Although there are legitimate ways of using offshore entities to minimize taxes, most of the offshore arrangements are designed to avoid income and estate tax by the home country of the owner of the money. Tax evasion should become a predicate offense for the crime of money laundering. Money laundering is an essential element of international financial fraud, market manipulation, illegal arms dealing, people smuggling, and the theft of intellectual property. Indeed, the amounts concealed in connection with these other crimes far exceed the total amount laundered by the drug trade. The criminals engaged in all of these activities use the facilities of the offshore financial world to hide their profits, and pay their suppliers and employees.
Money laundering is also an essential component of government corruption.
In country after country corrupt heads of state and governments officials have moved tens of billions of dollars into the offshore markets. Presidents Mobutu, Sukarno, Marcos, Duvalier, Bucaram, and Color de Mello are but a few examples of disappearing national wealth. When the money disappears, the IMF and the international community is called upon to replace it. If the money could not be effectively hidden, the problem of corruption could be mitigated. Money laundering is also supporting the explosive growth in international financial fraud.