A look into money laundering

In U.S. law, money laundering is the process of engaging in financial transactions to conceal the identity, source, and/or destination of illegally gained money. It is believed that the term “money laundering” originated from the Mafia’s ownership of Laundromats whereby large sums of money were made through illegitimate activities that showed origination from a legitimate-appearing business.

The U.S. Criminal Code contains more than 100 predicate offenses to the crime of money laundering, which include drug trafficking, smuggling, prostitution rings, illegal arms sales, embezzlement, insider trading, bribery, and computer fraud. The Internal Revenue Service (IRS) considers money laundering a “tax evasion in progress.” And when no other crimes could be pinned to Al Capone, the IRS obtained a conviction for tax evasion. Leaving the courthouse, Capone said, “This is preposterous. You can’t tax illegal income!” Had the money laundering statutes been in effect in the 1930s, Capone also would have been charged with this crime. However, since October 1986, with the passage of the Money Laundering Control Act, organized crime members and many others have been convicted of both tax evasion and money laundering.

One of the most notable money laundering cases was settled in March of this year. Wachovia Bank, which is owned by Wells Fargo & Co., reached a $160 million settlement with the Justice Department over allegations that a failure in bank controls enabled drug traffickers to launder drug money by transferring $420 billion from Mexican currency-exchange houses to the bank. Under a deferred-prosecution agreement, Wachovia “admitted failure to identify, detect, and report suspicious transactions in third-party payment processor accounts.”

And money laundering has even reached the Vatican. Media reports from the past week say that the Vatican Bank, along with its chairman Ettore Gotti Tedeschi and director general, Paolo Cipriani, have been targeted for alleged violations of money laundering laws. Italian authorities temporarily froze 23 million euros ($30 million) from an account registered to the Institute for Works of Religion (IOR) a.k.a. the Vatican Bank. The investigation was opened after the Bank of Italy, adhering to anti-money-laundering directives issued by the European Union, alerted officials to two suspicious transfers on September 6, 2010. The Holy See expressed surprise at the allegations.