But this narrow definition masks the fact that the
bulk of money laundered is the result of tax evasion, tax avoidance,
and outright tax fraud, such as the "VAT carousel scheme" in the EU
(moving goods among businesses in various jurisdictions to
capitalize on differences in VAT rates). Tax-related laundering nets
between 10-20 billion US dollars annually from France and Russia
alone. The confluence of criminal and tax averse funds in money
laundering networks serves to obscure the sources of both.
The Scale of the Problem
According to a 1996 IMF estimate, money laundered annually amounts
to 2-5% of world GDP (between 800 billion and 2 trillion US dollars
in today's terms). The lower figure is considerably larger than an
average European economy, such as Spain's.
The System
It is important to realize that money laundering takes place within
the banking system. Big amounts of cash are spread among numerous
accounts (sometimes in free economic zones, financial off shore
centers, and tax havens), converted to bearer financial instruments
(money orders, bonds), or placed with trusts and charities. The
money is then transferred to other locations, sometimes as bogus
payments for "goods and services" against fake or inflated invoices
issued by holding companies owned by lawyers or accountants on
behalf of unnamed beneficiaries.
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