The illegal drug trade is thought to be worth $400 billion each year, accounting for 8% of total worldwide commerce. Drug traffickers must convert the monetary gains from their illegal activity into income from seemingly legitimate sources in order to invest the earnings from their unlawful operations and avoid having their assets taken by the authorities. This is referred to as money laundering.
Though there are several methods for laundering drug money, the procedure typically consists of three main phases. The first step, placement, comprises putting drug revenues in local and international financial institutions. The second step, layering, entails constructing layers between the people who place the profits and the people engaged in the intermediate phases to conceal their source and ownership and the audit trail. Complex uses and the use of wirework transfers, shell corporations, bearer shares, and nominees in offshore financial hubs may be involved. The profits have been cleaned, and a plausible explanation for the funds has been developed in the third step, integration. This may be accomplished by using front companies, falsifying invoices, purchasing financial instruments (stocks, bonds, and certificates of deposit), or investing in real estate, tourism, and other legal industries.
Launderers have invented a variety of techniques to conceal the vast money made by illegal drug trafficking. To evade currency reporting requirements, one option, structuring, involves dividing significant sums of cash into transactions totaling less than $10,000. Other scams include casinos, diamonds, and precious metals, wire transfer businesses, and cash smuggling out of the country. Because of the immense profitability of drug trafficking, criminals may benefit from the balloon effect of global illegal commerce. Criminals alter techniques, industries, geographic routes, brokers, technology, and so on as soon as law enforcement personnel detect and move to restrict one laundering method. These rich and powerful drug syndicates hire specialists and deploy cutting-edge technology, intelligence, and strategies, including purchasing influence in smaller nations, to stay one step ahead of police enforcement.
Money laundering rules are enforced by various agencies, including the FBI, Customs, Drug Enforcement Administration, IRS, Federal Reserve, and Treasury. FinCEN, a division of the United States Treasury, employs artificial intelligence technology to evaluate all Currency Transaction Reports (CTRs), which individuals must file with the United States government when they receive cash payments over $10,000, as well as Suspicious Activity Reports filed by banks, thrifts, credit unions, and commercial and law enforcement database systems.
Various national, regional, and global arrangements and organizations aim to prevent money laundering. Many nations have established Financial Intelligence Units (FIUs) comparable to FinCEN to acquire and process financial disclosure information and to help anti-money laundering operations.
The G-7 nations established the Financial Action Task Force (FATF) in 1989, and it has released 40 recommendations or guidelines to combat money laundering. The United States forced the FATF to produce a report in 2000 that named 15 "non-cooperative nations and territories" (NCCTs) and indicated that if they did not cooperate adequately within one year, they would face countermeasures. In reality, almost immediately, the United States and other FATF members compelled financial institutions to strengthen their inspection of NCCT transactions, consequently impeding or, in some circumstances, effectively prohibiting most transactions from some of these countries.
When paired with other technologies such as machine learning and artificial intelligence, graph analytics provides a new way to comprehend the complicated patterns of money laundering involved in drug trafficking. These technologies have the potential to revolutionize society on several levels.
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