Perhaps, laundering drug money is such a tough decision to make, maybe not. Notwithstanding what you think, we will discuss how to launder drug money or say, how it is done.
To launder drug money means to convert illicit proceeds from drugs into ‘clean money’ and inject it into the economy. Drug money laundering is successful when the transaction cannot be traced or appears as legitimate income.
Drugs and money laundering have a close link. You want to get out of it uncaught, otherwise, you face the costly consequences.
The government has also implemented laws to aid the fight against drug money laundering. So, the fight against this act is severe and you may not be pardoned if caught in the act.
How Does Drug Money Laundering Work?
To make your illicit drug money legal involves three different stages, including placement, layering, and integration. The objective is to move the illegal money into the economy and legalize it without being traced.
You must structure the drug funds in various complicated transactions, typically involving smaller amounts, to move it into a financial institution.
Integration is the final stage of laundering drug money and this is when you make the money legally available. Placement and layering determine whether your integration will be successful or not.
Since you have integrated the dirty money into the economy, it is difficult for government agencies to trace. This can be easier for them if you did not break the money into tiny bits from various complicated transactions.
Finally, since the integration is successful, you can acquire assets for the money. You do not want properties that trigger government agencies to investigate you or your source of income.
How Do Drug Dealers Hide Their Money?
A good number of drug dealers spend their money directly, so they do not even have to launder it. You can spend yours on exotic homes, cars, food, vacation, etc.
Some drug cartels prefer to launder their money. They can flush their income through the global market to hide and legalize it. For instance, you can launder money through a business, including a restaurant, taxi service, etc.
Typically, these cartels use methods such as cryptocurrencies, real estate, mobile payments and payment cards. These methods of payment can allow you to underwrite your drug trafficking.
If you have much money to launder, it is tougher to get out of being caught. You just have to be careful not to be suspected or you will be questioned.
How to Launder Drug Money
In this section, we will discover the various techniques you can use to launder drug money successfully.
Smurfing is a common technique for laundering drug money. It is also called ‘Structuring’.
To do smurfing involves using a smurf or a group of smurfs that will break the drug money into smaller amounts. These amounts are then being injected into the economy without a trace.
Typically, the threshold of money you can transfer that is reportable is $10,000. Smurfs will move funds below this amount to avoid detection.
They function like couriers, except that their duty is to move your funds around. They can use various banks to make deposits or obtain cashier’s cheques in smaller denominations.
Smuggling can be quite complicated. Here, read our piece on cash smuggling to have a glimpse of the process.
Cash smuggling is a very common way to launder drug money, and many drug cartels and barons practice it. This typically takes place when illicit money from drugs is to be moved to a different country.
Most drug cartels each have a signature way of smuggling cash. It can be through businesses or a rapport with shipment officials. Many countries do not thoroughly check shipments exiting the borders or coming in.
As a drug dealer, you can use front or shell companies to launder drug money. Shell companies help a lot to move funds and even assets. You can even use more than one shell company to conceal your laundered drug money.
You only purchase other financial assets to help you move cash in the layering stage of the stages of money laundering. These stages are explained in the next section.
You will use the money to buy properties but it is saved securely in a bank account of a foreign jurisdiction.
Wire transfers can also be used to launder money from drugs. It involves moving money online from your country to another country.
You would be sending money to a different account in another country. It is part of the layering stage of money laundering and a vital way to launder cash.
Wire transfer is also commonly used by internet scammers. It is safer if you thread carefully, and ensure your laundered drug money is not traced.
What Are the Stages of Making Dirty Drug Money Clean?
The process of money laundering is divided into three, including placement (phase 1), layering (phase 2), and integration (phase 3).
Each of these stages must be carefully plotted to avoid getting caught. We will discuss how each stage works so that you can easily launder drug money.
The first stage is known as the placement stage. This involves introducing the illicit proceeds to a financial institution in a bid to legalize it. In this case, you are placing the drug money
Under placement, you will select what smalling method you can pull successfully. It can be smurfing, using money mules, shell companies, etc.
These techniques also help to hide the source of your illegal or dirty money from government agencies. A larger amount of money will attract agencies that check laundering so you want a method that suits your amount.
Layering is the second stage of money laundering you can apply to your drugs money.
Layering reduces the amount of money you have into smaller amounts that can be put in banks to avoid detection. This is done virtually.
With layering, the drugs money you have been made into complex amounts that can be difficult to trace. It prevents the financial fraud agencies of a particular country from being able to track the source of the funds.
Wire transfer could be used to move the drug money to an offshore bank account, a foreign bank account owned by the drug cartel, or a different organization or person.
The money will be transferred using different layers of various accounts, shell corporations, and more. You can inject the money into the stocks market of a foreign market to prevent any agency from tracking the source.
The third and final stage is the integration which involves injecting the illicit drug money into the economy without getting caught. At this stage, your drug money becomes legalized and, in most cases, no investigation is ever launched into it.
Of course, the money arriving for integration arrives in bits to cover the trail and void any investigation. When the integration is successful, you can use it to acquire assets or properties that do not make government agencies suspect you or your cartel.
The general idea is just to make the funds very legal and trustworthy in the system.
Unfortunately, laundering drug money can hinder the financial markets from being stable.
It also encourages the use of drugs. More and more people will begin to invest in the market considering the market value and how much money they stand to make.