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Irrespective of any definition, three principles establish the "general theory of relativity" with respect to money laundering, and they are placement, layering, and integration and it is against these concepts that the impact of this new legislation (C-22) should be considered. Placement is the stage at which possession of the proceeds of crime and the detection of money laundering is most vulnerable, and it is marked by activity designed to structure financial transactions under any legislatively established threshold. This is accomplished through the use of automated banking systems, front companies, asset or monetary instrument purchases, use of nominees, co-mingling, currency exchanges, and currency smuggling just to mention a few. Successful criminal organizations which focus on cash based crimes have an unusual problem, and that is the management of an inventory of currency. Imagine an environment where wealth-placement is the issue, not wealth acquisition. The result may be, and often is, the deliberate and irrational activity of incurring a financial loss for the purpose of disguising origin. The desired result may be a loss on investment, for the deliberate purpose of avoiding detection. Often cash in this environment is not counted - it is weighed! Margins of error of ten or twenty thousand dollars on the million are entirely acceptable, so as to ensure speed of transfer and security of concealment. Money laundering methods arising from vice crimes such as drug trafficking, prostitution and illegal gambling are commonly seen in legitimate cash based business venues, but it occurs in any industry or sector which permits the same good or service to appear to be sold more than once. Barber shops, hotel rooms, car parks, movie theaters, video arcades, and even vegetable and fruit stands, are all venues which can provide a good or service at a low marginal cost, and each have been used to justify an otherwise unexplainable volume of cash. Within the financial sector, placement is accomplished by the conversion of cash into other currencies, the establishment of accounts and simply the withdrawal of funds by some negotiable instrument. As financial institutions transfer transaction risk to the institution which accepted the deposit or issued the instrument, any access point to place cash into the system, is a risk point for laundering purposes. An example is a casino where a player plays at some minimal level, and then cashes out the currency he or she came with to a cheque. |