Laundering through Financial Institutions
The money is laundered through the Financial Institutions in three stages, which are universally accepted.
Placement of funds into a bank is the initial step in the process where the ill designed schemes are often exposed to legal actions. Placement can take any number of forms. If the money launderer in a suitcase and deposit it in an offshore bank. But the biggest problem here is handling cash and risk of the theft or seizure. To overcome these risks the banking systems are penetrated to get the best deals of swift transfers. The money is broken up into smaller amounts and deposited into bank accounts. But the risk of Banker questioning is always left behind. Here, Hawala can provide an effective means of placement. Suppose an Indian resident paid the premium to the Dubai Hawaldar having the legitimate business of import and export of CD’s. Since he also operates a business and also performs remittance services for others, he will make periodic bank deposits consisting of cash and checks. He will justify these deposits consisting of cash and checks. He will justify these deposits to bank officials as the proceeds of his legitimate business. He may also use some of the cash received to meet business expenses, reducing his need to deposit that cash into his bank account. Purchasing the demand Drafts, traveller’s cheques or Pay-orders are some of the commonly used techniques to place the funds into the banking system.
A criminal from the neighboring country opened an account in the nationalized bank located in Mumbai. The account was opened with a Passport and a 5 Pounds note. It was classified as a Non-resident External Account. He adopted a simple technique to convert the funds received from their terrorist organization. He procured the demand drafts from Branches of nationalized Banks located in Navsari in Gujarat and placed them for clearing so that bank payments to the parties could be.