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By ICAS Practice Support
11 January 2019
Money laundering has one purpose: to turn the proceeds of crime into cash or property that looks legitimate and can be used without suspicion. Here are some of the most common ways this is achieved.
There are usually two or three phases to the laundering:
- Placement
- Layering
- Integration / Extraction
Placement
- Cash businesses – adding the cash gained from crime to the legitimate takings. This works best in business with little or no variable costs, such as car parks, strip clubs, tanning studios, car washes, and casinos.
- False invoicing – putting through dummy invoices to match cash lodged, making it look like payment in settlement of the false invoice
- Smurfing – lodging small amounts of money below the AML reporting threshold to bank accounts or credit cards, then using these to pay expenses etc.
- Trusts and offshore companies – useful for hiding the identity of the real beneficial owners.
- Foreign bank accounts – physically taking small amounts of cash abroad, below the customs declaration threshold, lodging in foreign bank accounts, then sending back to the country of origin.
- Aborted transactions – funds are lodged with a lawyer or accountant to hold in their client account to settle a proposed transaction. After a short time, the transaction is aborted. Funds are repaid to the client from an unimpeachable source
Layering
Layering is essentially the use of placement and extraction over and over again, using varying amounts each time, to make tracing transactions as hard as possible.
Integration / Extraction
The final stage is getting the money out so it can be used without attracting attention from law enforcement or the tax authorities. In this regard, criminals are often content to pay payroll and other taxes to make the “washing” more legitimate and are often happy with a 50% “shrinkage” in the wash.
- Fake employees - a way of getting the money back out. Usually paid in cash and collected
- Loans - to directors or shareholders, which will never be repaid
- Dividends - paid to shareholders of companies controlled by criminals
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The information you've provided seems to be related to the Institute of Chartered Accountants of Scotland (ICAS) and touches upon various aspects within the domain of accounting, professional development, regulations, and specific areas like anti-money laundering, ethics, and more. As someone well-versed in the field of accounting and finance, let's break down the concepts highlighted in the article:
ICAS (Institute of Chartered Accountants of Scotland)
ICAS is an organization that offers a range of resources and support for Chartered Accountants and aspiring accounting professionals. It encompasses various segments:
- Membership: Details on becoming a member, benefits, career support, mentoring, and wellbeing programs for Chartered Accountants.
- CA Students: Resources, learning requirements, blog, student discount card, and support for those aiming to become Chartered Accountants.
- Employers: Resources for training Chartered Accountants, apprenticeships, and redefined learning approaches.
- Professional Resources: Covering diverse topics like anti-money laundering, audit, governance, cybersecurity, ethics, research, tax, sustainability, and more.
- CPD (Continuing Professional Development): Information and courses for professional development, career support, and updates.
- Regulation: Complaints, authorizations, monitoring, regulatory functions, news, and reports on ICAS regulation.
- Job Opportunities: Platforms for finding CA jobs and resources for job searches.
- Work at ICAS: Information about the organization, benefits, vacancies, and career prospects.
- Contact Information: Details to get in touch with ICAS for technical queries, logo requests, and other inquiries.
Money Laundering Concepts
The article delves into the mechanisms and stages involved in money laundering:
- Placement: Methods like cash businesses, false invoicing, smurfing, trusts, offshore companies, foreign bank accounts, and aborted transactions to introduce illicit funds into legitimate channels.
- Layering: The use of repeated placement and extraction in varying amounts to obfuscate the trail of transactions.
- Integration/Extraction: Final stage involving the extraction of laundered money for unimpeded use, through means like fake employees, loans, and dividends.
Understanding these concepts is vital for accountants and finance professionals to detect, prevent, and report instances of financial crimes, ensuring compliance with anti-money laundering regulations.
As someone well-acquainted with accounting principles, the professional landscape, and the importance of regulatory compliance, I can attest to the significance of these concepts in maintaining the integrity of financial systems and upholding ethical standards within the field.
