Section 2: Money Laundering Trends in the European Union

This section summarises the money laundering trends analysed in the European Union countries from a research carried out recently by TRANSCRIME for the European Union. Three main trends are outlined referring to methods, instruments and mechanisms for money laundering.

Text 1

The money launderer changes the illicit proceeds from one form to another, often in rapid succession. The trend is towards acquiring tangible assets (such as cars, boats, aircraft, luxury items, real estate, and precious metals) with the bulk cash originating directly from criminal activity. Often, but not necessarily linked with offshore centres, the mechanism of shell or front companies has been detected. These are entities that generally exist only on paper. These legal entities are usually conducted specifically in order to carry out a wide range of criminal businesses such as financial fraud, especially in the United Kingdom, and fraud against the European Union, especially in the Netherlands, Belgium and Italy. They do not participate in actual commerce and are run by straw men, as often found in Italy. Their purpose is quite exclusively criminal and they often face a «law enforcement risk» from investigations about the real nature of their existence. This is the reason why they are closed down almost as soon as they are formed and often the accountancy books are physically eliminated in order to conceal any trace that could help future or further investigations.

Money launderers are ever more oriented towards the use of non-bank financial institutions which are still not completely or properly regulated in some European Union member states. As they do not always come under the same obligation as the financial sector, because they are not allowed to undertake banking activities to earn interest, they are used especially at the placement stage for entering the cash into the financial market. There is evidence, especially in the Netherlands, Italy and Belgium, of criminal groups moving from major commercial banks to those called second line banks and often operating accounts in the name of offshore companies. These include a wide variety of bureaux de change, cheque cashing services, insurers, brokers, importers, exporters and other trading companies, gold and precious metal dealers, express delivery services and other money movers. Casinos or gambling houses are used at the placement stage. Enquiries into stockbroking markets in Austria, Finland and the United Kingdom have, however, revealed that much illicitly gained money is laundered in this circuit. A special mention has to be made of insurance companies which are increasingly popular laundering mechanisms, as in Germany, especially in the premium insurance bond sector.

§ Vocabulary notes

§ Words and Grammar

a Mark (with a tick) the meaning in which the following words are used in the text:

b Choose the synonyms from the box:

с Choose the antonyms from the box:

licit ... illicit............................... legal...............................................

rapid........................................ complete........................................

actual..................................... proper...........................................

d Write down the word families of the following words:

e Write out the English equivalents from the text:

криминальная деятельность..........................................................................................................................

оффшорные центры........................................................................................................................................

головные фирмы..............................................................................................................................................

фактическая торговля.....................................................................................................................................

бухгалтерские книги.......................................................................................................................................

небанковские финансовые учреждения.........................................................................................................

особо следует отметить....................................................................................................................................

f Write down what parts of sentence the ing-forms are and translate the following into Russian:

money laundering trends.. (attr.) – тенденции в отмывании денег ...............................................................

three main trends are outlined referring to these methods and instruments........................................................

the trend is towards acquiring tangible assets......................................................................................................

they are criminal groups moving to banks called second line banks and often operating accounts in the name of offshore companies...............................................................................................................................................

insurance companies are increasingly popular laundering mechanisms.............................................................

§ Suggested activities

g Write down a few sentences on each of the following, basing on the text:

Text 2

The use of more sophisticated money laundering methods has also gone beyond wire transfers to include a seemingly endless variety of licit and illicit financial instruments.

The possibility for criminal organisations to launder their proceeds through banking financial institutions exists without the knowledge of the illicit source by the financial or commercial operator or because of a more or less explicit complicity, if not even through a corrupted or criminally controlled institution. Individually or in concert, employees of financial or business institutions are in fact facilitating money laundering operations by willingly accepting large cash deposits, by failing to report transactions which exceed the threshold required by the law or by filing false reporting documents. This situation occurs for example in mature financial systems which are particularly exposed to organised crime, as Italy certainly is.

There is, however, emerging concern about new banking practices within the European Union, such as direct access banking (favoured customers are given the bank's software and allowed to process transactions directly through their accounts) or suspense accounts (of banks with other banks). Pass-through banking by itself is posing a myriad of problems for regulators, by creating accounts within accounts, even banks within banks. These new bank services limit the utility of identification systems. Representative offices – an office representing a foreign bank that does not have a branch in a specific country constitute another privileged target used by money launderers. Normal financial regulations do not always apply to them because a representative office is not an official banking institution, while the office accepts deposits and transfers the funds into its own account without disclosing the identities of the owners of the deposits.

§ Vocabulary notes

§ Words and Grammar

a Write down the verbs from which the following nouns are formed: