How does offshoring encourage money laundering?
Offshoring describes the relocation of businesses from one country to another. This includes any business transaction such as production, manufacturing, or services.The purpose of offshoring is to reduce costs. One way of reducing costs by offshoring is by hiring cheap labor. It is called cheap labor because offshore companies will usually pay very low wages to the employees of the country where they have set up their businesses or factories. Offshore banking also takes place on the international level.
Offshoring also allows large corporations, such as manufactuers and banks, to handle large amounts of money without being subject to the scrutiny of their respective governments. In that way, many illegal activities escape the attention of government agencies. Banks in particular are often involved in the practice of money laundering.
Money laundering is a system where individuals or large corporations get money from sales of things such as drugs, stolen merchandise, firearms, etc. They then take this money and pretend to lend it to someone who has a legal business, and they charge them interest. This way they get their money back in what apears as a legal transaction.
There are other known methods, however this is the most popular.