What is Money Laundering?
Money Laundering is the process of making dirty money “clean”.
Dirty money is money obtained directly from criminal activities. For example - theft, extortion, prostitution, drug or human smuggling – basically any activity that someone may wish to hide from authorities.
Since having piles of dirty cash lying around is extremely difficult to use, there needs to be a process where this dirty money becomes validated. An effective way of laundering a lot of money is to move them around via shell corporations, businesses and complicated banking set-ups.
This is what the former president of Ukraine, Viktor Yanukovych, did:
He deposited money in a bank account at Swedbank, the origins of which are unknown. However, what is known is that Yanukovych was implicated during his tenure as President of Ukraine for corrupt practices and his involvement in a war that killed over 10,000 people between Russian supporters and the Ukrainian government, and ultimately sentenced to 15 years in prison. He is presumed to have made millions due to illegal and corrupt practices, and these millions he needed to hide somehow. Hence he moved money from his Swedbank account to another account in another country.
He continued to transfer funds and, via a company called Vega Holding Limited which had an account with Swedbank in Lithuania, Yanukovych transferred 3.7 million euros ($4.2 million) through the Swedish lender in 2011.
Swedbank was also used by Russian oligarch Iskandar Makhmudov, who transferred at least 1.4 billion euros through a network of at least 20 accounts at Swedbank. The transfers were made by Carbo One, which is registered in Cyprus and alleged to be linked to Makhmudov.
If no one at any of the banks bothers to check the details of how the cash was originated and by whom, and by continuously moving the money throughout the world and within the banking system, dirty money gradually became “clean”.
All banks are obligated to be extremely aware of warning signals of this kind of behavior via strict “AML” (Anti-Money Laundering) Regulations.