Money laundering is a major hindrance that arises during the development of private sector due to the supply of products even below the production cost. Criminals would also use their money to turn an enterprise into impotent which was initially productive which ultimately leads to a decrease in the overall progress of an economy. However, estimations have been made regarding the amount of money laundered internationally but it’s difficult to measure the accurate size of money laundered. There have been many scammers like Ilan Tzorya who are responsible in many scams related to these kinds of investments. So, here are some tips to discuss all the aspects of money laundering so that people can be aware of all these factors.
What is Money Laundering?
Money laundering is a process of covering up illegally obtained money through activities like drug trafficking or terrorist activities and to show as they have been originated from a legitimate source. Dealing with such a large amount is really dangerous therefore money laundering becomes essential to deposit the money in the financial institution.
There are basically three steps involved in the process of money laundering which is mentioned below:-
- Placement: It’s the introduction of illegal money (obtained through criminal activities) into the financial system through any means.
- Layering: It is an act of dissembling the commencement of the money with the help of complex transactions and changes in the book-keeping records.
- Integration: It refers to the act of acquiring that money in supposedly lawful means.
Effects of Money Laundering
Destruction of the Financial Sector
The sudden flow of a large sum of laundered money might excavate the stability of financial markets. In addition, money laundering may also affect the reputation of those financial institutions who are involved in scheming which ultimately results to loss the goodwill and trust they have with the stakeholders. As per some of the worst scenario, money laundering is also responsible for huge financial crisis and major bank failures.
Reduction In the Government Revenues
Collection of tax is one of the major source of government’s revenue, but the act of money laundering make the process difficult to collect the revenue from all the transactions that take place illegally in an underground economy.
There are various socio-economic effects of money laundering. As the dirty money generated from illegal activities transformed into legitimate funds, these funds are again used to operate criminal activities.
Money laundering also impacts the interest of legitimate business as they found it more difficult to compete in such a market situation where products are available to the customer less than the market price, therefore, the act might also be connected from a serious and violent criminal activity.