Everything You Need to Know About Integration in Money Laundering

“Money laundering is giving oxygen to organized crime.”

Enrique Peña Nieto, President of Mexico

According to the World Bank and IMF report, 3-5%, approximately $2.17-$3.61 Trillion of global GDP, has been laundered and re-invested in the economy by representing this as hard-earned or legal money.

The above scenario, known as integration in money laundering, is also the final stage in stages of money laundering in which launderers invest or introduce their illegal money into the economy after layering it through the following different methods:

• By transferring the money to different countries.
• Buy goods and services through illegal money.
• By investing money in any asset or legal business.

We all know these activities are meant to layer illegal money so that it may look hard-earned.

Let’s cover all aspects of phase integration in the money laundering process to understand how criminals re-invest their money and which sectors they mostly prefer.

What is the Integration Stage in Money Laundering?

Launderers, after layering in money laundering, get these funds back into an account for re-investment purposes, referred to as the integration stage. Scammers layer money to escape from the region’s law enforcement agencies, and this stage is essential enough for them because it allows criminals to use money without fearing investigation.

But wait! It’s essential to explore why launderers integrate their illegal money.

Purpose of Integration in Money Laundering

• Avoid investigation of law enforcement agencies.
• Layers illegally gained funds as they have earned from any legal source.
• Launderers use the money to finance their other illegal projects.

A Needle in a Haystack – The Digital Challenges in Detecting and Preventing Integration

Detecting and prohibiting the integration phase in money laundering can be difficult due to subsequent reasons:

• Launderers use advanced technology to layer their activities.
• Weak aml laws and regulations provide opportunities for scammers.
• Advanced and interconnected financial systems make it difficult to manage cash movement.
• Integration in money laundering involves actual transactional activity that is difficult to differentiate from illegal financial activities.

Corruption, Cartel, and Cash – A Decade of Money Laundering

Money laundering is an ever-evolving crime that constantly changes because of advancements in technology. Therefore, financial organizations and law enforcement agencies have to be careful and implement their strategies to fight scammers.

Mexico’s Narco Violence – A Modern Day Tragedy

For almost two decades, Mexican authorities have been fighting a deadly battle against drug cartels in which thousands of residents die every year, including journalists and politicians.

Since 2006, 431,000 homicides have been seen after the government declared war against drug dealers. They have used almost every technique involving offshore banking and real estate investments to launder billions of dollars.

Panama Papers – Offshore Leaks Scandal

Panamanian law firm Mossack Fonseca, politically exposed persons, and firms that hide their assets in offshore organizations to escape taxes. Almost 11.5 million files were exposed of people involved in money laundering activities from different countries.

Panama Paper exposes the data of 214000 offshore firms and 200 jurisdictions over almost 40 years. The paper had emails, corporate records, financial spreadsheets, and passports of owners of illegal firms in Nevada, Hong Kong, and the British Virgin Islands.

Bernie Madoff – The Monster of Wall Street

In the 1960s, Bernie Madoff started his career as a trader and later formed his business named Bernard L. Madoff Investment Securities LLC, which is one of the largest penny stock brokerages. However, he committed fraud through his Ponzi Scheme despite being deadly rich.

Initially, Madoff attracted clients by promising them high returns on their investments. He paid off initial returns. However, investors’ trading statements showed fabrications.

In 2008, investors demanded a return of around $7 billion, but Madoff didn’t have enough money to cover up their returns. Police arrested him and sentenced him to 150 years, or he could return more than $700 million to investors.

Bernie Madoff’s life has inspired movies, including Netflix productions that constantly seek opportunities to amaze viewers.

Basic Techniques Used for Integration- Money Laundering Examples

Launderers used different techniques to reinvest their illegal money in the economy. Let’s see some examples of integration in money laundering:

Real Estate Investment

From 2015-2021, Global Financial Integrity (GFI) estimated that approximately $2.3 billion was laundered through the US real estate sector. This industry attracts scammers because launderers can easily break huge financial transactions into small ones to deceive law enforcement agencies.

Securities Investment

Launderers buy financial instruments, including bonds and stocks, that can quickly be sold in the market. FBI declared the following investment fraud as criminal activity.

• Ponzi Schemes
• Advance Fee Schemes
• Foreign Currency Fraud
• Broker Embezzlement
• Late Day Trading
• Hedge Fund-Related Fraud
• Pyramid Schemes

Charitable Donations

In 2021, UK non-profit firms lost $8.6 million in fraud. Launderers abuse non-profit organizations and other charity platforms to execute their illegal activities.

Scammers choose these platforms because the general public trusts NGOs, and law enforcement don’t take taxes from these social welfare firms.

Moreover, many non-profit firms deal with high-risk countries that can’t easily detect criminal activities.

The American Cancer Society of Michigan applied to the IRS to exempt taxes. Later on, authorities found that the charity was fake and was still IRS-approved.

Law enforcement agencies also found 76 fake charities of the same person that were IRS-approved and made to exempt taxes.

In 2019, a person laundered approximately £10 million by selling counterfeit supplements through his charity center, “Chabad Lubavitch UK”.

Online Gambling

The online gambling sector is attractive for launderers because it’s easy to re-invest their money, specifically in remote casinos.

In 2023, the gambling sector dealt with almost $475 million in fines due to repeatedly violating the Anti-Money Laundering and Counter-Terrorism Financing Act, according to the Australian Transaction Reports and Analysis Centre (AUSTRAC) report.

Trade-Based Money Laundering (TBML)

Trade-Based Money Laundering TBML is the complete process of laundering illegal money and layering it through international trade systems. Exported goods’ quantity or quality and falsifying the amount come under TBML practices. Following are a few of their favorite tricks:

• Over-Invoicing
• Under-Invoicing
• Multiple-Invoicing
• Over-or Under-Shipment
• Misrepresentation of Quality

The final stage, integration in money laundering, is mostly used by launderers because they want to reinvest their illegal money in an economy.

Due to the complicated nature of the financial structure, law enforcement agencies find it hard to catch money laundering, specifically in high-risk countries.

Law enforcement agencies and regulatory authorities need to strengthen their AML frameworks.