FINAL TERM LECTURE 2- ACTIVITY 2

1. What is Money Laundering?

 Money laundering is the illegal process of transforming money obtained through
illegal activities into "clean" money, which can be freely used in normal company
operations without having to be hidden from authorities.
 Money laundering operations handle trillions of dollars each year around the
world, and as a result, money laundering activities have a significant impact on
major national economies.
2. How does money laundering works?
Money laundering typically occurs in three phases:
 Initial entry or placement is the initial movement of an amount of money earned
from criminal activity into some legitimate financial network or institution.
 Layering is the continuing transfer of the money through multiple transactions,
forms, investments, or enterprises, to make it virtually impossible to trace the
money back to its illegal origin.
 Final integration is when the money is freely used legally without the necessity
to conceal it any further.
3. Give and discuss 3 examples of Money Laundering Activities in the Philippines.
1. Initial placement
A legitimate restaurant is owned by a criminal or criminal organization. Through
the restaurant, money gained through unlawful acts is progressively put into a bank.
The restaurant reports substantially higher daily cash sales than it actually receives.
Let's say the eatery receives $2,000 in cash in a single day. An additional $2,000 will be
added to that amount — money obtained through criminal acts – and the restaurant will
fraudulently declare $4,000 in cash sales for the day. The funds have now been
deposited in the restaurant's actual bank account and look to be standard restaurant
business proceeds deposits.
2. Layering the money
To avoid a high tax payment as a result of recording more revenue than it earns,
the restaurant may invest the additional deposited monies in another legitimate
business, such as real estate, to further obscure the criminal source of the funds. Shell
firms or holding corporations that control many company enterprises through which the
laundered money may be diverted further obscure things from authorities.
It may pass through a casino to be disguised as gambling winnings, go through
one or more foreign currency exchanges, be invested in the financial markets, and
eventually be transferred to accounts in offshore tax havens where banking transactions
are subject to far less scrutiny and regulation. Multiple pass-through from one account
or business to another make it more difficult to track the money back to its illicit origins.
3. Final integration
The money is then invested in legal businesses or personal accounts during the
integration phase of money laundering. It might be used to buy high-end luxury items
like jewelry or cars. It may even be used to form a new company to launder future
quantities of unlawful cash.
At this stage, the money should have been sufficiently laundered for the criminal
or criminal enterprise to be able to use it without resorting to illicit measures. The money
is usually invested legally or swapped for valuable items like real estate.