Al Capone: The One Who Gives Us The Term 'Money Laundering'

Blog / Al Capone: Origin of the Term 'Money Laundering

Al Capone, known as Scarface, was born in Brooklyn in 1899. A member of various gangs, including his childhood, Al Capone was America's most famous organized crime leader from 1925 to 1931. 

On June 5, 1931, Capone was charged with tax evasion of 22 federal income taxes between 1925 and 1929. On June 12, Capone and his gang were charged with violating the law between 1922 and 1931. In October, he appeared on trial and was found guilty of three of 23 crimes. He was sentenced to a $ 50.000 fine and 11 years imprisonment. Capone, who spent many years in jail in various jails, was released on parole in November 1939. After his release, he moved to Florida and died in January 1947.

About Anti-Money Laundering 

Money laundering is the gaining of money obtained through illegal means as if it was obtained legally. Money laundering can be realized in a variety of ways. For example, Al-Cardone is a criminal who covers up his illegal money by purchasing laundry. 

According to the statements made by the United Nations Office on Drug Crime, more than $ 2 trillion of money is laundered each year. The series of regulations implemented by countries and governments to prevent money laundering is the greatest evidence in understanding the problem's seriousness. Also, many international organizations, such as FATF, constitute Anti-Money Laundering regulations. 

How the Term Money Laundering Originated? 

Al Capone is also known as the person who gave the term money laundering. Money laundering is not a new activity in our lives. However, it was because of Al-Capone that we knew it in terms of terms. Al-Capone has made the source of the money illegally obtained by buying laundries in cash invisible. Thus, the laundries he bought became a front for hiding the money he obtained through drug smuggling, prostitution, and tax evasion. 

Most gangsters, such as Al Capone, used laundries as a cover for money laundering activities because the amount of cash flowing into laundry operations was challenging to track. Thus, large sums of money could be processed in one go without being noticed.

Al Capone's Innovative Money Laundering Techniques

Al Capone was renowned for his ability to create sophisticated money laundering schemes that allowed him to hide the origins of his illegally obtained funds. One of his primary methods involved investing in legitimate businesses, such as restaurants, nightclubs, and breweries. These businesses served a dual purpose for Capone. On one hand, they generated legitimate revenue, providing him with a cover for his criminal activities. On the other hand, they acted as a means to launder his illicit funds.

By investing in cash-intensive businesses, he could commingle his illegal proceeds with legitimate earnings. This made it difficult for law enforcement agencies to trace the source of his wealth back to his criminal activities. The revenue generated from these businesses could be used to purchase assets, pay employees, and cover operational expenses, creating a facade of legitimacy.

Influence on Modern Money Laundering Techniques

Al Capone's money laundering techniques have had a lasting impact on the evolution of modern-day money laundering practices. Criminal organizations today continue to employ similar strategies to obscure the origin of their illicit funds and integrate them into the legal economy.

One key aspect of Capone's influence is the creation of complex financial networks. Like Capone, modern criminals establish intricate webs of shell companies, offshore accounts, and nominee directors to conceal their true ownership and control over assets. These structures make it challenging for authorities to follow the money trail and identify the ultimate beneficiaries of criminal proceeds.

Capone's use of offshore accounts as a means of hiding and moving money has become a prevalent tactic in modern money laundering. Offshore jurisdictions with lax financial regulations and strict bank secrecy laws offer a convenient avenue for criminals to stash their ill-gotten gains. By transferring funds to offshore accounts, criminals can further distance themselves from the illegal source of their money.

Furthermore, his investment in cash-intensive businesses as a means of laundering money is still utilized today. Criminal organizations often seek out industries that deal primarily in cash, such as casinos, real estate, and high-end luxury goods. By investing in these sectors, criminals can blend their illegal proceeds with legitimate transactions, making it harder to detect suspicious activities.

What Are The Stages of Money Laundering? 

  • Smurfing: Smurfing is the prevention of reporting and informing businesses obliged to provide continuous information and reports to authorized institutions. 
  • Layering: It is the second stage of the money laundering process. Illegal income is obtained at this stage, legitimate assets are purchased, and the laundered money is legalized and transferred. The layering can be repeated several times, and the income gains a little more legitimacy with each iteration. 
  • Integration: The integration stage is the mixing of revenues into a legitimate economy. In this way, the income takes on a fair appearance and is completely rid of its illegal appearance. 

However, no matter how long it goes, illegal income is never completely lost. It does not become legal. Because revenues are not lost, the source of crime income is more limited than ordinary income. Therefore, if the necessary precautions are taken early, the illegal money source can be detected quickly. 


How to Prevent Money Laundering? 

The globalization of the financial system and developments in the communication network has made it easier to hide the source of crime. Therefore, nowadays, it is inevitable to be more careful against money laundering activities and increase the severity of the measures taken.

The financial sector has more obligations to follow than before. Also, the globalization of crime means that the space for a criminal to commit a crime expands. Therefore, law enforcement authorities should be aware of and cooperate with all competent authorities' jurisdictions and powers.  

Technology offers financial companies many new solutions in the prevention of financial crimes. AML compliance software such as the Sanction Scanner helps companies prevent money laundering and terrorist financing crimes. 

With its AML solutions, Sanction Scanner aims for businesses to take measures against money laundering risks and financial penalties. With AML Transaction Monitoring, you can scan your customer's identity and transaction information and easily perform your Customer Due Diligence (CDD) processes in case of any risk. 

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