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Money Laundering

Forensic accounting firms have long been trying to crack down on money laundering.
Money laundering is simply the act of disguising the proceeds of illicit activities in an attempt to create legitimate money. Money laundering was first truly started back in the 1930’s during prohibition. It was during this time that money from the sale of forbidden alcohol illegally took place in legitimate businesses. The act of hiding this money evolved into the 1980’s during the war on drugs. This gave law enforcement another way to prosecute criminals. Money laundering can be broken down into three categories. First is the placement of money where illegal money is introduced to the legitimate financial system. This can take place in a multitude of types of businesses. The next step is considered “layering” where cash is tumbled through transactions with the intent to obscure where it originated from. Last is the integration process where the illegal funds actually begin to acquire legitimate wealth.

There are several subcategories of money laundering that exist as well. Tax evasion and threat financing are just a few of the main subcategories that concern forensic accounting firms. Threat financing refers to terrorist financing. Professional forensic accountants gather
evidence that allows them to detect weaknesses in financial institutions. Expert forensic
accountants are able to follow paper trails left by money launderers and are excellent at
“reading between the lines” of the information provided. These skills allow forensic
accountants to spot potential red flags and to investigate further.

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