What is Money Laundering? What are the top practices of money laundering and their different stages? FBT ACCA exam
DefinitionMoney laundering as the word itself says, is the cleansing of the money while hiding the criminalized activity involved during the process of obtaining it. These illegitimate activities can include human trafficking, terrorist funding, harmful drug supplies, etc. Latest news : The ACCA Anti-Money Laundering resource for practitioners has been updated as of March 2022 and includes detailed guidance developed by CCAB and a free on demand lecture and standard documentation.- Acca Global
Reasons to involved in money launderingThere are despicably two reasons why people get involved in money laundering. One is when people try tax evasion, especially in countries where direct tax rates are relatively high, such as the United Kingdom. People also get involved in tax evasion due to high corruption and low social welfare for the betterment of society and its citizens. This is when people feel most threatened by their government and avoid paying their taxes. This problem is common in South Asian countries, including India, Pakistan, Bangladesh, etc.
Root Cause Of Money LaunderingHowever, another root cause of money laundering is when people intend to hide the real source of income because it is obtained via unauthorized sources; thereby, it is important to hide it to stay protected from regulations and law enforcement. Before we move to the definition of money laundering, let me tell you that this topic is part of the ACCA F1 paper, taught by Owais Mirchawla and is highly examinable topic in Acca. If you are an ACCA aspirant, you must understand the topic well.
What Is Money Laundering In Business And Technology – FBT ExamThe entire idea of converting black money (illegally earned money) into white money (legally earned money) is known as money laundering.
The Top 5 Practices of Money LaunderingAfter you are clear on what money laundering is in business, here are a few common practices applied to perform money laundering all around the globe.
Smurfing a large amount of money into small transactions
Deterring money via casino
Money laundering via the trade in diamonds and gold
Cash smugglers trade money across borders.
Three Stages Of Money LaunderingWhat are the three stages of money laundering?
Placement-First StageThe first and most important step in money laundering is placing dirty, unauthorized funds earned through bribery, corruption, and theft into the financial system. It is possible to accomplish this by dividing the money into smaller transactions. The use of fictitious sales and purchases and the appointment of ghost employees and customers are examples of this practice. By doing so, illegal funds may be disguised as legitimate funds and placed in legitimate financial transactions. This stage of money laundering is highly detectable by legal authorities, making it the riskiest stage How these are done ? These placements are done in various ways: Through the process of money merging, people frequently combine illicit funds with legitimate revenue. This is frequently done in establishments that only accept cash, like casinos, hair salons, and supermarkets. These kinds of enterprises frequently conduct large numbers of cash transactions each day, which makes it simpler for illicit funds to be mixed in without arousing suspicion from the law. Many people use invoice fraud as a method of laundering their illegal funds. Making an unlawful transaction seem legitimate entails inflating or deflating the value of sales and purchases. Some even fabricate transactions that never occurred in order to support their offshore businesses.
Layering-Second StageSeparating illicit activity from its source is the second procedure in a sequence of processes that make up money laundering. Criminals use a number of strategies to accomplish this, one of which is to conceal the unapproved source. To conceal the audit trail of unlawful activity, layering, which involves many transactions and bank accounts, as well as the use of trust foundations and cooperatives, is used.
Integration-Third stageThe process of money laundering entails several stages, with the final one being integration. At this stage, the launderer usually invests their unlawfully acquired funds in diverse financial instruments to make them appear lawful. Once the funds have been invested in various assets, the launderer may perceive the audit trail as sufficiently obscured and proceed to utilize the money for legal purposes, such as acquiring lavish items such as homes and vehicles. After the layering process is concluded, the illicit funds are reintroduced into the economy as clean and legitimate capital. “If you aspire to excel in a particular subject, consider the possibility of enrolling at Mirchawla’s Hub Of Accountancy.” for advance course ACCA, ICAEW, CFA & CIA and many more .
Conclusion :So, this was all about what money laundering is, how it is done, and its different levels. To conclude, money launderers who deal with hundreds of millions of dollars require a secure way to hide their funds from authorities and keep them out of sight.
The Question That Often Arises Is: Where Do They Keep This Money?Swiss banks offer a solution for such individuals by providing a secure location to store their funds and ensuring that their identities remain hidden at all times. This improves the credibility of Swiss banks and makes them a reliable option for such individuals. The illicit practice of money laundering poses a significant danger to national security and is deemed to jeopardize not only the domestic financial system but also the global economy. Thats why Acca have launched ACCA Anti-Money Laundering guidelines which students are being taught in business and technology course at Mirchawala. To curb such unlawful activities, various anti-money laundering initiatives have been established. Furthermore, financial institutions that previously struggled to combat this issue have enhanced their technological capabilities, resulting in more efficient strategies for addressing this problem. That’s it for now. If you are looking for the right teaching guidance for your learning journey, Contact us; we have the best teaching team to educate and empower you until you succeed in your ACCA exam. – Written by Hafsa Yahya, Inspired ACCA student at Mirchawala hub of accountancy
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