Buzz
Paul Manafort, a former advisor to the Trump administration, is under investigation for money laundering, as reported by the Wall Street Journal late yesterday. It’s a tragic situation, and you might be wondering, what exactly does money laundering mean?
To provide some context, Manafort is already under investigation for his involvement in Russian interference in the previous election. The New York Times reported yesterday that Manafort owed around $17 million to pro-Russian entities before joining the Trump campaign. If that doesn’t sound suspicious enough, the Journal is now reporting that the New York Attorney General is examining Manafort’s real estate dealings for possible money laundering activities.
In simple terms, as I learned from watching too much television—and observing Tony Soprano’s various money-heavy operations—money laundering is the process by which illicit funds are ‘cleaned.’ Money earned through illegal activities goes through a procedure that makes its shady origins hard to trace. Here's how Investopedia describes it:
Money laundering involves making large sums of money acquired from serious crimes, such as drug trafficking or terrorism, appear to come from legitimate sources.
Imagine this scenario: you’ve got $5 million earned through illicit activities, like a major illegal drug deal. You can’t just deposit that into your Ally account! You’d have to report it to the IRS, and ‘serious crime’ doesn’t come with a 1099 form. To get around this, you need to launder the money, and according to the United Nations Office on Drugs and Crime, this involves three key stages:
“Placement:” This is the step where you move the funds away from their criminal origin;
“Layering:” The process of hiding the trail to avoid detection; and
“Integration”: This is when the money is made available for use by the criminal, now with its source and location concealed.
Some examples of how criminals might go about this laundering process include:
Real estate laundering: Criminals purchase property using illegal funds and then sell it, making it seem like their profits are legitimate.
Bulk cash smuggling: Cash is smuggled into another country and deposited into offshore banks that maintain confidentiality for their clients.
Structuring: This involves breaking up large sums of cash into smaller amounts to avoid triggering reporting requirements.
Cash-heavy businesses: Launderers use businesses that handle large amounts of cash to process their illicit funds, making it appear legitimate.
These are just a few common examples, and this Quora thread goes into more detail. If you're interested, the IRS also provides several real-life examples of money laundering here.
