Illegal Drug Use_Illegal Prostitution_and Money Laundering_Anderson_Richard

Illegal Drug Use, Illegal Prostitution, and Money Laundering 1
Illegal Drug Use, Illegal Prostitution, and Money Laundering
Richard W. Anderson
American Public University System
Professor Dena Weiss
CMRJ303
12 April 2015

Abstract
The purpose of this research paper was to look into the implications of illegal drug use, illegal
prostitution, and money laundering in America and Western society in general. Details are noted
as to illegal drug trafficking penalties, the effect of hard drugs on relationships, and drug use as it
pertains to those incarcerated in an American prison or jail. Street prostitution has presented
serious observable side effects, and new programs focusing on the buyers have been instituted in
some cities. Money laundering is a global issue, and there is information on how it is performed
in today's high-tech world, where the money goes, and a basic idea of how much is being
laundered. Illegal drugs, prostitution, and money laundering have a detrimental effect on
society. Programs developed based on empirical evidence discovered through research need to
continue, in hopes to at least limit these three detrimental aspects of our modern day societies.

Illegal drug use, prostitution, and money laundering are serious problems in America and
the world in general. Illegal drugs are clearly defined in America's penal codes, and an
understanding of the consequences of their use include violence, difficulties between domestic
partners in holding down their relationships effectively, and contribute to the hundreds of
millions, perhaps billions, of dollars funneled through the global money laundering scenario.
Prostitution and human trafficking are equally disastrous aspects of the modern day human
condition. Street prostitution has particularly disastrous effects on young women who, by their
own accord or through trickery, evolve into persons taking enormous risks for the rest of their
potentially short lives to earn money for daily existence. Money laundering is a large scale
hindrance on manageable and predictable economic growth. The modern day world of high-tech
has allowed huge sums of money, earned illegally, to circulate unaccounted for, do not
contribute to the infrastructure tax base, and eventually result in legal assets. If society is to
continue in a reasonably safe environment for everyone to participate in and enjoy, an
understanding of the processes of illegal drug use, prostitution, and money laundering is
essential.
Illegal Drug Use
The modern age of illegal drug use has many challenges. First off, there is a tremendous
desire for substances listed under the Schedule I category, those few substances which are
deemed of no medical value to society and have a high susceptibility to be abused. These drugs
include heroin, LSD, methaqualone, and in most states marijuana. The exception marijuana for
recreational use has been approved at the state level in Colorado, Washington State, and Alaska.
Under the next level, Schedule II, are listed substances which have been accepted as having

some medical use but are accompanied by restrictions due to their capacity to induce
psychological and physical dependency. These substances include cocaine, opium,
amphetamine-laced products, and most barbiturates. The Schedule III-V drugs are considered
low on the possibilities for abuse and have medical applications, and are therefore not subject to
the standing as illegal (Saferstein, 2013, p. 268).
Currently there are stiff penalties for illegal drug trafficking, sales, and possession of
illegal drugs. A first time offense in trafficking Schedule I items can result in a sentence of up to
20 years in prison, accompanied by a $1 million dollar fine. In addition, the use of designer
drugs - drugs slightly altered from original compositions - has caused further concerns.
According to the regulations laid down in the Controlled Substances Act, chemicals that are
close to the structures of the originals in the Schedule I category will be looked upon, for
negative sanction's sake, the same as the original (Saferstein, p. 269).
Illegal drug use has been shown to be detrimental and contributory to the breakdown of
the family in America, particularly where hard drugs such as heroin, crack cocaine, and
powdered cocaine are concerned. In a study performed by Golub, Dunlap, and Benoit (2010), it
was demonstrated that hard drugs and violence were integral to the breaking up of partners in
their relationships. After surveying a group of African-Americans, it was found that those
individuals who were adolescents during the crack epidemic of the 1980s and 1990s experienced
aggressive language and physical altercations primarily over money problems and after the hard
drugs had been used up. Those partnerships that used marijuana as a primary drug of choice had
quite a different experience, and the drug actually seemed to have a pro-social effect on those
surveyed; they laughed more, enjoyed their time together, and appeared to be more desirous of

sex between one another (Golub, Dunlap, & Benoit, 2010, p. 331). Many of the hard drug users,
those who did not go to prison or become deceased, eventually gave up their habits due to
maturation (p. 336). Those who did end up incarcerated may have still continued some drug
abuse due to the stress of their confined environment.
According to a survey performed by McGrath, Marcum, and Copes (2012) of several
inmates recently paroled from a Midwest American prison, seeing violence occur increased the
likelihood that an inmate would be engaged in violence, and that both witnessing violence and
being violent one's self tremendously increased the likelihood of abusing alcohol and drugs
(McGrath, Marcum, & Copes, 2012, p. 60). Violence in prisons is a constant source of stress,
and prisoners who lack the coping skills necessary to avert confrontations, or lack an avenue to
learn said coping skills, are prone to abusing substances as an emotional way of compensating
for the stress they are experiencing. Some prisoners are amenable to picking up religious beliefs
as a way of coping; others simply remain volatile and use violence as a way of expressing
themselves when provoked. Anger, violence, and depression were all associates of the drug
abusing behavior (p. 66). In addition, those individuals who were in prison due to drug
violations, had violent cohorts in prison, and those who had spent more time in prison, thus
experiencing more violence, were prone to drug abuse while incarcerated.
Illegal Prostitution
The long history of illegal prostitution has been glamorized, demonized, tolerated, as well
as having been the cause of many a fallen flower. But this view of demoralizing the female
prostitute is changing, as well as the view of the male involved. Historically, female prostitutes
have been viewed as, for lack of a better term, the evil person where solicitation of sex has been

regarded. There is, however, a turn toward seeing their victimization side from sex-for-profit
lifestyle. Many young women have been either tricked into going along with someone who
promised legitimate work, only to find themselves servicing men at an unimaginable pace, or
noting other women making money from their temporary engagements (married tonight,
divorced in the morning) by offering themselves up for a fee to pay rent, buy food, support their
families (Adler, 2013, p. 339), or even buying illegal drugs. The male human has stereotypically
been touted as virile, needing sex, and to purchase it was simply a man's way, but that view is
also changing (Gurd & O'Brien, 2013, p. 149).
Following Sweden's lead, America is focusing more attention on the buyer of sex rather
than the seller. The term "John School" has been added to the social correction side of
prostitution by dealing with the concept of sexual addiction, particularly for men, in that sex for
payment, specifically street sex, should be reduced by educating men on the variety of harms
associated with it. Three programs in California have been developed to address the sex buyer-
offender; the First Offender Prostitution Program (FOPP), San Francisco, begun in 1995; the
Prostitution Abatement/Rehabilitation Program (PAR), Fresno, begun in 1998; and the Mid-City
Prostitution Taskforce, Prostitution Impact Panel (PIP), San Diego, begun in 2000 (Gurd &
O'Brien, 2013, p. 151).
The above mentioned programs focus on the fact that street prostitution effects many
individuals in society other than just the buyers and sellers of sex, and that current ways of
dealing with the problem are ineffective; arrests, fines, jail time, release, then the whole cycle
repeating itself. Instead, by focusing on the buyers of sex in an attempt to reduce the demand, to
some extent the main cause for street prostitution can be somewhat abated. Not all "Johns" are

eligible to attend the John Programs after arrest. They must have no previous criminal record of
consequence, and must not have had previous convictions for violent crimes. In addition, a
program attendance fee is assessed with consideration to the offender's income level, and the fee
is not to exceed $1,000 (Gurd & O'Brien, 2013, p. 152).
The street sex industry, as opposed to those quieter approaches to prostitution such as
massage parlors and escort services, is the primary approach for the FOPP, PAR, and PIP
programs due to the obvious negative social environment which is created at the hot spots for
street prostitution. Violence and drugs accompany prostitution, and objects such as condoms,
syringes, and broken bottles tend to litter streets and parks where this activity occurs; the same
streets that children use. There also tends to be increased foot and automobile traffic, loud
shouting and screaming, as well as intoxicated people, public defecating, and, both buyers and
sellers of sex, being violently accosted (Gurd & O'Brien, 2013, p. 153).
The education guided toward the offenders includes insight into the fact that somewhere
between 80% to 90% of these prostitutes were abused as children, and many began as young as
12 years of age. An impression is also made to the men to imagine if that were their daughter or
sister being sold to someone, and how would they feel about that. Men are informed that many
of these women are possibly mentally ill, and that being stabbed or robbed is a potential hazard
for the buyers of sex. In addition, the street sex worker generally does not like their buyers. It is
more likely they detest their Johns. Furthermore, there is a high potential for receiving a
sexually transmitted disease, particularly HIV. Also, the process of street prostitution adds to the
more heinous global problem of trafficking in humans. Finally, the program participants are

instructed that sex should be associated with love between two people, and not simply be a
means of stress relief (Gurd & O'Brien, 2013, p. 157).
Money Laundering
Money laundering is a process whereby funding accumulated through illegitimate means,
such as illegal gambling, prostitution, drug sales, human trafficking, and fraud, after which the
money is passed through perhaps several transactions, the final act being the purchase of
legitimate enterprises such as gold and real estate. With the advent of modern technology of all
sorts, combined with electronic money transfers, the money laundering processes may be
involving upwards to $1 trillion per year (Taylor, Swanson, Territo, & Chamelin, 2013, p. 424).
Money laundering has three basic steps in its processing: (1) placement, which is money
gained illegally being placed into a banking system, usually in sums of less than $10,000 so as
not to alert the reporting processes put in place by the Bank Secrecy Act of 1970; (2) layering,
upon which the funds are moved to different banks or a variety of legal assets such as expensive
art, stocks, or jewelry to get as far from the illegal origins as possible; and (3) integration, where
it will be extremely difficult, if not impossible, to detect where the funds originated. These areas
might be real estate and other legitimate businesses (Taylor, Swanson, Territo, & Chamelin,
2013, p. 424).
Due to the high technology environment of money laundering in today's world, electronic
frameworks have been instituted for monitoring potential illegal financial activities. Two main
frameworks today are Control Objectives for Information and Related Technology (COBIT)
which is governed by the Information Technology Governance Institute (ITGI), and is U.S.
based, and the Committee of Sponsoring Organizations (COSO) framework. Electronic

monitoring of banking transactions is now incorporated in most banks (Pramod, Li, & Gao,
2012, p. 171-172).
Money laundering continues to be a problem today despite the sophistication of these
banking framework systems. Apparently, the Bank Security Act of 1970 establishes what should
be done, but not specifically how the processes for control should be implemented along with
their many other functions. Also, regulations are continually changing, it is therefore necessary
for all banks to maintain a system for updating their monitoring functions (Pramod, Li, & Gao,
2012, p. 172).
The COSO monitors internal processes with regards to banking security. The COBIT
framework manages risks associated with information technology (IT). The information controls
controlled by COBIT are broken down into 34 processes, which are further delineated into over
300 functions which include policies, procedures, and practices of the respective banking
systems. According to Pramod et al., it is important to establish a mapping system to merge the
two systems, COSO and COBIT, to better monitor the many events in money laundering which
can occur, particularly during the layering phase (Pramod et al., p. 175).
The extent to which money laundering has grown was taken under a study by Angela
Samantha, Kim-Kwang, and Liu (2012) in which terrorism was included into the mix. The
actual dollar values in money laundering where terrorism is concerned have eluded definite
figures. The secretive nature of both aspects contribute to the problem, but several techniques in
money laundering have been discovered. The typologies for money laundering are many. The
predominating ones involved illegal activities such as gambling, corruption, fraud, counterfeit
goods, diamonds, trafficking in commodities, as well as the sex trade industry. Tax evasion and

theft were also considerations for comparing the magnitude of the problem (Angela Samantha,
Kim-Kwang, and Liu, 2012, p. 93).
Smurfing, the process of making multiple deposits or purchasing multiple bank drafts,
was a preferred type of placement methods used by all money laundering typologies.
Camouflage, or disguising huge amounts of cash as something other than it was, was a preferred
method for gambling institutions such as casinos. According to Pramod et al., drug trafficking
preferred smurfing and structuring techniques in their placement phase of money laundering,
those committing fraud preferred camouflage, and human traffickers only used smurfing (p. 95).
Front or shell companies were the preferred method for layering by all typologies. Other
less preferred layering methods involved fake documentation such as invoices, phone purchases,
using money transfer mechanisms, and using bank drafts and bank checks to cover their trail of
illegal monetary manipulations. The least preferred methods for layering, but still used, were
low-interest loans or loans without any interest at all, and the use of insurance markets (Pramod
et al., p. 95).
The favored integration phase of money laundering, according to the Pramod et al., study,
was the purchase of real estate. Out of all of the international data collected and studied, tax
evaders, fraudsters, and drug traffickers led the way in real estate investing. Commodity
traffickers preferred the import export route for integration, and thieves appeared to have no
specialty interest for their investments, and opted for the purchase of luxury items, smuggling
armaments, as well as real estate (Pramod et al., p. 97).
When considering who is making the most out of their money laundering schemes, as
well as the number of layering schemes employed, high-level fraud and drug smuggling were the

big winners. High-level fraud used on average ten layering processes and averaged over $200
million in laundering. Drug trafficking averaged over $20 million in laundered funds, employing
nine methods of layering. Commodity trafficking ranked next, averaging about $6 million per
episode, followed by tax evaders with an average of $2 million worth of transactions; both
employing seven and six layering methods respectively (Pramod et al., p. 100).
With regards to terrorism, compared to the drug trafficking, fraud, and other reasons for
laundering money, the terrorist functions usually incorporated only one layering technique, and
the amounts laundered on average were small by comparison to other organized criminal
processes. From start to finish, terrorist operations may average less the three million in money
laundering schemes, but then again, they are not in the game for financial gain. They are in it to
financially support acts such as civilian deaths and economic and infrastructure damage, as well
as changing public opinion and undermining the Western philosophies of capitalist existence
(Pramod et al., p. 105).
Conclusion
In conclusion, illegal drug use, prostitution, and money laundering are understood by
many citizens of the global community. With a larger focus on treatment and rehabilitation for
drug abuse as opposed to simply creating more people with documented criminal histories, and a
focus on educating our young people on the pitfalls of destroying one's brain during their
developing years, as well as suppressing the notion that one can become wealthy with a get-rich-
quick scheme in drug sales, the American youth can focus more of their attention on learning and
achieving more honorable goals, rather than ending up in one of our many prison institutions,
fearing for their lives and becoming a violent person themselves. Prostitution can be better

deterred by creating more programs which demonstrate to the "Johns" of that heinous life-
destructive process that it is a shame, a phony release of one's tensions, and a very destructive
force in our local communities. People should be informed that sex should be looked upon as an
association with love, not physical abuse of others; which in the end adds to the socially
destructive difficulties of many communities.
Money laundering is a global problem, and our government regulated banking institutions
have the means to address hidden funds through the use of electronic banking frameworks such
as the COBIT and COSO systems. Refinement, coordination, and cooperation between countries
spanning the globe in the use of these systems need to continue. In addition, with the refinement
of these systems, perhaps the banking world can reduce the minimum transfer requirement to
satisfy the Bank Security Act of 1970; as low as $1,000 in the future. More exact monitoring of
large sums of money, better attention to the camouflage methods for currency concealment, and
a deeper view of the placement, layering, and eventual integration of huge sums of money needs
to occur, to maintain an equitable format for everyone in the capitalist societies to reach their
individual and family financial goals.

Illegal Drug Use, Illegal Prostitution, and Money Laundering pg 13
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