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ECON 316 Money Laundering.docx

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McGill University
Economics (Arts)
ECON 316
Tom Naylor

Money Laundering 10/28/2012 9:18:00 AM For case study: macro-vs. micro sources Micro  i.e., informants (inherent liers and exaggerators due to vested interests)  “sting operations” o police set up a sham (front), advertising that theyre in business of laundering to attract criminals o subject to legal constraints, police view  cases o generalisable (but how generalisable is it?) Macro estimates  police forces (exaggerated bc their budgets and powers are based on there being a big threat)  informants (vested interest)  criminals (after arrest, deal with litigators to inflate estimates)  mass media (sensationalism sells)  politicians (raising political profile, and diversion from other issues)  researchers (grant and peer pressures) History of Laundering  Usury laws/interest rates (anytime therell be laws, people will find ways to work around them)  Modern concept comes out of 1920s prohibitions o Bootleggers took over laundries bc they were a cash based business Definition  Three stage circular process o Move money away from the vicinity of the crime/criminal o Hide—and disguise the trail o Return to place or person of origin  (money is not “laundered” until it comes back to the person and is accounted for in an overt way) dangers from using cash  theft  attracting attention  subject to seizure  question: is money really anonymous US—IRS 4800, if you use more than 10000 in cash to buy consumer durables you have to declare it  Evasion techniques—serialize transactions, bribe clerks, use cutouts o Only works with money spent on goods directly  Possible danger o Attracts attention, possible informants, steal your goods Onshore laundries  Episodic o Race track  Buy winning tickets off someone o State lottery o Stock market  Buy and sell stock to launder money? o Property flips  Continuous o Bars/restaurants o Car washes o Video parlors o Video rental stores Principle: MIX AND MATCH Elias kanaan’s revolving credit scheme  Set up “contracting company”  Borrow money from a local trust company  U
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