What is money laundering?
Money laundering is the process used to disguise the source of money or assets derived from criminal activity. Profit-motivated crimes span a variety of illegal activities from drug trafficking and smuggling to fraud, extortion and corruption. The scope of criminal proceeds is significant - estimated at some $590 billion to $1.5 trillion (U.S.) worldwide each year.
Money laundering facilitates corruption and can destabilize the economies of susceptible countries. It also compromises the integrity of legitimate financial systems and institutions, and gives organized crime the funds it needs to conduct further criminal activities. It is a global problem, and the techniques used are numerous and can be very sophisticated. Technological advances in e-commerce, the global diversification of financial markets and new financial product developments provide further opportunities to launder illegal profit and obscure the money trail leading back to the underlying crime.
While the techniques for laundering funds vary considerably and are often highly intricate, there are generally three stages in the process:
- Placement: involves placing the proceeds of crime in the financial system;
- Layering: involves converting the proceeds of crime into another form and creating complex layers of financial transactions to disguise the audit trail and the source and ownership of funds (e.g., the buying and selling of stocks, commodities or property); and,
- Integration: involves placing the laundered proceeds back in the economy under a veil of legitimacy.
FINTRAC's financial intelligence plays a critical role in helping to combat money laundering. This financial intelligence is used to assist money laundering and terrorist financing investigations in the context of a wider variety of criminal investigations, where the origins of the suspected criminal proceeds are linked to drug trafficking, fraud, tax evasion, corruption, and other criminal offences. With these types of crimes, there are victims, there is often violence, and there is real social harm.
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