Money Laundering

Money Laundering through offshore financial institutions is one of the biggest concerns of offshore banking. Many people view money laundering as a shady enterprise, which is an image most probably derived from movies and the popular media. But in reality, before 1986 money laundering wasn’t even illegal. But what exactly is money laundering? According to the Money Laundering Control Act that was passed in 1986 in the United States, in which money laundering was made into a federal crime for the first time, it is a financial transaction carried out with proceeds from any illegal activity. According to the Act of 1986, the legal definition of money laundering states that it is illegal to make any transaction with the proceeds of specified unlawful activity with the intent to promote that activity. Also, you cannot make a transaction knowing that the transaction is designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity, or to avoid a transaction reporting requirement under state or federal law.

But what this means for the regular, non-criminal citizen is that you cannot deposit or use your money if taxes have not been paid on it, as this is considered money laundering. This makes it difficult to open a foreign bank account and start a nest egg without informing the government of your intentions. In addition, the government’s anti-money laundering legislation tends to prosecute those who are simply doing business, while the real money launderers have found ways around the government’s new laws.

Because of money laundering all financial institutions and many offshore service providers have implemented KYC or “Know Your Customers” to be sure of the source of funds you want to deposit with them.

In Canada the anti-laundering law defines money laundering in a similar fashion. For example, it states that money laundering involves concealing or converting property or money, or knowing or believing that they were derived from the commission of specified offenses such as drug trafficking, bribery, child pornography, prostitution, theft, extortion, fraud, illegal gambling, murder, robbery and counterfeiting. The fines for conducting such activity can run up to US $1.3 million, with five years in prison and the forfeiture of all laundered property.

Opening offshore accounts and having an offshore company in one of the many tax havens shouldn’t be akin to money laundering – it is a legitimate way to do business that has only recently become “illegal” in the eyes of the government.

An inside look on Money Laundering