The Hows and Whys of Money Laundering

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The most direct way to hide dirty money is make small withdrawals and deposits from the bank. The method is referred to as “structuring” or “smurfing.” All banks are required to report transactions involving amounts over $10,000 to the Financial Crimes Enforcement Network( FinCEN), so criminals usually split their dirty cash and deposit and withdraw small bills per time across several bank accounts to prevent being investigated. This could happen when the amount of cash is not so large that won’t get much attention.

The US is one of the few countries require report of large amount transactions. For developing countries that are in the process of establishing comprehensive regulations, money launderers may take advantage of less regulated banks. In the 1990s, large amount of dirty cash entered banks in the developing Baltic states, and bank patrons had to cover that with their own clean money to prevent losing insurance as a result of investigations into the dirty money. This ultimately led to collapse of banks.

Using foreign banks is also a common way for hiding money without alerting one’s own country. Switzerland is an ideal choice for money launders because of its stringent secrecy laws. However, recently transactions are easier to be exposed in Swiss banks because of the pressure by the U.S. government. Hong Kong, Aruba, Ghana, and many other countries are also popular sources for money laundering.