What is Money Laundering?

  • Money laundering is the process of taking the proceeds of criminal activity and making them appear legal.
  • Money laundering usually consists of three steps: placement, layering and integration.
    • Placement is the depositing of funds in financial institutions or the conversion of cash into negotiable instruments. Placement is the most difficult step. The easiest way to begin laundering large amounts of cash is to deposit them into a financial institution. However, under the Financial Intelligence Centre Act 38 of 2001 (FICA), financial institutions are required to report large deposits in cash made by an individual in a single day. To disguise criminal activity, launderers route cash through a "front" operation; that is, a business such as a check-cashing service or a jewellery store. Another option is to convert the cash into negotiable instruments, such as cashier's checks, money orders, or traveller’s checks.
    • Layering involves the wire transfer of funds through a series of accounts in an attempt to hide the funds' true origins. This often means transferring funds to foreign countries that have strict bank-secrecy laws such as the Cayman Islands, the Bahamas, and Panama. Once deposited in a foreign bank, the funds can be moved through accounts of "shell" corporations, which exist solely for laundering purposes. The high daily volume of wire transfers makes it difficult for law enforcement agencies to trace these transactions.
    • Integration involves the movement of layered funds, which are no longer traceable to their criminal origin, into the financial world, where they are mixed with funds of legitimate origin.
Subject: 
Directors and Officers Liability