Money Laundering/Terrorism Financing/Proliferation Financing PDF

**Chapter 1** ============= **Concept of Money Laundering/Terrorism Financing/Proliferation Financing** =========================================================================== **1.1 Money Laundering** ------------------------ The word 'Laundering' though has positive connotations, in the cont...

**Chapter 1** ============= **Concept of Money Laundering/Terrorism Financing/Proliferation Financing** =========================================================================== **1.1 Money Laundering** ------------------------ The word 'Laundering' though has positive connotations, in the context of financial sector, Money Laundering or asset laundering indicates criminal activity and subject to harsh punishment in most of the jurisdiction. In today's world, there are number of incomes generating sources legal or illegal. For making the world better, government and financial service providers have placed a mechanism to track cash and other financial transaction sources to identify whether it comes from legitimate or illegitimate source. Economic stability is regarded as a pillar for the long-term development of the economy. Price stability, external sector stability, and financial sector stability are all necessary for economic stability. Efforts to prevent money laundering and financial investment in terrorist operations aim to strengthen the economy and boost public confidence in it. Today, such an effort is recognized not only as an organization or a country, but as a worldwide effort. Nepal has also been working to avoid financial investments in money laundering and terrorist operations. It is difficult to put into place a single uniform and universal AML system because of political, religious and national implications from country to country. Money laundering and terrorist financing sometimes share transactional characteristics, primarily involving secrecy and disguise it from originality. ### **1.1.1 Key Concepts of Money Laundering** 'Money laundering' means to disguise illegally earned money to a legal channel. Furthermore, Money laundering is the illegal process of hiding the origins of money obtained illegally by passing it through a complex system of banking transfers or other financial transactions which misguide the illegally earned money to justify that was legally earned. In other terms, money laundering is the process of \"laundering\" money from a dirty source to a clean one by hiding its true source. It is connected to criminal activity like corruption, tax invasion, insider trading, bribery, as well as smuggling and sales of weapons. Additionally, there might be a connection to the funding of terrorism from these sources. Money laundering remains a widespread problem globally. Governments all over the world have taken their regular action to fight money laundering, with Preventive and punitive measures. The preventive measures require financial institutions to put AML/CFT systems in place to detect and report the suspicious transactions and activities. The healthy development of the financial sector will increase investment for sustainable economic development, which will aid overall economic development. When financial institutions mobilize resources for undesirable, illicit, and unlawful operations, not just the financial sector but the entire economy cannot attain the desired goals. Economic stability can be maintained by enhancing public trust in the financial system, supporting the legitimate sources of wealth acquisition and discouraging illicit sources. ### **1.1.2 Stages/Process of Money Laundering** Money laundering occurs when illegally acquired property enters the financial market through deposit, insurance premium, or another instrument, circulates through the financial system, purchased property, or used for any other purpose in order to get legitimacy. Generally, the person involved in illegal asset consolidation in his/her attempt to launder the first stage would be illegal assets (money) to be infiltrated into the financial system (*Placement*), and then spreading such assets through various tools (*Layering*) finally, this money is use as a legal income (*Integration*) in a stepwise manner. *Step 3. Integration* While practicing, these stages may overlap or be repeated according to the situation. **What is placement in money laundering?** Placement is the first stage of money laundering, where illegally earned money is injected first time into the financial system. The placement stage of money laundering involves the physical introduction of cash or other assets derived from illegal activity into the financial system. Some of the technique used by are: 1. **Purchasing insurance policies with illicit funds:** Criminals may choose to use illegally obtained funds to purchase insurance policies, thereby introducing the funds into the insurance industry. They may also intentionally overpay premiums to receive a legitimate insurance policy and later request a refund of the excess amount. 2. **Premium financing:** Criminals may acquire loans or financing from legitimate insurers on the collateral of insurance policy that may be used to pay for insurance premiums. By doing so, they are able to place illicit funds into the insurance industry while making it appear as if the financing was obtained for legitimate purposes. 3. **Fronting:** Criminals may establish fraudulent insurance policies using illicit funds, making it appear as if the insurance policy is held by a legitimate business or individual. By doing so, they are effectively placing illicit funds into the insurance system. 4. **False claims:** Criminals may create fictitious claims or inflate the value of actual claims in order to receive insurance payouts. This allows them to introduce illicit funds into the system under the guise of legitimate insurance claims. 5. **Collusion with insurance agents:** Criminals may collude with insurance agents to manipulate the underwriting process, allowing them to secure insurance policies using illicit funds. Through this collaboration, they can place their illegally obtained funds into the insurance industry. It is the most vulnerable stage, so the chances of being caught on fraudulent financial activity are highest. The goal of Placement in Money Laundering: - To hide the source of illicit money - To distance the money from its illegitimate source - To introduce illegally earned money into the financial system **What is layering in money laundering?** After placement layering is practiced hiding illegal money by adding multiple layers to the proceeds of criminal income to avoid the detection of its actual source. Layering is the process of moving money from one account to another, as well as from one financial institution to other, in order to add layers of lawful owners, escape detection of the true source of the funds, and make it more difficult for authorities to track down the original source of the cash received. Insurance professionals play a crucial role in detecting and preventing financial crimes, including money laundering through identifying layering techniques. As part of their responsibilities, insurance professionals need to be aware of the methods criminals use to introduce illicit funds into the insurance industry. Here are some examples of how criminals may utilize layering in the insurance sector: 1. **Policy premium layering:** Criminals may use multiple transactions involving different accounts or financial institutions to pay for insurance policy premiums. By moving funds through various channels, they can create a complex web that makes it difficult to trace the true origin of the funds. 2. **Policy Loans and Surrender:** Another typical example of Layering in insurance sector is Launders tend to obtain loans on the collateral of existing insurance policy and purchase a new insurance policy. They may be willing to take multiple insurance policies in the name of family members and close associates. Similarly by surrendering the existing insurance policies, they may subscribe a fresh insurance thereby making the money trail complicated. 3. **Cross-border layering:** Criminals may exploit differences in international regulations and jurisdictions by moving funds across borders to purchase insurance policies in different countries. This allows them to further obfuscate the true source of the funds and complicate the tracking process. 4. **Reinsurance layering:** Criminals may set up sham reinsurance policies or create convoluted reinsurance arrangements to launder illicit funds. By layering transactions within the reinsurance market, they can further mask the true source and ownership of the funds. 5. **Premium financing layering:** Criminals may utilize loans or financing arrangements, potentially involving multiple intermediaries, to pay for insurance premiums. This layering technique adds complexity to the transaction and makes it harder for authorities to trace the funds back to their original source. 6. **Fraudulent claim layering:** Criminals may manipulate claims processes by creating multiple fictitious claims or using various intermediary entities to receive insurance payouts. Through this layering of claims, they can further distance the illicit funds from their original source. By actively identifying the typologies of layering of illicit funds in the sector, insurance professionals contribute to maintaining the integrity and trustworthiness of the insurance industry. **What is integration and repatriation in money laundering?** During this final stage, the money laundering process ends by mixing illegal earnings to legitimate earnings so, that it's difficult for authorities to separate the legally or illegally earned. Once the illegally earned money has been mixed with the regular funds, criminals can use it normally without raising any suspicion about its origin from the authorities. This makes us clear that the primary purpose of the integration stage of the money laundering process is to enable the launderers to mix illegal funds with their legitimate funds, from where they can use this illegally earned money for personal benefits without drawing the attention of the regulatory and investigative authorities. **Example:** Multiple account and person were involved, Cross borders transaction, Limited value transaction, Buying and selling of property and companies, Buying and selling of foreign currency etc. One example of integration in the insurance industry could involve a criminal using illicitly obtained funds to purchase an insurance policy. The criminal might set up a shell company or use a front person to apply for the policy, obscuring the true identity of the beneficiary. Once the policy is purchased, the criminal can then make regular premium payments using the illicit funds. These payments would be mixed in with legitimate premium payments from other policyholders, making it difficult for authorities to trace the origin of the illicit funds. Upon the maturity or termination of the policy, the criminal can receive a payout from the insurance company, which would now consist of a mixture of legal and illegal funds. This payout can then be used for personal benefits without raising suspicion. Another way criminal can integrate illicit funds in the insurance industry is through fraudulent claims. They may fabricate accidents, injuries, or losses and then submit claims to insurance companies. By doing so, they convert their illegal funds into legitimate insurance payouts. In conclusion, understanding the stages of money laundering is important for effective anti-money laundering practices by using advanced technology, collaboration with financial companies and tracking citizen's financial data and property by the concerned local government are imperative to combat this illicit financial activity. ### **1.1.3 Impact of Money Laundering** Money laundering has a negative impact on economic development. Money laundering is a serious threat to country economy and respective government plan and policies. The entrance and saturation of dirty money in legitimate financial sectors and national accounts could damage economic and political stability. It is difficult to describe the negative impact of money laundering but it is clear that such activity has negative impact on economic growth of country, reduces productivity of real sector by diverting resources and increase in criminal activity and corruption which directly or indirectly impact the long --term economic development. **Figure 1: Impacts of Money Laundering** Impact of money laundering.jpg**Financial Sector:** Money laundering damages financial sector by changing the assets and liabilities that are unknowingly used, which will create a risk for the institution. Due to involvement in the money laundering process the reputation of financial institutions will deteriorate and it also changes the aggregate profit of the institution. Money laundering raises the economy\'s inflation rate when there is a lack of money flow. 1. **Economy:** Money laundering directly hinders a nation's economic growth by weakening financial institutions, which promotes economic inequality and results in a loss of revenue generation for the national budget. It also undermines the confidence of the legitimate private sector, impacts foreign direct investment and grants, and is detrimental to international trade relations, including reinsurance placement. Additionally, money laundering creates unfair competition, disrupting investments within society. Consequently, both consumption and savings are negatively affected, disturbing the regular economic cycle. 2. **Society:** Money laundering provides fuel to terrorist, drug traffickers, illegal arms dealers and other criminal groups which will support criminal activities in society. Due to which, there is increase in income inequality on the society. 3. **Politics:** Money laundering decrease the reputation and trust of the financial sector which directly affect aggregate national economic system. It increases the corruption and bribery in the public sector that undermines the political institutions which will impact on the election process. Because of the economic crisis the government have to increase taxes used in national consumption. 4. **International Relations**: It has also negative impacts on the nation's diplomatic relations. In modern interconnected globalized system, it is very difficult for a nation to survive in isolation. As a member to civilized society, member to United Nations and other regional intergovernmental organizations, Nepal has a duty to implement its international obligations. So unrestrained money laundering and financial crimes have serious impacts in its diplomatic relations and causes a serious reputational loss at international forums. **1.2 Terrorism Financing** --------------------------- In global scenario, earnings from criminal activities such as corruption, extortion, drug, arms trafficking and kidnapping for ransom continue to be a major source of money for terrorists and terrorist's groups. So that, terrorism financing is the act of providing financial help to terrorists or terrorist organization in order for them to carry out terrorist activities or to benefit any terrorist or terrorist groups to legitimate their illicit earning. ### **1.2.1 Key Concepts of Terrorism Financing** Financial support provided to terrorist organizations or individuals to facilitate their terrorist activities is known as terrorism financing. Similar to the concept of money laundering, there are generally three stages in terrorism financing: raising, moving and using fund. The way of terrorism financing is similar as money laundering but in some case, it is identical to the methods used to money laundering. In both cases, the criminal aims to use the financial or non- financial sectors for illegitimate purposes. It is important to note that a distinction exists in the nature of the two offences are separate in character: - In money laundering - the cash involved must be the result of illicit activity. - In terrorist financing - the source of funds, this might be legitimate or illicit. *''Any person knowing that a terrorist person, a terrorist organization or a foreign terrorist fighter is or may be used in whole or in part in a terrorist activity, voluntarily, with unlawful intent, directly or indirectly, by any means, to such person or organization. Must not provide or collect property or funds*"- Money Laundering Act, 2064 (Amendment, 2080). ### **1.2.2 Overview of Terrorist Organizations and Their Financing Needs** Terrorist is a person who uses unlawful violence and intimidation, especially against civilians, in the pursuit of political, religious, ideological or financial aims. Terrorism is defined as: - \"*the use or threat of action designed to influence any Government or the general public, for the purpose of advancing a political, religious, racial or ideological cause.\" (Terrorism Act 2000)* There are mainly two categories of terrorist organizations: a. **International Terrorism:** Violent, criminal acts committed by individuals and/or groups who are inspired by, or associated with, designated foreign terrorist organizations or nations (state sponsored). b. **Domestic terrorism:** Violent, criminal acts committed by individuals and/or groups to further ideological goals stemming from domestic influences, such as those of a political, religious, social, racial, or environmental nature. The reasons for establishment of Terrorist organization are complex. Some terrorist organizations are motivated by a desire to destabilize a government or gain independence for a specific group of people. Others are motivated by religious extremism or hatred for a specific group of people. Terrorist organizations establish a significant threat to global security. They have the potential to claim death and destruction; they can also generate fear and uncertainty. Understanding the characteristics of terrorist organizations is critical for combating their threat. Basically, we can say that the illegal and unlawful activities done by any organization in society is known as terrorist organization. Whose mission and vision are to spread violence and intimidation to the society to get political, religious, ideological presence. Terrorist organization need fund for their logistics, recruitment and training, propaganda and recruitment materials, bribes and corruption, maintaining support networks, strategic investments, infrastructure and communications, international operations, attacks, maintaining control over the criminal society and other day to day operation. For the fulfillment of their financial need terrorist organizations basically fund themselves through variety of illegal method for regular income source, such as: extortion and protection rackets, kidnapping and ransom, drug trafficking, arms trafficking, robberies of financial institutions, foreign currency trafficking, cybercrime, state sponsorship, donation and charity from same kind of other organization, black market as well as other newly introduced method as per the economic environment of the society. ### **1.2.3 Importance of Combating Terrorism Financing** Combating terrorism financing is essential for national and global peace and security by protecting financial system and maintaining economic stability. It is complex to understand the terrorist financing but with the disturbance in financial lifelines, we can make it significantly difficult for terrorist organizations to operate, which result decrease in terrorist activities in our society. Combating terrorist financing is important for several reasons such as: - **Disruption of recruitment:** Cutting off money supply reduces terrorist capabilities. - **Promotion of global security:** Weakening terrorist organizations enhances global security. - **Protection of financial systems:** Making it harder for criminals to launder money helps maintain economic stability. - **Government action:** By targeting terrorist financial systems, governments can weaken terrorist groups and enhance security. - **Reduction of violence:** Decreasing the number of terrorist groups leads to a reduction in violence. - **Public confidence:** Active government efforts to prevent terrorism increase public confidence and a sense of safety Combating terrorism financing requires a multifaceted method including regulatory measures, international cooperation, exchange of Financial Intelligence, Sanctions and Asset Freezing and public -- private partnership. Implementing an effective Combating terrorism financing method helps institutions avoid fraud and financial losses. Proper client identification methods and determination of beneficial ownership provide specific due diligence for higher risk policies and allow for monitoring of suspicious activity. Prudent internal controls ensure a financial institution\'s safety and good operation which result increase public trust in financial institutions. Strong Combating terrorism financing regimes discourage illegal activity in the economy. This allows investments to concentrate on fulfilling consumer requirements and help to increase the productivity of the overall economy. **Specific Role of the Insurance Industry in combating Terrorism Financing:** **Life Insurance Policies:** Terrorists may purchase life insurance policies to use as collateral for loans, which are then used to fund terrorist activities. They may also make false claims to receive payouts. **Property and Casualty Insurance**: Insurance fraud, such as false claims for damages, can be used to generate funds. **Health Insurance:** False claims can be made to cover medical treatments for injured terrorists. **Reinsurance:** Complex reinsurance structures can be manipulated to obscure the origin of funds and facilitate the movement of illicit money. **Personal Accident Insurance Policy or a high value Life insurance Policy of a terrorist fighter or a suicide bomber**. The insurance claim amount may be used as compensation to the family members or to fund the further terrorist activities. **Example of Terrorist Financing in Connection to Insurance** A known case involved a terrorist group that purchased life insurance policies for its members. Upon the death of these individuals, the beneficiaries received the payouts, which were then funneled back to the terrorist organization. This method provided a legitimate cover for transferring large sums of money. In another instance, a terrorist organization staged a fake accident to claim a large payout from a property insurance policy. The funds were then used to finance a series of attacks. These examples highlight the vulnerabilities in the insurance industry that can be exploited for terrorism financing. ### **1.2.4 Impact of Terrorism Financing** Terrorism financing has a far-reaching influence on many aspects of global civilization. Effective countermeasures need strong international collaboration, strict regulatory frameworks, and constant adaptation to terrorist organizations shifting methods. The global community can reduce the threat and improve global peace and security by addressing the underlying causes and channels of terrorist financing. Terrorist financing has far-reaching negative consequences for individuals, economies, and international relations. Here\'s an overview of some significant areas: 1. Economic impact 2. Societal impact 3. Political impact 4. Reputational damage to legitimate organization 5. Decline in physical and emotional health of public 1. **Economic Impact:** Terrorist financing has significant negative impact on both national and international as well global economy. Terrorism financing directly or indirectly effect economic system in different horizon like: infrastructure damage, loss of human life and injury, reduce foreign direct investment, decline of tourism sector, increase security cost for government as well as long term impact on economic recession and international trade. Addressing these effects require a multidimensional approach that includes strong financial laws, international cooperation, and investments in economic and social resilience. 2. **Societal Impact:** Terrorism Financing has a broad Socioeconomic impact on various aspects of community, Social and overall wellbeing of the people living in these societies. Due to the terrorist attack, there is not only loss of life but also effect psychological Trauma of living people, erosion of trust, Reduced sense of security, increased polarization, decrease freedom of people, Impact on education, impact on social activities, increase migration and refuges rate as well as number of other social aspect of people. Overall, terrorism financing weakens the social structure and quality of life. So, combating terrorism financing is not only important for economic reason but also for safeguard the overall wellbeing of the society and promote social cohesion. 3. **Political Impact:** The impact of terrorism on politics is complex and varies depending on the context but in general, terrorism makes complicated and difficult by a variety of factors including legislation, international cooperation, political stability and international relationship and geopolitics, democratic practice and election on the way's terrorist organization raise, move and utilize funds. Government and international organizations must constantly adjust their methods to successfully address the changing nature of terrorist financing. So, we have to develop more effective strategies to combating terrorism financing and weaken terrorist organization by our regulatory authority. 4. **Reputational damage to legitimate organization:** In association with terrorist finance could adversely impact legitimate firms' reputation, impacting trust, financial performance, regulatory status, employee morale and long-term strategic goal. Proactive and planned steps are required to reduce the effects and safeguard the organization reputation. Otherwise, it takes years to recover the bad image developed in public perception. Overall, a lawful organization may suffer greatly from reputational loss resulting from terrorist money laundering process. It can lead to financial hardship, operational challenges and long-term recovery process for the organization. 5. **Decline in physical and emotional health at public:** Those public who was not directly involved in and terrorist activity can also suffer from the attack can negatively impact on the physical and emotional health of the public. Due to the victim of the terrorist attack people suffer from different stage such as: Increase anxiety and fear, general psychological distress, physical health problem, long term emotional issue and tension, cause of depression and post-traumatic stress disorder. In conclusion, the impact of terrorism has a negative impact on the health and safety of individuals and society**.** **1.3 Proliferation Financing** ------------------------------- ### **1.3.1 Key Concepts of Proliferation Financing** In order to improve their capacity to develop chemical, biological, radiological, and nuclear (CBRN) weapons, aggressive and destabilizing \"proliferation actors\" may use funds or financial services known as \"proliferation financing\" (PF) to acquire materials, components, data, technologies, and expertise. This concept is crucial for understanding how money and resources are misdirected to promote actions that are normally prohibited by international treaties, agreements and rules. International forum like the UN Security Council and the Financial Action Task Force (FATF) have recently determined that there is a greater chance of such proliferation groups feasibly getting CBRN weapons. Disrupting the financial flows, financing sources, and financial service accessibility that proliferation actors rely on to obtain CBRN weapons is therefore very important. Member nations implement the principles and criteria that the Financial Action Task Force (FATF) has created for combating proliferation financing. **Connection to the Insurance Industry** The insurance industry can be exploited for proliferation financing in several ways: - **Trade Credit Insurance:** Used to finance the procurement of dual-use goods that can be diverted for use in WMD development. - **Marine Insurance:** Policies covering the shipment of goods may be exploited to transport prohibited materials or technologies. - **Life Insurance Policies:** Used as a vehicle for laundering funds that could be redirected to proliferation activities. - **Property Insurance:** Claims may be falsified to generate funds for proliferation activities. - **Casualty Insurance:** Policies could be manipulated to cover losses incurred during illegal activities related to proliferation. - **Reinsurance:** Layers of reinsurance can be used to obscure the true origins of funds, making it harder to track illicit financing. ### **1.3.2 Importance of Understanding Proliferation Financing** Understanding proliferation financing is critically important for several reasons to stop the spread of WMDs and safeguard global peace, security and stability. 1. **Hindering WMD Development**: By interrupting the financial support system, it becomes more difficult to spread terrorism. 2. **Supporting National and International Security:** Proliferation financing poses financial threats to terrorist organizations. 3. **Compliance with International Obligations:** Ensuring adherence to international regulations such as UNSCRs and FATF recommendations. 4. **Stabilizing Economic Environment:** Preventing legitimate businesses from being infiltrated by illicit actors. 5. **Reducing WMD Acquisition:** Protective steps can reduce the possibility of terrorist organizations acquiring WMDs, preventing catastrophic attacks. 6. **Promoting International Collaboration:** Strengthening information exchange between regulatory agencies and financial institutions enhances efforts to combat proliferation threats. 7. **Adapting to New Trends and Technologies:** Staying updated on proliferation financing trends enables regulatory authorities and financial institutions to proactively mitigate risks. Understanding proliferation financing helps to measure the risk of national and international security threat from illicit organization and prevent legitimate business organization from terrorist group helps to stabilize global economy. **Specific to Insurance Industry:** 1. **Risk Assessment and Underwriting:** Insurers must develop robust risk assessment frameworks to identify potential red flags associated with proliferation financing. 2. **Client Due Diligence:** Implementing enhanced due diligence processes for high-risk clients and transactions helps in identifying and mitigating proliferation financing risks. 3. **Claims Monitoring:** Continuous monitoring of claims for unusual or suspicious activity can prevent the misuse of insurance payouts for proliferation activities. 4. **Training and Awareness:** Regular training programs for insurance professionals on proliferation financing risks and red flags ensure a knowledgeable workforce capable of identifying and reporting suspicious activities. 5. **Collaboration with Regulatory Bodies:** Active collaboration with regulatory authorities and sharing of information regarding suspicious activities strengthens the overall fight against proliferation financing. **Example of Proliferation Financing in Connection to Insurance** A known case involved a proliferation network that utilized trade credit insurance to finance the procurement of dual-use goods, which were later diverted for the development of nuclear weapons. The use of legitimate insurance products provided a cover for illicit activities, illustrating how the industry can be misused. Another instance involved marine insurance policies covering the shipment of materials later found to be components for WMDs, showing the critical need for vigilant monitoring and reporting within the insurance sector. ### **1.3.3 Impact of Proliferation Financing** Proliferation finance directly and indirectly impact on global security, national- international economy and international relations. By recognizing and tracking the effect of proliferation financing, International community will be more secure and stable. The key impacts are as: 1. Global security threat 2. National and International economy 3. International relation 4. Regulatory and compliance requirement 5. Humanitarian Concerns 1. **Global security threat**: Proliferation financing support for the development of terrorism and extremism organization which increase the risk of WMDs (Weapons of mass destruction) results to catastrophic loss by terrorist attacks. 2. **National and International economy**: Proliferation financing affects the integrity of the national and international financial system because financial institutions may unintentionally act as conduits for illicit funds. Countries involved in proliferation financing will face international sanctions, economic isolation and hardship. 3. **International relation**: Countries that are found to support proliferation financing will face interruption in diplomatic relation with other countries. It directly or indirectly weakness the agreements and treaties among the member nation. 4. **Regulatory and compliance requirement**: Proliferation financing affect the national and international regulatory and compliance requirement. Such as United Nations Security Council, FATF, Nepal Rastra Bank (Financial Intelligence Unit), Nepal Insurance Authority and other related regulatory body. 5. **Humanitarian concerns**: Proliferation financing helps terrorist organization to spread WMDs (Weapons of mass destruction) activities which can cause widespread death, injury, and displacement. By Nuclear war and chemical attacks harm long term health effect and environmental damage. **Infamous money launderers: Pablo Escobar ❄️** 🇨🇴 Born in Rionegro, Colombia, in 1949, Pablo Emilio Escobar Gaviria came from modest beginnings.Before stepping into the world of crime, he worked as a car salesman and a bodyguard. However, his ambition soon led him down a darker path. \ 📦 Escobar\'s illegal activities began in the early 1970s, initially involving theft and smuggling. By the late 70s, he had pivoted to drug trafficking, founding the Medellín Cartel. One of the largest criminal empires the world has ever seen, built on the global cocaine trade. 😶🌫️ He managed to export vast quantities of cocaine to the US and Europe. To do so, he was using an extensive network of smugglers, politicians, and law enforcement officials. He also pioneered the use of submarines and planes for transportation. ⚙️ Here are some techniques that Escobar used to launder money: 📌 Cash smuggling: Large amounts of cash were smuggled into Panama, where it was deposited in banks. 📌 Bank complicity: Banks in Panama and the Caribbean were accepting large cash deposits, thanks to bribes and corruption. 📌 Real estate investments: Properties in Colombia, the US, and other countries not only served as investments but also as storage sites. 📌 Front businesses: Legitimate businesses, including taxi companies, were used to mix illegal earnings with legitimate income. 📌 Shell companies and offshore accounts: These companies, conducting transactions that appeared legitimate, were used to disguise the origins of his funds. Offshore bank accounts helped obscure the money trail further. 📌 Currency exchange: By converting funds into local currency, and then moving them out again, he cleaned large amounts of money. 📌 Trade-based money laundering: This involved over or under-invoicing on trade transactions to move money across borders. 📌 Precious metals and art: Investing in these, Escobar converted drug money into assets that were easier to move and less likely to attract attention. 🚨 The pursuit of Escobar involved coordinated efforts by Colombian and US authorities, including the DEA. Innovative tracking techniques and extensive surveillance were employed to dismantle his network. Escobar was eventually killed in 1993 in Medellín, after his escape from La Catedral prison. ⚖️ Escobar\'s activities highlighted the need for stricter AML laws and task forces to combat narco-terrorism. Billions in assets acquired through drug trafficking were seized or frozen worldwide. Efforts to recover his hidden wealth continue to this day, with discoveries of cash and assets periodically reported.