GUEST POST/Money laundering: placement, layering and integration

Sent in by Panama Reuter:

Traditionally, money-laundering takes place in three distinct stages.

PLACEMENT is the stage at which criminally derived funds are introduced into the financial system. For example, a corrupt politician accepts the typical 10% bribe, and his country buys solar panels at an inflated price from the foreign mafia, government or otherwise.

LAYERING, the second stage, is where the property is ‘washed’ and its ownership and source are disguised. For example, the politician announces – if and when he is asked to account for the money by a financial institution – that he used to work in some foreign jurisdiction and money was coming out of his ears back then and it’s still waiting for him to deposit it somewhere – e.g., in a trust.

Or that his foreign wife comes from a very wealthy family and he needs somewhere to park the dowry. Ludicrous as it may sound, it pays for cynical and corrupt politicians to shop for a wife from a country where official records are scant and family and social systems are mysterious to outsiders.

When the money is finally parked in a secretive jurisdiction, the ownership is disguised as well.Hence, if a money launderer is smart enough to cover his tracks, both the ownership and the true source of his money are disguised.

INTEGRATION is the final stage where the ‘laundered’ property is re-introduced into the legitimate economy. In Malta this accounts for the frequent amnesties that allow corrupt politicians from both sides of parliament to bring in their hidden foreign money into Maltese mainstream banking.

“OK,” they would tell you if you press them for an explanation, “I paid the Maltese government-imposed penalty on it.” Never mind that the penalty was a drop in the bucket in the big scheme of things.Their explanation is code for “I have atoned for my sins.”

In the rare event that a money-launderer is a bumbling idiot like Konrad Mizzi, he would try to drum up a smokescreen by asking for an audit that can’t be done and would decide himself what penalty he should pay (as if he were his own judge) and “attempt” to pay it even though nobody levied it or would accept it from him.

Mr. Mizzi imposed a trifle penalty on himself, equivalent to about two or three parking tickets for your car. His atonement scheme is pure theatre.

“I am proud of what I did,” a jubilant Prime Minister chimed in last weekend during his visit to Gozo. I am lost for words and have to stop here.