The history of money laundering dates back to over two thousand years ago, in ancient China. According to the historian, Sterling Seagrave, affluent Chinese traders tried to keep their pecuniary gains away from the prying eyes of the authorities.
Within that period, the Chinese authorities had outlawed several forms of commercial trade. The reason could be traced to a track-record of activities that made the government skeptical about traders; labeling them as callous, greedy and cunning fellows who tried to circumvent the law. This was true, in part. Most traders of the time got a large portion of their gains from bribe, extortion and other forms of black-market deals that slipped past the purview of the law. Proceeds from successful trades were channeled into assets that could be moved out of the “hostile” territory and reinvested elsewhere.
Though the original idea—of concealing illegal gains from the law—has endured through centuries, money laundering practices have become sophisticated and, in many cases, institutionalized in the modern world. Some have likened its sophistication to Cuban art. More so, the dense web surrounding the practice has made it a fail-safe system for present-day, high-end criminals.
According to the United Nations, money laundered annually ranges between $800 billion and $2 trillion. Since it is difficult to trace the channels these corrupt monies follow, the above amount remains conservative figures at best.
Before we walk you down memory lane, unraveling the bits and pieces of money laundering, let's give you a head start with a definition of terms.
First off, money laundering is an illicit practice that alters “dirty” or ill-gotten money into “clean” or legal money. “Laundering” simply means “washing”, i.e. money washing. The practice involves channeling ill-gotten money through an elaborate series of commercial deals and legal bank transfers. The goal is to get the money across to the launderer in a way that triggers no suspicion from the authorities or banking institutions. In other words, by the time the laundered fund reaches its destination, it no longer looks like where it is coming from.
For money launderers, this is a big win as they are at liberty to spend the money without fear of legal backlash. That is, the money cannot be seized and the launderer(s) roams free.
Although the term “money laundering” first appeared in the early twentieth century, the history of money laundering dates back to over two thousand years. And have survived for much longer than Cuban art. It was the inevitable outcome of the Chinese government’s ban on several forms of trade. In no time, rich merchants devised a system of circulating money gotten from banned products through a series of legal financial deals and transactions. The ultimate goal was to escape discovery and prosecution.
In modern times, money laundering became more prominent in the United States between the 1920s and 1930s when the government outlawed the production, importation, transportation, and sale of alcoholic beverages. However, like most bans, alcohol sales did not stop. Rather, it was sold in the black market, which swelled income for crime bosses across the U.S. such as Al Capone. The proceeds from alcohol were then mixed with proceeds from other legitimate businesses, rendering it impossible for the government to trace.
Decades later—in the 1980s—, the U.S. government's anti-drug campaign saw a major wave of confiscation of funds from supposed drug crimes. The existing laws allowed government agencies to seize cash until their owners could prove the source was legitimate. It was within this period that the terms “money” and “laundering” were tied together. The goal was to, in part, make it easy to recognize and apprehend drug dealers, members of the Mafia and gang members; who masked the source of “dirty cash” and channeled such cash into legitimate funds.
Even though the world is speeding towards a cashless policy, the advent of online financial vehicles, credit cards, and mobile payment platforms have only changed the mode of practice for money launderers. And most governments and their agencies are only waking up to the challenge. Nevertheless, there has been laudable progress.
From the early 2000s—2002 precisely—most governments around the world started to amended money laundering laws to counter the advanced tactics of money launderers. These amended laws mandate financial institutions to report all of their financial dealings to a centralized, electronically designed reporting system. Australia’s AUSTRAC system is a case in point. The rewards so far perfectly mirror the huge benefits of technology in special education.
So far, anti-money laundering procedures have been introduced into most financial institutions worldwide. An example is the Surveillance and monitoring systems set up for financial transactions involving varying amounts. So, transferring certain amounts of money would require some form of identification and source-checking with most banks today. When introduced at first, this law was as controversial as the no-zero policy. However, it has been widely adopted.
More so, governments and financial institutions are entering intelligence-sharing agreements with each other and with anti-graft agencies. Over the last two decades, many countries have either initiated or fortified border restrictions on the amount of cash that can be carried in and out.
In most jurisdictions, money laundering is a criminal offense punishable by law. This is because it involves concealing ill-gotten money. In the United States (U.S.), there are varying interpretations across states as to what constitutes money laundering. Nevertheless, the practice is recognized as crime across the board. In the U.S. and most other jurisdictions, money laundering is usually mentioned in court either as a felony or a misdemeanor.
When criminals are slammed with misdemeanor money laundering charges, they get to spend between six months to one year behind bars. If slammed with a felony charge, criminals should expect more than one year in jail, with adjoining fines and penalties. Most fines are often put at twice the laundered sum of money. Say, for instance, a criminal gets charged for laundering $1,000,000 in cash, the fine will be placed at $2,000,000 or close to that. In rare cases, offenders have been sentenced to as many as 35 years behind bars, depending on the severity of the case.
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