What is money laundering
What is money laundering?
A manicurist open only half a day each week. An unemployed neighbour who drives a brand new Ferrari. A street full of gold buyers. An export company specialised in exporting underwear to South America. Any of these could be an indication of money laundering. But what is money laundering exactly? And how can you identify it?
Money laundering is a wide-ranging phenomenon. It involves an even wider range of activities than perhaps you might expect.
Virtually any activity that involves using the proceeds of crime could be regarded as money laundering. The object of such activities is often the same; to enable those proceeds to be used in legitimate business or in the underworld without the authorities finding out.
This may sound a little vague. An example should help to make it clearer.
Suppose a criminal organisation earns a lot of money trafficking cocaine. They want to use that money to finance a luxurious lifestyle of their members, without getting into difficulties. Therefore they need to launder their proceeds. A business is set up and a fictitious turnover and profit are created. In this way it looks as though their turnover and even salary come from a legitimate source. This is just one of the many possible methods of money laundering.
Money laundering can however assume more complicated forms. A criminal can divert illicit value through several countries and companies. He can also provide a seemingly legitimate status by sending false invoices. Then it does not look as though the money originates from crime.
But money laundering also occurs when someone buys a car with illegally acquired money. Or when someone applies for a mortgage with false documents and buys a house with it.
Money laundering can therefore assume many different forms. Although money laundering is usually about money, the Dutch concept of money laundering is broader than that. Objects and rights, for example, can also be laundered.
Money laundering as process
Money laundering is regarded as a process which consists of 3 phases:
- The first phase is bringing the cash into the financial systems, by depositing it in a bank account for example.
- The second phase is concealment. This involves such things as transferring sums of money to various bank accounts in the Netherlands and abroad.
- In the third phase the proceeds of crime are spent. Luxury goods are purchased for example, or investments made.
The legal definition of money laundering in the Netherlands is much broader than the three phases described above. According to Dutch law it is not necessary for all three phases to take place for a money laundering conviction.
Money laundering is a threat
Money laundering poisons the economy and society. According to scientific studies, billions of Euros in criminal proceeds are laundered in or through the Netherlands each year. The money originates from things like drugs trafficking, fraud and financial fraud. Money is the driving force for almost all forms of crime. Money laundering encourages criminal behaviour because it allows criminal money to be used in daily life. The investments made by criminals may even give them a degree of influence over people, undertakings and legal sectors. This is why money laundering is such a serious threat to the economy and why it also affects the integrity of the financial sector. By tackling money laundering we are tackling a major source of criminal motivation. The fight against money laundering is a matter of investigation and prosecution, but it also a matter of making it as difficult as possible for criminals to profit from their criminal gains. By introducing, for example, a notification requirement for car dealers who are paid with large amounts of cash.
Money laundering is a criminal offence according to the Netherlands Penal Code. A term of imprisonment may be imposed for this offence.