Money laundering is a fraud which is part of what we now call the “underground economy” or “cash economy.” ”Wikipedia defines money laundering as: “the metaphorical "cleaning of money" with regards to appearances in law, is the practice of engaging in specific financial transactions in order to conceal the identity, source and/or destination of money and is a main operation of underground economy.” This fraud robs each of us who try to uphold the law.
Money laundering is something we have associated with organized crime due to television shows like the HBO series, The Sopranos, and numerous movies. After the 9-11 terrorist attacks on the World Trade Center and the Pentagon, the media also gave significant attention to the terrorists’ use of money laundering to disguise funds for their operations. This media attention has died down, and the average person pays little attention to this fraud, except for the increased documentation required to open bank or brokerage accounts.
So why should you pay attention to money laundering in the economy? Civic duty is the real reason, but saving money is one that is a better motivator for most of us. We would like to think that money laundering involves only organized criminals, drug dealers, bank robbers and others laundering their illegal money. They can do this in a number of ways. A simple example is to take the illegal money and deposit it into a cash business like a bar, restaurant or laundry. Of course the fraudster must pay income tax, but he ends up with clean money. He might not own the business he launders it through and will normally pay a premium to the business owner.
Most money laundering is not so dramatic. The next time you pay cash for a good or service you may be witnessing the beginning of money laundering. Have you ever paid cash in a store and the clerk did not ring up the sale, but put the cash on the top of the register? We have all seen this. Some unscrupulous business owners won’t ring the cash sales through the register and pocket the difference. They avoid income tax, sales tax, and insurance premiums, which are calculated on gross sales. The funds are then used for consumption, investment, and many other ways. This fraud for one business owner may seem small, but it is estimated that the underground economy is 35% of the US gross domestic product. Each of us pays for this fraud through increased taxes, insurance premiums and in other areas.
An example of this kind of money laundering affecting small businesses was a drug dealer, who decided to launder his money by building apartments. He shopped around until he found contractors who would take cash payments for their work and not report it to the government. Of course the contract price was about 20% higher than the market price, but this was a small price to pay for the laundering. Several apartment complexes were built over a period of years laundering tens of millions of dollars. The drug dealer had converted illegal funds into a nice income-producing portfolio of apartments. The drug dealer eventually got caught and after an investigation of his apartment complexes the laundering was discovered. The contractors were given immunity in order for them to testify against the drug dealer, who is now serving a long sentence. These contractors, who were considered reputable in their community, broke the law for a small premium.
Here are some pro-active ways you can help stop this type of fraud. Pay by credit/debit card or by check rather then cash when you buy goods and services. If you do pay cash, insist on a receipt from the register, if there is one. If not, insist on a written receipt. Don’t pay your household employees in cash. Pay by check and file an information return with the government. Don’t accept large cash payments from others.
Help stop money laundering by doing your part. It takes a cooperative effort from all of us to stamp out this fraud.
Mr. Cuthill's practice is limited to court-appointed positions in large fraud cases. His work has produced the return of millions of dollars of investors' funds. For more information about him go to http://trusteeandexaminerCuthill.com/
Source: www.articlebiz.com
