The motivation behind most crime is to make money. If criminals want to use that money it needs to appear to have come from legitimate sources. They need to clean or launder the black money.
The Australian Crime Commission, fresh from a 12 month undercover operation which netted $580 million in drugs and cash from organised crime, has created four charts explaining how money laundering works.
“There is no single method of laundering money,” the crime commission says. “Money launderers have shown themselves to be imaginative and use a variety of methods to get around counter-measures designed to identify and stop this activity.”
The following chart shows a method called “structuring” or “smurfing” or “cuckoo smurfing” where a large amount of black money is deposited in small amounts to avoid detection. Organised crime groups often employ people to make the deposits (click all of the images to enlarge):
This is the informal value transfer system and is used because it doesn’t need the actual movement of money, an activity which can be traced. The system itself is very old and is mostly used legitimately. Systems include Hawala in the Middle East and Hundi in India:
And this is trade based money laundering where money is disguised as legitimate trade sometimes using false invoices:
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