According to official statements, money laundering is an illegal activity that makes large amounts of money generated by criminal activity, such as drug trafficking or terrorist funding that appears to have come from a legitimate source.
The money from criminal activity is considered dirty, and the process “launders” it to look clean. However, contrary to public perception, it is not just drug or terrorism related crimes that require money laundering.
Every second federal criminal indictment seems to include at least one charge on money laundering. People think it involves the clandestine exchange of bags full of cash and numbered Swiss bank accounts.
This is not the case.
“Technically, under U.S. law, the crime of money laundering means engaging in a transaction that involves the proceeds of an earlier crime with an intent to either carry on further criminal activity, or hide the nature, location, source, ownership or control of the proceeds of the earlier crime, or avoid a federal reporting requirement,” Jacob Thiessen, of Williamsburg, said in an interview with the Gazette.
Thiessen, a lawyer by training, has dealt with money laundering cases for 25 years.
He also holds a doctorate degree in comparative world history from Johns Hopkins University. In the fall of each year, Thiessen teaches a course at the William & Mary Law School.
“Most crimes, except crimes of passion, are committed for profit and therefore involve proceeds,” he explained. “Most criminals want to hide their crimes and therefore try to draw attention away from the proceeds they’ve made. So, most people who commit crimes will do something that can be characterized as money laundering. This isn’t just a phenomena of drug cartels and international arms traffickers; money laundering is ubiquitous because crime for profit is ubiquitous.”
Thiessen explained that criminals need to do three things with the proceeds of crime, if they really want to enjoy those proceeds. First, they need to place those proceeds somehow in a non-criminal commercial world. Sell the stolen goods, deposit stolen currency or checks. Then they need to layer transactions — move money from one account to another, buy something valuable and resell it. Finally, once they’ve successfully covered their tracks, they need to integrate the proceeds into the legitimate financial system. This layering integration allows the authorities to focus their attention on the process and instruct third parties such as banks to watch for suspicious financial transactions, a thing they are good at.
Although money laundering is usually associated with converting “dirty money” to legitimate money, terrorist financing makes legitimate money available for illegitimate purposes. Thus, guarding against money laundering involves scrutinizing transactions to see where the money comes from and where it goes.
The Bank Secrecy Act passed in 1970 intended to guard the U.S. financial system against being used to launder money. It requires financial institutions, including banks, to have anti-money laundering programs, keep records and report certain kinds of transactions to the federal government.
In the wake of 9/11, a new law, popularly known as the “USA Patriot Act,” was passed in October 2001. It gave the federal government more power to crack down on terrorist financing.
It is well-remembered how easily the 19 hijackers could open bank accounts, get money wired to them and navigate life in the United States while plotting their attack. Since then, one of the provisions is a requirement that financial institutions identify their customers before opening accounts for them.
According to Thiessen, a new twist in the anti-money laundering world is the rise of cryptocurrency. It is some sort of private electronic money, on which you can speculate the price rising and falling. Some people passionately support cryptocurrencies, others hate them. However, millions of people around the world use them. This presents a challenge to traditional ways of protecting against the use of financial transactions to launder money or finance terrorism.
To illustrate the volatility of cryptocurrency, Thiessen described the first-ever Bitcoin transaction. It was the purchase of two pizzas on May 22, 2010, for 10,000 bitcoins, which worked out to $41. The exchange value of one bitcoin was $0.0028. Earlier this year, one bitcoin was worth $58,685.10.
Frank Shatz is a Williamsburg resident. He is the author of “Reports from a Distant Place,” the compilation of his selected columns. The book is available at the Bruton Parish Shop and Amazon.com.
