‘Dissecting the concept of money laundering; an effective step towards safeguarding our financial system

Money laundering is the process of disguising the origins of ille­gally obtained funds and making it to appear as being derived from a legitimate source, thereby allowing criminals to use the funds without raising suspicion about its illicit origins. Indeed, it is an undeniable fact that greed fuels criminal activities and the end result of these activities are that illegally obtained funds are introduced into the legitimate financial system. Through money laundering, the criminal is able to transforms the illicit proceeds into some activities that appears to have come from a legitimate source.

Section 1 of the Anti-Money Laundering Act, 2020 (Act 1044) provides that a person shall not engage in money laundering and that a person commits an offence of money laundering if the person knows or ought to have known that a property is, or forms part of the proceeds of unlawful activity and the person; converts, conceals, disguises or transfers the property for the purpose of concealing or disguising the illicit origin of the property; or assisting any person who is involved in the commission of the unlawful activity to evade the legal consequences of their un­lawful activity; conceals or disguis­es the true nature, source, location, disposition, movement or owner­ship of or rights to the property or acquires, uses or takes possession of the property knowing or sus­pecting at the time of the receipt of the property that the property is or forms part of the proceeds of unlawful activity.

It further provides that where a person under investigation for money laundering is in posses­sion or control of property which the person cannot account for and which is disproportionate to the income of that person from known sources, that person shall be deemed to have committed an offence under subsection 2.

Stages of Money

Laundering

First stage of money laundering (Placement)

The first stage of Money Laun­dering is where, money has been derived from a criminal activity and the criminal is contemplating on how to introduce the funds into the financial system; this may include depositing the money into a bank account, purchasing stocks and bonds or purchas­ing a life insurance policy with a lump sum. This stage is also known for activities like structur­ing, which involves breaking up large sums of money into smaller transactions to avoid reporting obligations. For instance, if an accountable /reporting institution is required to report on a transac­tion threshold of GH¢100,000, a criminal with the intent to avoid being reported would break the amount into smaller deposits or into amounts below the threshold such as GH¢70,000, GH¢99,000, GH¢94,000, GH¢85,000 among others. Accountable institutions are expected to monitor these activities for reporting purposes.

Second stage of money launder­ing cycle (Layering)

At the layering stage, the illic­itly obtained proceeds have been successfully deposited into the financial system and a convenient platform created for the criminal to engage in subsequent transfers to conceal the origin of funds. The illicit funds which are already in the financial systems are broken into several layers to avoid tracing. This usually involves transaction such as transfers between accounts or ordering financial institutions to in­vest part of the funds or engaging international trade arrangements.

Third stage of money laundering (Integration)

At this stage of laundering, the illicit funds obtained by the criminal are reintroduced back into the economy, appearing legiti­mate, often through investments or business ventures. Businesses such as investments in the sale of second-hand vehicles, real estates, supermarkets, restaurants and bou­tiques are some of the businesses that may seem attractive by crimi­nals perhaps due to the high values involved in these sectors.

While placement is necessary, it must be followed by the layering and integration stages to fully achieve the goal of a typical money laundering cycle. That notwith­standing, in a cash intensive econ­omy, it is possible to acquire illicitly obtained funds (placement) and use the cash payments to purchase high value luxury goods (inte­gration) such as vehicles, houses or jewelleries without necessarily channelling the funds through the financial system (layering) stage.

What constitute money

laundering?

Money laundering is said to be a derivative offence usually based on a predicate offense. Predication refers to the underlying criminal activity that generates the illicit proceeds which are then laundered. Essentially, it’s the initial crime that creates the “dirty money” that is later disguised as legitimate.

Predicate offense of money laundering includes the following:

Illicit trafficking in narcotic drugs and psychotropic substances (Illegal drug production, distribu­tion, and sales generate substantial profits that can be laundered)

Corruption, Extortion, Bribery, Counterfeiting of currency, Coun­terfeiting of products, Cybercrime (Crimes like hacking, data breaches, and online fraud can generate pro­ceeds that require laundering)

Fraud (financial and internet fraud schemes like investment fraud business fraud over the in­ternet, produce illicit proceeds. Tax crimes, Forgery, Terrorism, includ­ing terrorism financing, Participa­tion in Organised criminal groups and racketeering, Murder, grievous bodily harm, Environmental crime (Illegal activities like poaching, illegal logging, illegal mining and toxic waste dumping can generate profits.

Trafficking in human beings and migrant smuggling (exploiting in­dividuals for labour generates illicit proceeds). Illicit arms trafficking (illegal trade of weapons generates substantial profits) Piracy, Illicit trafficking in stolen and other goods, Sexual exploitation, includ­ing sexual exploitation of children

Kidnapping, illegal restraint and hostages, Robbery or theft, Insider trading and market manipulations.

Although these predications are not exhaustive of money launder­ing, they form the grounds for the offense of money laundering to be established, charged and prosecut­ed. Investigative and prosecuto­rial authorities are to include the charge of money laundering in cases involving these predications and to identify the sources of illicit proceeds, trace and follow the money.

Types of Money

Laundering

Self-laundering refers to the pro­cess where an individual launders funds or assets generated through a criminal activity. It involves the same individual being both the perpetrator of the initial crime and the subsequent money launderer. Self- laundering occurs when a criminal or a transnational criminal organisation tries to hide the illicit origins of the proceeds of crime by laundering the money itself. An example of self- laundering is that someone commits fraud and then uses the proceeds to invest in the sale of luxury goods to make the money appear legitimate.

Professional money laundering involves an external service pro­vider to launder the proceeds of crime for a criminal or a criminal organisation. Professional money launderers may serve multiple criminals, advertising their services by word-of-mouth or on illicit marketplaces, such as dark net or encrypted platforms. These may include the misuse of the profes­sionals such as lawyers, accountants and corporate service providers by criminals to receive illicit proceeds.

Third-party money laundering refers to the use of a business or individual to conceal the origins of illicit funds. These third parties can be complicit or unwitting participants in the laundering pro­cess, unknowingly facilitating the movement and disguise of criminal proceeds. For instance, a company, an NGO or an individual agrees to use its bank account to receive the proceeds of crime for a criminal on percentage terms.

TO BE CONTINUED

BY RITA YEBOAH QUAYSON