You may have heard the widespread news about criminal cases of money laundering, which are often used to enrich oneself from illegal actions. But do you know what money laundering means and what the methods are? Come on, see the complete explanation in this article.
What is Money Laundering?
According to Law No. 8 of 2010, three definitions are categorized as money laundering as follows;
- Placing, transferring, diverting, spending, paying, donating, entrusting, taking abroad, changing the form, exchanging for currency or securities, or other actions on assets that he knows, or reasonably suspects are the proceeds of a criminal act to hide or disguise the origin wealth proposal.
- Concealing or disguising the true origin, source, location, designation, transfer of rights, or ownership of assets that he knows, or reasonably suspects are the proceeds of a criminal act.
- Receive and control the placement, transfer, payment, grant, donation, safekeeping, exchange, or use of assets that he knows, or reasonably suspects are the proceeds of a criminal act.
In simple terms, money laundering can also be defined as the process of hiding the source of money obtained from illegal actions and then making it appear as if it were a legal source to avoid prosecution, punishment, and confiscation of criminal funds.
Operational Basis for Money Laundering
According to the OJK, three steps form the basis of money laundering operations, namely as follows:
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Placements
Placement is the initial form of money laundering, which involves entering cash into the financial system. At this stage, the movement of money has the potential to be detected, so the perpetrators usually break the money into smaller units so that they are not easily suspected.
Another method that is often used is to place money in various storage instruments, such as checks and deposits, and smuggle money or assets resulting from money laundering abroad.
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Layering
This practice is used to hide money obtained from money laundering crimes by buying assets, investing, or spreading the money across several bank accounts in several countries, especially countries that implement tax havens or tax haven policies.
Another way is through offshore banking activities and transactions using dummy companies.
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Integration
This step is an effort to combine or use assets that already appear legitimate by investing in a business activity, selling and purchasing assets, and corporate financing.
Money Laundering Modes
According to the OJK website, there are 10 modes of money laundering that you should be aware of:
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Smurfing
Efforts to avoid reporting by fragmenting transactions carried out by many actors.
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Structuring
Efforts to avoid reporting by breaking up transactions so that transactions become smaller.
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U Turn
Efforts to obscure the origin of the proceeds of crime by reversing transactions, which are then returned to the original account.
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Cuckoo Smurfing
Efforts to obscure the origin of the source of funds by sending funds from the proceeds of crime through the accounts of third parties waiting for funds to be sent from abroad and not realizing that the funds received are the proceeds of criminal acts.
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Purchase of assets or luxury goods
This method is carried out by hiding the ownership status of assets or luxury goods, including transferring assets without being detected by the financial system.
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Exchange of goods or barter
This mode is used to exchange goods to avoid cash transactions so that the financial system does not detect them.
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Underground Banking
This mode involves money transfer activities through informal channel mechanisms based on trust.
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Third-party use
This mode is carried out to avoid detecting the real identity of the real owner of funds from money laundering crimes.
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Mingling
Mixing funds from criminal acts with funds from legal business activities to obscure the source of the funds
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Use of fake identities
This method uses fake identities to make it difficult to trace the identities and whereabouts of money launderers.
Money Laundering Prevention
The crime of money laundering is a serious matter; according to the OJK, it can even threaten economic and social stability. The following are several actions that financial service providers, you as a customer, and the public can take to prevent and avoid money laundering crimes.
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Role of Financial Services Providers
- Implementing an anti-money laundering program with Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) in customer acceptance, starting from identification, verification, and monitoring, as well as customer profiles and updating (the principle of recognizing service users).
- Monitoring and updating data.
- Maintain statistical data on reported accounts.
- Submitting Cash Financial Transaction Reports (LTKT), Suspicious Financial Transaction Reports (LKTM), and Financial Transaction Reports for Fund Transfers From and to Abroad (LTKL) to the Financial Transaction Reports and Analysis Center (PPATK).
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Your role as a customer
- Provide correct information regarding personal data, source of funds, and purpose of the transaction if the transaction is carried out for the benefit of another party.
- You are also required to provide correct information regarding the originator, address of origin, recipient of the money, amount of money, currency, date of sending the money, source of funds, and other information based on statutory provisions when transferring money.
- You must also firmly accept and/or store other people's funds in your account only after clarifying the origin of the source of the funds.
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Your role as a general public
- Do not buy property whose ownership status is unclear.
- The firm refuses to provide financial donations without clarity of their designation.
- Firmly refuses to fund the purchase of dangerous chemicals suspected of being related to terrorist activities.
- Not involved in collecting funds by the foundation for activities that are not related to the function of the foundation
- Firmly refuses to help distribute books, articles, and writings whose contents tend to be anarchist or radical.
In line with the spirit of the 21st GERNAS APU-PPT (National Movement for Anti-Money Laundering and Prevention of Terrorism Financing), Bank MAS consistently participates in maintaining financial integrity by strengthening the internal financial system, holding APU-PPT training for Bank MAS internal employees and providing education to customers to prevent money laundering crimes.
That is the discussion about the crime of money laundering. Please understand more about money laundering risks and efforts to prevent it. You can also read other tips on the Bank MAS website to make your transactions even safer.
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