Money laundering is the process by which cash or other liquid assets that are earned by illegal means are filtered or laundered through the financial system. The market for laundering money has been estimated to be as high as $500 billion annually, even though there are serious efforts made by anti-crime government agencies and the financial services industry to stop these illicit activities.

Standard Chartered
Lately, a number of high profile companies have become embroiled in allegations that their businesses have either helped facilitate money laundering, or haven't gone far enough in stopping the activity. Most recently, the New York Department of Financial Services (DFS) accused British-based bank Standard Chartered (OTC:SCBFF) of helping facilitate the laundering of as much as $250 billion in Iranian funds. The accusations were far reaching and alleged that Standard Chartered kept false records of its activities, allowed these illegal activities to occur for at least a decade and did so through letting the assets flow through its banking services as illegal wire transfers.

Rather than fight the charges in court, Standard Chartered chose to settle with the DFS for an estimated $340 million. There are still remaining allegations that it may have helped facilitate similar activities in Sudan. Additionally, other regulators, including the Federal Reserve, Justice Department and Treasury in the United States, as well as international financial regulatory bodies, are still investigating.

HSBC (NYSE:HBC), another British-based bank, has also recently been the subject of a money laundering scandal. It recently apologized for having lax compliance procedures to detect and prevent money laundering activities. The illicit activities were said to have included laundering by drug cartels and terrorists and have resulted in the resignations of a number of HSBC executives, including the head of its compliance department. These funds were alleged to have filtered through Mexico, Syria and Iran, and were supposedly laundered in places including the Cayman Islands.

The detailed activities included the transportation of billions of dollars of cash, the clearing of more billions in travelers' checks, and allowing drug lords to purchase airplanes and related assets with their ill-gotten gains. Mexico fined HSBC around $30 million and the bank set aside $700 million to help pay what could be more than $2 billion in eventual fines for failure to prevent money laundering through its various businesses and international locations.

Las Vegas Sands
Casinos deal with billions of dollars of cash on a daily basis and, therefore, have also been ideal places for organized crime and other illegal organizations to launder their funds. Casino giant Las Vegas Sands (NYSE:LSV) is currently the subject of a money-laundering probe. The investigation centers on its helping a Mexican drug trafficker funnel millions of dollars in drug money through its casinos. Another large gambler from China also supposedly used its casinos to launder funds and is under investigation. In addition, Las Vegas Sands is being investigated for allowing bribes to take place as it opened casinos in Asia.

The company currently operates casinos in Macau and Singapore and is in the works to open additional casinos in the region, pending the outcome of these investigations and approval from other local governments.

The Bottom Line
The extent of the money laundering activities at the above companies is still being uncovered. At the very least, it has served as a warning to other financial services firms and casino-based operators to ensure they are doing all they can to help prevent money laundering. It is highly doubtful that money laundering will ever be completely eliminated, especially when cold hard cash is involved. The digital tracking of wire transfers and other electronic activities could likely be improved, but those overseeing illegal activities also continue to be creative in finding ways to filter their illicit gains into legitimate assets.

Disclosure: Ryan C. Fuhrmann has been long HSBC since 2010.

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