Identifying financial patterns of money laundering with social network analysis: a Brazilian case study (2024)

FAQs

What is an example of a money laundering case? ›

A restaurant might bring in $2,000 in profits, but reflect $4,000 in the books and deposit $4,000 in the bank. This mixing of legitimate and illegitimate money gets the dirty funds into the financial system.

Potential financial stability impacts include bank runs and lost foreign investment. Large-scale money laundering can even spur volatility in international capital flows, undermine good governance, spark political instability, and just generally erode trust—in governments and institutions.

Integration in money laundering is the third and final stage, where illegally obtained funds blend with legitimate ones, erasing the line between clean and illicit sources. This integration makes it challenging for authorities to trace the true origin or source of the funds.

The traditional forms of laundering money are smurfing, using mules, and opening shell corporations. Other methods include buying and selling commodities, investing in various assets like real estate, gambling, and counterfeiting. The rise of digital technology also makes it easier to launder money electronically.

Common red flags include large cash transactions, structuring transactions to avoid reporting thresholds, rapid movement of funds, unusual customer activity, lack of business justification, dealing with non-resident customers or Politically Exposed Persons, offshore transactions, unregistered or unlicensed entities, ...

Warning signs include: rapid succession of transactions relating to the same property. use of cash or third-party intermediaries without adequate commercial explanation. use of overseas trusts or companies to conceal property ownership.

Transactions involving large sums of cash, particularly if they are structurally designed to avoid reporting requirements, are often associated with money laundering schemes.

Cash Transaction Reports - Most bank information service providers offer reports that identify cash activity and/or cash activity greater than $10,000. These reports assist bankers with filing currency transaction reports (CTRs) and in identifying suspicious cash activity.

The majority of professional service providers in gatekeeping positions, such as lawyers, accountants, and financiers, play an important role in the financial system and offer valuable legitimate services.

What are common reasons for money laundering? ›

With few exceptions, criminals are motivated by one thing-profit. Greed drives the criminal, and the end result is that illegally-gained money must be introduced into the nation's legitimate financial systems.

Smurfing involves splitting large sums of money into smaller, more easily concealable amounts of illegally obtained funds to avoid detection by authorities, while structuring involves deliberately depositing cash in smaller amounts to avoid reporting requirements.

Layering can include changing the nature of the assets, i.e. cash, gold, casino chips, real-estate, etc. Complex layering schemes involve sending the money around the globe using a series of transactions. The more countries the money enters and leaves, the harder it is to uncover the “dirty” source of the money.

What Is an Example of Money Laundering? Cash earned illegally from selling drugs may be laundered through highly cash-intensive businesses such as a laundromat or restaurant where the illegal cash is mingled with business cash before deposit. These types of businesses are often referred to as “fronts.”

Penalties

If prosecuted as a misdemeanor, Money Laundering can be punished by up to a year in jail and court fines. If prosecuted as a felony, a sentence can carry up to three years in prison and a maximum fine of $250,000 or twice the amount of money laundered, whichever is more.

The three main money laundering offences (or prohibited acts) under Part 7 of POCA are: concealing, disguising, converting, transferring, or removing criminal property (s327)

Money laundering is the process of hiding the source of money obtained from illegal sources and converting it to a clean source, thereby avoiding prosecution, conviction, and confiscation of the criminal funds. It is an illegal exercise that converts black money into white money.