Explain the differences between money laundering and terrorist financing. List the steps of money laundering.
Money laundering encompasses processing illegal profits to make it seem like it is gained from authorized sources.
Terrorist financing is the act of terrorist funding acts from profits gained from legal or illegal actions.
Differences
Terrorist financing can come from personal incomes, credit cards, and charities to finance their operations or use illegal money from sources like drug trafficking, theft, or human trafficking to gain funds. On the other hand, money laundering is purely criminal ways of achieving, which is processed to authorize the origin of the money.
In money laundering, the criminal organizations commit the crimes to obtain money which they “wash” to make origin seem legitimate. At the same time, in terrorist financing, they use every way possible whether illegitimate or legal to obtain funds to cater for their needs and fund their operation and later attack their target area.
Steps of money laundering
- Placement –the illegal profits are deposited into different bank accounts or converted into other valuables to avoid suspicion from tax examiners.
- Layering- obscuring the origin of the illegal money through changing of currencies, depositing in bank accounts in different countries from the country where the crimes occurred.
- Integration – creating a legitimate source of the money and using the profits for personal gains, for example, investment.