Sunday, February 20, 2011

Manuel Castells

There are three stages involved in money laundering:

(1) The first stage is the placement of the illegal proceeds into the financial system through banks or other financial institutions. Often, criminal organizations use banks located in countries that exercise banking secrecy (they do not disclose financial information to investigators), such as Aruba, the Cayman Islands or Luxemburg.

(2) The second stage is called “layering,” that is, to detach the funds from their illegal source. This can be done by swapping currency (illegal proceeds in US dollars are converted into Euros) or by investing the money into stocks. Thanks to the liberalization of global financial markets, it is easy to transfer vast sums of money all over the world, several times over within seconds.

(3) The third stage is call “integration,” that is, the introduction of the laundered money back into the legitimate economy through various investments. The majority of criminal organizations described above engages directly in money laundering or hire the services of other criminal syndicates to do it.

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