Research Paper on "Money Laundering What Is the Deviance/Crime"

Research Paper 6 pages (1729 words) Sources: 1+

[EXCERPT] . . . .

Money Laundering

What is the deviance/crime, legally what level felony?

The crime of money laundering is defined as a "financial transaction scheme that aims to conceal the identity, source, and destination of illicitly-obtained money."

It is a federal felony in the United States, for which the penalty is "…a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both."

Who is the victim(s)?

In money laundering, there are a number of victims. The most direct victim is the financial institution through which the money passed, which are typically deceived by the money launderer as to the source of the money. The crime victimizes nations in a broader way by distorting national and global financial data. Inaccurate financial data can have many negative macroeconomic consequences, including inexplicable changes in money demand, prudential risks to bank soundness, contamination effects on legal financial transactions, and increased volatility of international capital flows and exchange rates due to unanticipated cross-border asset transfers.

3. Is there a "typical" social background of the offender(s)? Are there any current trends . . . data issues?

The typical money launderer is usually wealthy since the person or organization has a large, steady amount of excess money that needs to be "washed" of its illicit origin. However, the "social" characteristics, including the race, level of education, vocation, and social position of the person or organization is more diverse.

Typical money launderers are criminal organizations, such as the American Mafia or Chinese Triads, which are engaged in black market activities such as controlled substances, gambling, and prostitution. Such activities often bring in large amounts of money which cannot be directly transferred to and through financial institutions without suspicion.

However, money laundering activities are not restricted to marginalized social segments. They are also committed by more formal organizations or persons with more acceptable positions in society. These include political organizations and financial institutions themselves. Furthermore, small businesses engaged in cash-based or informal economic activities may launder money in order to evade the tax liability connecting with their undocumented earnings.

4. Describe the actual criminal/deviant behavior involved (mind-set values, techniques, group aspects . . .).

First, the launderer introduces breaks up large amounts of cash into less conspicuous smaller sums and deposits directly into a bank account. The offender might also purchase a series of checks or money orders that are then collected and deposited into accounts at another location.

After the funds have entered the financial system, the offender may purchase investment instruments, thereby spending the money in the formal economy.

Some offenders choose to wire the funds through a series of accounts at various banks across the globe. The most popular destinations are countries with weak or non-existent financial monitoring standards. This use of widely scattered accounts for laundering is especially prevalent in those jurisdictions that do not cooperate in anti-money laundering investigations.

Having successfully transferred the funds to the destinations account/s, he launderer might choose to invest the funds into real estate or business ventures.

5. What impact does the criminal justice system (police, courts, corrections, laws) have on this behavior or any other social structures?

The criminal justice system has limited impact on money laundering because it is a very unconventional crime. In a traditional sense, money laundering is a victim-less crime because no individual is directly harmed from it. In fact, many of the entities, such as financial institutions, which have the ability to stop or report money laundering actually benefit from the flow of money through their control. The criminal justice system needs the close cooperation of financial institutions in monitoring cash flow, but the financial institutions profit from the receipt and possession of money, which they can lend and invest, so they have an incentive to settle for lax monitoring standards.

The criminal justice system affects money laundering activities mainly through financial reporting laws, which are enforced through the Internal Revenue Service and the Securities and Exchange Commission. The Internal Revenue Service can audit the financial records of an individual or business if it detects suspicious activity in its tax returns. Also, the Securities and Exchange Commission may audit a company if it detects suspicious activity in its annual financial report.

Many nations have recognized and criminalized money laundering and have implemented Anti-Money Laundering programs. However, there numerous channels, formal and informal, through which money can be transferred. It appears that money launderers are always one step ahead of authorities in devising new channels for transferring money.

6. What is the neutralization strategy of the offender(s)?

Most offenders launder money because they cannot prove that they obtained the money legally or formally. They reason that they are just trying to make use of hard-earned money that is outside of the formal economy. Persons engaged or somehow involved in money laundering activities reason that they are not actually hurting anybody.

Some offenders launder money in order to evade tax obligations on money for which they could prove was sourced legally. These offenders are more likely justify their behavior by opining that taxes are unfair and criticizing government policies. They reason that: "This is my hard-earned money, I should be allowed to keep it."

7. Possible criminal/deviant desists, declines, exits.

Offenders would desist from money laundering if financial monitoring standards in their country are poor or non-existent. In that situation, there would be no need to conceal the illicit origin of the money because no one would inquire into it origin.

Offenders might also desist if financial institutions in their country are strict and aggressive in ascertaining the source of money. This is because the offender could lose the money deposited if the money is determined to be illicitly obtained, not to mention the risk of imprisonment. However, the offender would not just burn such illicitly obtained money, but would seek other ways to spend or make use of the money.

8. The best (can be a combination) sociological theory which explains this behavior.

Merton's theory of innovative deviance explains the behavior of organized criminal organizations. Merton recognizes four distinct categories of deviance based on two criteria: 1) the person's motivations or her adherence to cultural goals; (2) the person's belief in how to attain her goals.

For Merton, each of the two characteristics constitute a discrete, exhaustive criterion for general deviance by themselves, with rejection indicating deviance. However, deviant individuals do not always exhibit the same behavior in each the two areas, which produces five different outcomes and four different types of deviance.

The second outcome, where the individual accepts the goals of a culture but rejects the traditional and/or legitimate means of attaining those goals constitutes Innovative Deviance. In the case of money laundering, the offenders accept a fundamental American cultural value: making money. Furthermore, they have saved money and are usually attempting to use that money to make more money, sometimes through formal investment. Thus, they are not deviant in regards to their goals, they are actually exemplars and paragons of a fundamental cultural value.

The offenders are deviant only because of their belief in how to achieve their goal of making money. They choose to make money through informal or illicit economic activities, the fruits of which are prohibited from entry into the formal economy through financial monitoring regulations. This prohibition is an indirect method used by the criminal justice system to punish criminals by spoiling the fruits of those illegal economic activities.

For example, the Italian-American Mafia wishes to make as much money as possible and use that money to make more money. However, its members believe that they are somehow incapable or unwilling to make money through wage labor or entrepreneurship in legal economy activities. Thus, they choose to engage in socially unacceptable and legally prohibited economic activities, such as organizing gambling dens or running brothels for prostitution. These people are socially deviant because they do not believe that prostitution or gambling, nor the act of profiting from such activities, is wrong.

9. Research still needed or policy implication of social control/response.

Money laundering activities are such a complex, clandestine phenomenon. There are so many channels through which money can move in the world. Money can be moved through methods as traditional as commercial paper and promissory notes or through sophisticated electronic securities. These are channels that governments can regulate by placing legal regulations upon the financial institutions dealing with them. However, the more persevering offenders, unable to deposit a large amount of money at a formal financial institution, he/she may split the money into much smaller increments and initiate those deposits into bank accounts over a longer period of time. That offender may even employ associates to assist in this.

Money laundering is also assisted heavily, perhaps primarily, by informal channels. These channels almost always involve the exchange of cash and leave no paper trail. Offenders can transfer cash to a country with weak or non-existent financial monitoring standards where it… READ MORE

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