Understanding Money Laundering Offences

Money laundering constitutes a generic term used to describe a predicate crime.  A predicate offence is a crime that is a component of a more serious criminal offence. For example, generating proceed of crime through fraud or criminal-breach of trust (CBT) is the main offence and money laundering is the predicate offence when the original ill-gotten proceeds are disguised and cleansed so that such proceeds appear to have derived from a legitimate source. In Malaysia, the Second Schedule of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act (AMLATFPUAA 2001) has outlined various sections and sub-sections of forty two legislations that are considered as predicate offences.  In practice almost all serious crimes, including, criminal breach of trust, drug trafficking, human trafficking, tax evasion, terrorism, fraud, robbery, prostitution, illegal gambling, arms trafficking, bribery and corruption are capable of predicating money laundering offences in most jurisdictions. 

The processes by which criminally derived proceeds (These proceeds can be in the forms of cash, assets/property, donations or investments) may be laundered are extensive. Though criminal money may be successfully laundered without the assistance of the financial sector, the reality is that hundreds of billions of dollars of criminally derived money is laundered through financial institutions, annually. The nature of the services and products offered by the financial services industry (namely managing, controlling and possessing money and property belonging to others) means that it is vulnerable to abuse by money launderers.  Today, money launderers are opting for other forms of institutions to launder their illegal proceeds.  Institutions such as non-profit organisations, co-operatives, money changers, designated non-financial businesses and professions (DNFBPs) such as accountants, lawyers, real estate agents, company secretaries, and casinos are now becoming popular targets for money laundering.

There are typically three stages of the money laundering process: Placement, Layering and Integration.  Placement is the movement of cash/fund from its original source. Often disguised, it is placed into circulation by putting it through financial institutions, casinos, shops, bureau de change and other businesses, both local and abroad. Layering is a process where monies are placed into multiple and complex transactions with the sole purpose of making it difficult for the law enforcement agencies to detect the financial trails of money laundering activities.  Integration is the movement of cleansed laundered money into the mainstream economy.  Now that the laundered money appears cleaned, money launderers will use the normal banking system to place such monies which appear to be normal business earnings.