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How Money Laundering Practices Violate Financial Ethics

Corruption is one of the biggest problems a government can face. U.S. President Joe Biden has declared war on crime against money laundering. The latter include gray schemes for buying houses for cash and investing in offshore shell companies. According to Glink & Tamkin (2021), roughly a third of total U.S. home sales are cash transactions, as owners are reluctant to deposit embezzled money into bank accounts to avoid detection. In this blog, the author will explain how money laundering practices violate financial ethics. (week 10)

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Outsourcing to distant nations with significant time zone variations is referred to as the offshore concept. Investing in offshore firms with no financial reporting obligations or providing personal information about the owners is a standard money laundering method. Money that has been moved to offshore accounts cannot be found or accessed. Corrupt government officials frequently employ shell businesses to launder their ill-gotten gains in the real estate market. The distribution and management of money concept is a commercial activity in corporate finance that enables the buildup of capital. For better management, the finance expert is entrusted with tracking the company’s profitability and sources of money.

Interestingly, the government is encouraging insurance companies to report cash buyers, but this approach has not yet lived up to expectations (Glink & Tamkin, 2021). The Biden administration has promised to close legal gaps, strengthen anti-corruption agencies, and protect the media and investigative journalists to stop unethical financial practices (Wermus, 2021). While investigations like the Pandora Papers may expose government officials involved in bribery, the U.S. economy is too big to be completely controlled. (week 10)

Bribery is immoral conduct since it contributes to wealth disparity and helps corrupt regimes. Bribery should be pursued as a foul crime, even in nations where it is legal. Companies and governments should be viewed as moral entities entering into a social compact. Bribery and corruption, which create significant flows of instant money, cause considerable damage to the economy of the state and violate the principles of financial ethics. To be more precise, ethics must come from the core of the organization, and constant recourse to unethical practices can constrain the corporate governance structure. Even if the decision for evil actions comes from the top management, the entire management system will suffer (Bhasin, 2021). Moreover, such activities expose the company to the risk of litigation, disclosures, fines, and penalties. As a rule, some positions, such as accountants or financial advisers, involve the obligation to report violations of the law and financial fraud to the IRS or other organizations. Employees who inadvertently engage in corrupt practices may experience intense pressure to leave, resulting in increased employee turnover. (week 10)

Real estate is a favorite place for money launderers since there are no strict rules for buying and selling real estate. According to Glink & Tamkin (2021), there are more buyers than sellers in the U.S. housing market, leading to bidding wars. Because of the high prices paid for real estate, it is an appealing choice for criminal laundering funds. Criminals, for example, try to convert unlawful revenues into legitimate equity in real estate by paying down a mortgage with illegitimate cash. These financial transactions may include the purchase and sale of real estate.

Buyers do their best to secure rates, even if that means adding more funds. Real estate agencies may ask for proof of funding sources, which results in upfront payments to help close the deal. Ethics in finance determines what is right and wrong and protects the interests of all parties in financial relations. The practices described are unethical because they leave honest buyers with less money in a precarious and dependent position when they have to participate in gray market bidding (Bhasin, 2021). Just as importantly, cash payments, bank checks, and wire transfers used to conceal accounts provide corrupt officials with a reliable way to cash out and launder illegally acquired assets. (week 10)

Having studied the theories and concepts, it can be said that cash transactions are widely used in money laundering schemes. In many countries, corruption and waste of public funds are critical issues as governments impose sanctions on local and international trade. In my opinion, frequently bought assets such as real estate are the best examples due to high demand and a growing share of customers in local markets. These practices violate the rights of participants in financial relations and are unethical. The media have a social responsibility to report any suspicious schemes and expose those who use public resources for personal gain. (week 10)

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References

Bhasin, H. (2021). Ethics in finance – meaning, importance and Code of Ethics. Marketing91. Web.

Glink, L. & Tamkin, S. J. (2021). How does an “All-cash offer” work when buying a home? The Washington Post. Web.

Wermus, K. (2021). Treasury wants to regulate all-cash real estate deals to crack down on money laundering. Newsweek. Web.

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