including reasons and methods behind the process. Also, how itrelates to the funding of terrorist groups will be discussed.
Theprocess of money laundering comprises of three stages, which includeplacement, layering, and integration. The first stage is marked bythe initial entry of illegal proceeds of crime into the economicsystem. The purpose of this phase is to relieve the criminal ofholding vast amounts of cash and placing the resources into thelegal, financial system (Hopton, 2009). In this stage, launderershave a high chance of being caught since putting massive amounts ofresources into the legitimate economic system makes one be suspectedby officials. Different methods can facilitate the placement phase.One of them is the asset purchase. Through buying an asset,launderers are in a position to transfer their bulk cash to a lessconspicuous form. Another approach entails blending funds by openingdifferent businesses so as to allow the mingling of illegal and legalfunds. Moreover, the stage may become facilitated by using theillegal resources to repay loans. Alternatively, currency may includeanother option that can be used to support the process.
Thelayering step is considered as the most complex of the three phases.The chief intention of this stage is to disconnect the illicitresources from their source by making it harder to detect and reveala laundering activity. Besides, it makes a trail of dishonestresources hard for the agencies involved in law enforcement. Thereare various techniques that are adopted by lawbreakers to support theinitiative. One such approach entails converting cash into monetaryinstruments. In most cases, this involves the use of money orders andbanker’s drafts. Another way is through the resale of materialassets bought with the illegal resources. The assets can be soldeither locally or internationally. In such a scenario, it can becomeexceedingly difficult to trace and seize the property. Furthermore,during this phase, money may be transferred electronically from onenation to another making it uneasy for law enforcement officials todiscover any potential irregularities (Hopton, 2009).
Thelast stage is the integration, where laundered money enters theeconomy chiefly through the banking system. In this phase, the moneygets back to criminals from what is deemed as legitimate sources. Theprimary objective of this stage is to reunite the resources with thelawbreaker in a way that does not draw attention. One of the methodsused in this step is through false export/import invoices bycompanies. This involves an overvaluation of entry documents so as tojustify the funds deposited in local banks or the value of fundsobtained from exports (Hopton, 2009). Another technique is throughthe criminals dealing with front organizations established in nationshaving corporate secrecy laws. In this case, the lawbreakers lendthemselves their laundered proceeds in what seems to be a validtransaction.
Criminalshave been indicated to be involved in money laundering for threeprimary reasons. One of them is that the trail of resources fromoffense to scandalous individuals can be incriminating evidence.Thus, these people try very hard to make money derived throughdubious means seem legal (Rösner,2010). The goal of such acts is to ensure that the government doesnot get proof that can put those who acquire wealth unlawfully into atrial. Furthermore, since proceeds obtained from unscrupulousactivities are usually a target of investigations, those engaged inthe acts attempt to shield the gains from becoming suspiciousthrough concealing their existence or making them appear legitimate.Furthermore, criminals are involved in the process of moneylaundering so as to support their operations. Since the undertakingsof lawbreakers are not allowed by law, they have to cover theirsources of income so as to progress their activities (Rösner,2010).
Themoney laundering process has been related to funding of terroristgroups. The laundering of criminal resources aims at giving a legalappearance to dirty money, while the laundering of terroristresources has an objective of obscuring assets of a legal origin(Thony, 2000). This being the case, criminal and terrorist assetshave a threat to financial systems. Today, criminal activities areincreasingly more significant part of the terrorist economy, and theactivities differ depending on the terrorist entities concerned. Thebest well-known criminal activity that supports terrorist groups bylarge amounts, as a source of funding, is drug trafficking (Thony,2000). The smuggling of narcotics has resulted to money launderingsince the activity is regarded as criminal and its proceeds attractlegal ramifications. This being the case, terrorist groups can beseen to be involved in money laundering since the gains that theyobtain from drug trafficking becomes integrated into the economy in amanner that makes the resources seem legitimate.
Apartfrom drug trafficking, other criminal activities have been deemed toplay a critical role in the financing of terrorist groups forinstance, racketeering, abductions where ransom is demanded, humantrafficking, and illegal trade of precious stones (Thony, 2000).Since all these activities involve obtaining of incomes illegally,their proceeds undergo the money laundering process. Therefore, arelationship can be established amid money laundering and thefinancing of terrorist groups.
Examplesof terrorist groups that benefit from the money laundering processinclude the Al Qaeda and Sunni extremists groups. The Al Qaedafrequently uses the “Hawala” system to obtain funds that they useto support their operations. The tracking of the money is exceedinglydifficult. The Sunni extremists are involved in drug trafficking,which is their source of funding. This calls for money laundering inan attempt to disguise their source of funds.
Moneylaundering is a process through which an illegal source of assetsgenerated by involving in criminal activity becomes covered to hidethe association between the resources and the initial illegalactivities. The money laundering process can be analyzed in threestages, which include placement, layering, and integration. Sinceproceeds obtained from unscrupulous activities are usually a targetof investigations, those engaged in the acts attempt to shield thegains from becoming suspicious through laundering. In addition,criminals are involved in the process so as to support theiroperations. The money laundering process has been related to fundingof terrorist groups. This emanates from the reasoning that terroristgroups are involved in criminal activities to fund their operations,which make them involved in laundering.
Hopton,D. (2009). Moneylaundering: A concise guide for all business.Surrey, England: Gower Pub.
Rösner,S. (2010). MoneyLaundering: Effects and measures.München:GRIN Verlag GmbH.
Thony,J. (2000). Moneylaundering and terrorism Financing: An Overview.