The term “money laundering” itself explains the meaning of the action – to turn “dirty” money into “clean” money.

“Dirty” money is funds that have been obtained from illegal activities and the criminal wishes to be able to use the funds for further illegal activity or just to enjoy life.

The principal aim, of course, is not to get caught.

A further aim is to prevent the funds being seized by authorities as proceeds of crime.

Many countries now have in place legislation which allows for seizure of funds gained from criminal activities and, in some cases, associated “clean” money mixed with the “dirty” can be also seized. This includes items of value purchased by the criminal including homes, cars, boats, etc..

Also, many countries have seized funds sharing agreements between them so that traditional methods of avoiding detection by moving internationally are being closed down. For example, the USA and Switzerland have an agreement whereby funds from a criminal activity in one country seized in the other country are shared 50%/50%.

Money laundering is not a new activity.

Examples go back to the 11th century when a system of international trade was established (prior to today’s merchant banks) and operated by the Knights Templar who are remembered as “soldiers of God” in the Crusades. A sum of money could be deposited with the Templars in one country and a promissory note given which could be redeemed for cash from Templars in another country; the resulting funds were then “clean”. It is emphasised that for the most part this process was a legitimate form of trade but did have its misuses.

Another example and one of the first recorded in England when a criminal was caught trying to launder ill-gotten gains was the 17th century pirate Henry Every. After some years of very successful pirate activity Every and his men decided to retire. They split the considerable treasure between them and Every moved back to England. After un-successfully trying to bribe his way to a full pardon he changed names and went to ground. When trying to convert some of his treasure (diamonds in this case) to cash the merchants correctly guessed that they were the proceeds of crime and swindled him of it. He had no recourse to the law as he certainly could not expose himself or the source of his treasure so he lived the rest of his life in poverty. Many of his men successfully laundered their treasures and lived a contented life.

The lesson for criminals is that it is often more difficult to gain an advantage from the proceeds of crime than from carrying out the crime itself.

In recent times the laundering of proceeds of crime has taken on a greater focus following the rise of international terrorism which is usually funded from these proceeds.

An attack on terrorism necessarily involves an attack on their sources of funds and location of the sources of funds is very often the mechanism whereby terrorists can be identified and apprehended.

A large number of laws and regulations have been enacted around the world to combat money laundering including opening for scrutiny many of the hiding places that have been used such as banking regulations in Switzerland, the Cayman Islands, etc which were favourites for tax avoidance.

The laws and regulations, to be discussed later in this paper, enacted around the world have forced significant changes in the way business has been carried out and mandated implementation of Anti-Money Laundering (AML), Counter-Terrorism Funding (CTF) systems in all governments, institutions and businesses.

It is not possible, or advisable to try, to avoid adherence to the laws in place or being enacted even though the costs of adherence can be very high.

To be continued.

© Roger L. Levy 2008 Forensic.Technology@Gmail.com

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