What Is Money Laundering and Is It Possible to Fight It Essay

Money laundering is a crime that can be explained by the theory of the crime of the powerful, and this is the focus of this research essay. By using specific examples of the most powerful individuals in influential positions and some major global corporations, this research essay shows that money laundering is indeed a crime of the powerful and almost untouchable.

According to the Internal Revenue Service (2015), money laundering refers to “the activities and financial transactions that are undertaken specifically to hide the true source of the money” (p. 1). Certainly and more often money involved in laundering is obtained from illegal activities and the main objective of laundering is to ‘clean’ the dirty money and give it a legitimate appearance in terms of source. It is a crime, which involves taking the proceeds and using other legal channels to move the money. Specifically, “a criminal or someone acting on a criminal’s behalf generates proceeds, in the form of money or property, as a result of committing a designated crime known as a Specified Unlawful Activity (SUA)” (Leff 2013, p. 4). The term money laundering can be attributed to the act of American mobster Al-Capone (1899-1947) more than 85 years ago (Shah 2015). It is believed that Al-Capone cleaned his dirty money using the laundry trade. This marked the major starting point for money laundering, and it is believed that more than $1 billion had been laundered using different forms of legal entities. These businesses were critical in disguising and hiding all the illegal proceeds from controversial sources such as “gambling, prostitution, bootlegging business and rackets involving law enforcement and political protection” (Shah 2015, p. 1).

Several internationally renowned leaders, including “Nigeria’s dictator Sani Abacha, former Filipino President Ferdinand Marcos, Panama’s Manuel Noriega, Taiwan’s Chen Shui-bian, former Ukrainian Premier Pavlo Lazarenko, former Guatemala President Alfonso Portillo and Indonesia’s ex-President Suharto” (Shah 2015, p. 1) among others have been convicted in money laundering cases within the last past decades. These were no ordinary citizens.

The above-mentioned powerful individuals (mainly government officials) were convicted of criminal offenses involving hiding and disguising huge sums of money, which they had obtained through dubious means.

When the mighty get involved in money laundering activities, it shows that crime, to some extent, is not only committed by petty thieves but also individuals of influence and international reputations. Their status in society gives such crimes a new dimension and thus the theory of crime of the powerful. The fact that watchdog agencies have been able to investigate and apprehend the most powerful individuals involved in money laundering demonstrates that such agencies are serious about combating organized crimes and holding cartels behind them liable for criminal conduct.

Today, the world football governing body, FIFA is fighting serious allegations of corruption while UEFA has been accused of money laundering and child trafficking. It is believed that proceeds from these acts are cleaned through legal entities. These powerful bodies and individuals use legal international transfer systems to launder or filter their dirty money. Allegations of corruption and money laundering in these football sports giant bodies are not new. Such cases have been reported since 2006 with specific concerns on questionable transfer deals associated with irregular money movement among various global network clubs.

Researchers in money laundering have often cited challenges such as interference that many police officers encounter when investigating political destabilization and massive corruption linked to powerful politicians and their cartels (Tupman & Zabyelina 2015). According to Tupuman and Zabyelina (2005), there is a mismatch between issues related to organized crimes and governments and response policies. More than 20 years ago, it was evident that many reforms in the police investigatory practices would expose several money laundering crimes committed by governments and people in governments or their powerful associates. Money laundering is a cross-border, organized crime supported with widespread linked networks that mainly include legal bodies. In some instances, they challenge investigators and the existing legal frameworks. Thus, they require extraterritorial police involvement and cooperation. However, organized crimes, to some extent, have always found their way in governments of the day. Such powerful cartels use their money to fund political campaigns and support initiatives in society to make even more profits legally.

At the center of money laundering are financial institutions. Many banks, including the giant HSBC and small ones and other financial institutions, auditing firms, and law firms among others have been linked to money laundering directly or indirectly. Banks offer the most reliable means of participating in the financial system. In this role, banks have the primary role and responsibility of ensuring that they safeguard and protect the system from criminal activities. Thus, banks should “detect and prevent criminal proceeds and terrorism funds from entering the financial system” (Day 2013). These roles and responsibilities are covered by various laws of nations and therefore must be applied and failures could lead to sanctions and subsequent prosecution. The law is a robust tool to curb money laundering within the banking system, and banks are expected to implement and adhere to it – an anti-money laundering policy. Financial institutions may also depict questionable conduct and thus might indicate possible ongoing criminal activities. In other words, they may demonstrate “willful conduct, which is systemic, pervasive, and results in significant amounts of criminal proceeds flowing into or through a financial system” (Day, 2013). With sufficient suspicion, such financial institutions should be investigated to ascertain if they have implemented and enforced AML policies and adhere to banking conducts and regulations.

Banks are powerful. This is the case of HSBC, and it reflects a new episode in money laundering. In the past few years, federal investigators established that HSBC was engaged in serious crimes, including “money laundering for terrorists and/or facilitating cleaning for drug cartels and moving dirty money for Saudi banks associated with terrorist organizations” (Greenwald 2012, p. 1). Based on the investigation, it was established that “senior bank officials were complicit in the illegal activity” (Greenwald 2012, p. 1). In fact, “an HSBC executive at one point argued that the bank should continue working with the Saudi Al Rajhi bank, which has supported Al Qaeda” (Greenwald 2012, p. 1).

It is noteworthy that powerless, ordinary folks would be prosecuted and imprisoned for similar crimes ruthlessly with maximum aggression possible. It has been shown that powerless, unknown, low-level workers have been persistently handed long sentences concerning jail terms for engaging in comparatively inconsequential money laundering activities, which are not threats to the public and on a negligible scale when compared to crimes HSBC and its senior executives had committed.

Such actions cannot apply to HSBC. In the past few years, the US Department of Justice made it clear that HSBC would not be “criminally prosecuted but outright claimed that the reason is that they are too important, too instrumental to subject them to such disruptions” (Greenwald 2012, p. 1). The US Department of Justice opted to shield HSBC from criminal sanction for the public good (Greenwald 2012, p. 1). This shows the role of the global banking giant and the position of the US authorities on money laundering. Instead, the authority fined HSBC $1.9 billion for handling dirty money from drug barons and rogue states.

Day (2013) argues that law enforcement officers have many tools to investigate and prosecute financial institutions or any other institutions that engage in money laundering.

The Bank Secrecy Act (BSA), for instance, has been used to pursue criminal charges against powerful individuals engaged in money laundering. Government can seize the assets and property of individuals engaged in money laundering, but they must investigate to determine the overall violation. Leff (2013) has however observed that asset forfeiture is usually misunderstood or ignored and as a result, powerful criminals can enjoy their dirty money even if convicted.

The age of information technology has even made money laundering more lucrative. Today, technology has ensured that money laundering is an online activity that can be executed through simple steps (Lisanawati 2010). Online transaction facilitates money transfer across national and international borders. There are technical legal issues associated with these emerging practices. Evidence such as electronic funds transfer is available to trace the movement of the money. In some instances, countries have not been able to formulate laws and regulations to control online money laundering. Emerging issues with technology and the transfer of money create even more challenges that are technical. Lisanawati (2010) argues the “increase in the amount of crime indicates the following series of techniques and mechanisms that had been detected about money laundering activity” (p. 163).

Investigating money laundering is not simple. Investigators must review many documents to follow trails of dirty money. These documents may include real estate records, assets, and banking details, which could show the movement of money in processes of laundering. During investigations, any records that can assist to trace the money are regarded as important. The investigation aims to trace all avenues that the money follows until it gains legitimate status. Investigations must discover all parties involved to prove criminal conduct. Schneider (2004) has shown that financial proceeds of organized criminal activities are often laundered through real estate in Canada.

When governments fail to prosecute powerful individuals or institutions engaged in criminal activities, it sets a bad precedent and reflects a dark day for the rule of the law, which many common citizens must face when caught. The case of HSBC shows that powerful banking giants cannot be prosecuted. They operate outside the law and/or above the rule of law. They cannot be punished even if caught red-handed engaged in money laundering and criminal offenses. On the contrary, common criminals who engage in such activities face several decades in jail. It sets a new precedent. That is, the most powerful are free to” engage in whatever crimes they want without any fear of the law” (Greenwald 2012, p. 1). The bank was left because it is too big and important and therefore its failure could have devastating effects on the public.

The most powerful actors in money laundering are fully immunized against the rule of law (Greenwald 2012). It seems powerful countries have accepted this fact. This is an anomaly and the opposite of what citizens expect from institutions and individuals that break the law. Money laundering is an organized transnational crime. It thrives on illicit activities across different countries. Most powerful criminals use various means to achieve their goals and they may opt to clean their money in states with weak governments. Such governments do not have the power to oppose them and as a result, many illegal activities apart from money laundering can thrive.

Money laundering hurts economies. It develops an underground, untaxed economy that has overall negative consequences on the growth of economies. Money laundering is a threat to the global financial system and any failure to prosecute individuals or institutions reflects a failure in the criminal justice. It is noted that”no doubt that the wrongdoing at HSBC was serious and pervasive, but the bank is simply too big, too powerful and too important to prosecute” (Greenwald 2012, p. 1).

Shah (2015) has provided a short account of only powerful persons and institutions with global reputations that have been associated with money laundering, which depicts that money laundering is generally a crime of the powerful. Few of these cases have been successfully prosecuted. The amount of money involved in these transactions is huge and therefore creates powerful individuals when they get proceeds. Banking and other financial institutions are most vulnerable because they do not enforce their anti-money laundering regulations. Consequently, they help powerful criminals meet their goals. In this case, they become part of the system for money laundering. The crime involves powerful people in governments and private businesses. In addition, investigating alleged money laundering schemes is not simple for investigative officers because of several trials that the money must go through to become clean.

Attempts to investigate money laundering by governments show that no criminal activities should go unpunished. In most instances, however, the nature of the investigation is complex and outcomes remain uncertain while powerful criminals continue to enjoy their proceeds.

Reference List

Day, M K 2013, ‘Prosecuting Financial Institutions and Title 31 Offenses’, United States Attorneys’ Bulletin, vol. 61, no. 5, pp. 19-28.

Greenwald, G 2012, ‘HSBC, too big to jail, is the new poster child for US two-tiered justice system’, The Guardian, Web.

Internal Revenue Service 2015, Overview – Money Laundering, Web.

Leff, D A 2013, ‘Money Laundering and Asset Forfeiture: Taking the Profit Out of Crime. United States Attorneys’ Bulletin, vol. 61, no. 5, pp. 4-11.

Lisanawati, G 2010, ‘Electronic Funds Transfer in Money Laundering Crime Needed in Response to Meeting of Technology and Crime in Indonesia’, International Journal of Cyber Society, vol. 3, no. 2, pp. 163-170.

Schneider, S 2004, ‘Organized crime, money laundering, and the real estate market in Canada’, Journal of Property Research, vol. 21, no. 2, pp. 99-118.

Shah, S 2015, Powerful people arrested for money laundering, Web.

Tupman, B & Zabyelina, Y G 2015, ‘Organised crime yesterday, today and tomorrow’, Journal of Money Laundering Control, vol. 18, no. 2.