How Corruption Money Is Laundered

Money laundering is the process of making legal, money that was illegally obtained. Under certain circumstances the morally grey (eg. politicians, government officials, corporate employees, lawyers, judges etc) can launder their illegal cash gains if the money passes through a legitimate business.

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(1) The morally grey person and the gift bearer agree on the deal.

(2) The cash paid by the gift bearer is funneled through the bank account of the morally grey person's rookie to avoid direct association.

(3) The rookie withdraws the cash and funnels it through a legitimate cash-based business owned by the morally grey person. This could be a restaurant, pub, disco, supermarket – preferably a business that provides services rather than products since it is harder to collate information on services for evidence. The company should have a constant flow of business and cash so that when the tainted money flows through it would appear as if it is part of daily transactions. (For large amounts the rookie may have to push the money through in stages.)

(4) As the owner of the business the morally grey person can legitimately withdraw the money from his company as dividends after paying tax on it and places it in his bank account.

(5) Once all the documentation are in place to make the money look legal, the morally grey person can then withdraw it and spend it openly since it is all "accounted" for.

How to Use Banks to Get Around the Cash Dilemma

Cash gifts in large amounts are of no use to the morally grey person if he can’t spend it without getting caught. Wily people on the take (eg. politicians, government officials, corporate employees, lawyers, judges etc) can get around the tainted cash dilemma by taking out loans and getting their gift bearers to repay them as part of their deal.

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(1) The morally grey person and the gift bearer agree on the deal and the amount.

(2) The morally grey person then goes to the bank and gets a loan based on his salary, networth and creditworthiness.

(3) When the loan is approved and all the proper documentation are in place the morally grey person can then legitimately splurge on big ticket items like a house, car, yacht etc.

(4) The monthly installments are deducted from his salary so the source of his splurges are legitimately on record for the public to view. The gift bearer then repays the morally grey person the monthly installments in cash. And so long as no one squeals everything will look legitimate.

How Tainted Money is Funneled Via a Bogus Business

Another way for the morally grey (eg. politicians, government officials, corporate employees, lawyers, judges etc) to conceal their deals is to funnel money through a bogus business owned by family, relatives or cronies. This is similar to using a rookie except more effort has to be made to make the money look legal.

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(1) The gift bearer and the morally grey person agree to the deal.

(2) The gift bearer fabricates requirement for some bogus business service that is hard to detect (like consultancy or marketing services) that he will contract and pay to a sham business owned by the morally grey person’s family, relatives or cronies.

(3) The sham business makes a pretence at delivering the bogus service and quite likely will also fabricate delivery notices and invoices to make it look legitimate (if it’s hard working).

(4) The family, relatives and cronies withdraw the money from the sham business and gives it in cash to the morally grey person.

How Corruption Money Is Funneled Via A Rookie

One way the morally grey (eg. politicians, government officials, corporate employees, lawyers, judges etc) can hide his illegal financial activities is to use a rookie. Although the morally grey can always accept cash directly from the gift bearer the link is too direct. Adding a rookie to the process creates another layer of opacity which the corrupt person can always use to his advantage.

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(1) The gift bearer has a verbal agreement on the amount due to the morally grey person.

(2) The morally grey person decides to use his rookie to process the money. The rookie chosen should be an ordinary person who has regular amounts of cash flowing through his bank account – possibly also an entrepreneur; the rookie is unlikely to attract attention from the tax department and has no criminal record. The ideal rookie should also be morally grey, loyal, financially greedy and ready to accept some payment or favour in return for helping the morally grey person. Lastly, the rookie must be either sufficiently stupid, desperate or gutsy.

(3) The rookie goes to the bank and opens a personal bank account in his name.

(4) The gift bearer deposits the cash (preferably rather than a cheque to avoid a trace) in the rookie’s bank account.

(5) The rookie withdraws the cash and gives it to the morally grey person.

The Tainted Money Dilemma

The most primitive way for the morally grey (eg. politicians, government officials, corporate employees, lawyers, judges etc) to take bribes is to accept cash from their clients. Yet accepting large amounts of cash directly from the gift bearer presents two dilemmas for the morally grey.

Wot to Do With Da Loot?

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The first is what to do with the cash. Having too much money without any means to legitimise it nor spend it openly without attracting public attention is a problem for the morally grey (ie. harbouring the evidence).

The second dilemma is that accepting cash directly from the gift bearer can be easily traced. The morally grey can be easily found out if an insider on the deal decides to squeal. These days the savvy criminal will try to re-route the money through a fall guy or better yet launder it.

Corruption and Money Laundering

Three critical factors that the morally grey need to consider when conducting illegal money-taking activities are:

• how to keep their moonlighting activities hidden;
• how to avoid leaving a paper trail that can be traced back to the source and the recipient of the money;
• what should the recipient do with large amounts of tainted cash (which is the evidence).

In the past, a common way for the gift bearer to bribe his target was to give him cash in an envelop or suitcase. (Everyone's watched the Godfather.) Although direct cash bribes still occur today they are not necessarily the most convenient form of payment especially for scams that involve large amounts of money. The corrupt recipient could always hoard his money for the sake of hoarding. But generally speaking large amounts of money are useless if the owner can't spend it openly without attracting public attention. Hence, it is important for the morally grey to legitimise their tainted money (ie. money laundering) so that they can openly enjoy their gains.

However, graft is increasingly not tolerated nor legally acceptable in many countries today. Or at least, it can't be seen to be acceptable. Efforts have been stepped up in the war against corruption in the past few decades using modern investigation techniques; there has been greater cooperation on the international front to crack down on money laundering and push for greater transparency and accountability from public officials and corporations. However, it's difficult to ascertain just how much progress has really been made in stamping out corruption. With all this going on the morally grey have to work harder to conceal their activities and corruption schemes have just become more sophisticated and harder to detect.

Why Morally Grey Companies Do It

Businesses privately lobby their politicians to assist them all the time. Take the Jefferson case as an example (more on this). But why?

Obstacles to Closing A Business Deal

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There can be many bureaucratic, legal and market-oriented obstacles to closing a business deal. These obstacles can be daunting especially for companies trying to break into a new market, say in a foreign country. All these obstacles eventually translate into a financial cost for the firm and yet the prospects of winning over the customer are not always certain. Since there are costs involved the morally grey company might as well pay the equivalent to their equally grey counterparts who can help them remove these obstacles and or increase their chances of securing the deal.