Money Laundering

Money laundering is the process to which the proceeds of crime are transformed into ostensibly
legitimate money or other assets. However, in a number of legal and regulatory systems the term
money laundering has become conflated with other forms of financial crime, and sometimes used
more generally to include misuse of the financial system (involving things such as
securities, digital currencies, credit cards, and traditional currency), including terrorism
financing, tax evasion and evading of international sanctions. Most anti-money laundering laws
openly conflate money laundering (which is concerned with source of funds) with terrorism
financing.
Money obtained from certain crimes, such as extortion, insider trading, drug trafficking, illegal
gambling and tax evasion is "dirty". It needs to be cleaned to appear to have been derived from
non-criminal activities so that banks and other financial institutions will deal with it without
suspicion. Money can be laundered by many methods, which vary in complexity and
sophistication.
Different countries may or may not treat tax evasion or payments in breach of international
sanctions as money laundering. Some jurisdictions differentiate these for definition purposes, and
others do not. Some jurisdictions define money laundering as obfuscating sources of money,
either intentionally or by merely using financial systems or services that do not identify or track
sources or destinations.
Other jurisdictions define money laundering to include money from activity that would have
been a crime in that jurisdiction, even if it were legal where the actual conduct occurred. This
broad brush of applying the term "money laundering" to merely incidental, extraterritorial, or
simply privacy-seeking behaviors has led some to label it "financial thought crime".
Many regulatory and governmental authorities issue estimates each year for the amount of
money laundered, either worldwide or within their national economy. In 1996, the International
Monetary Fund estimated that two to five percent of the worldwide global economy involved
laundered money. The Financial Action Task Force on Money Laundering (FATF), an
intergovernmental body set up to combat money laundering, stated, "Overall, it is absolutely

impossible to produce a reliable estimate of the amount of money laundered and therefore the
FATF does not publish any figures in this regard."
Academic commentators have likewise been unable to estimate the volume of money with any
degree of assurance. Various estimates of the scale of global money laundering are sometimes
repeated often enough to make some people regard them as factualbut no researcher has
overcome the inherent difficulty of measuring an actively concealed practice.
Regardless of the difficulty in measurement, the amount of money laundered each year is in
the billions (US dollars) and poses a significant policy concern for governments. As a result,
governments and international bodies have undertaken efforts to deter, prevent, and apprehend
money launderers. Financial institutions have likewise undertaken efforts to prevent and detect
transactions involving dirty money, both as a result of government requirements and to avoid the
reputational risk involved. Issues relating to money laundering have existed as long as there have
been large scale criminal enterprises. Modern anti-money laundering laws have developed along
with the modern War on Drugs. In more recent times anti-money laundering legislation is seen as
adjunct to the financial crime of terrorist financing in that both crimes usually involve the
transmission of funds through the financial system.

Poison Pill
A shareholder rights plan, colloquially known as a "poison pill", is a type of defensive tactic used
by a corporation's board of directors against a takeover. In the field of mergers and acquisitions,
shareholder rights plans were devised in the early 1980s as a way for directors to prevent
takeover bidders from negotiating a price for sale of shares directly with shareholders, and
instead forcing the bidder to negotiate with the board. Shareholder rights plans are unlawful
without shareholder approval in many jurisdictions such as the United Kingdom, frowned upon
in others such as throughout the European Union, and lawful if used "proportionately" in others,
including Delaware in the United States.
The typical shareholder rights plan involves a scheme whereby shareholders will have the right
to buy more shares at a discount if one shareholder buys a certain percentage of the company's

shares. The plan could be triggered, for instance, when any one shareholder buys 20% of the
company's shares, at which point every shareholder (except the one who possesses 20%) will
have the right to buy a new issue of shares at a discount. The plan can be issued by the board as
an "option" or a "warrant" attached to existing shares, and only is revoked at the discretion of
the board of directors. A shareholder who can reach a 20% threshold will potentially be a
takeover bidder. If every other shareholder will be able to buy more shares at a discount, such
purchases will dilute the bidder's interest, and the cost of the bid will rise substantially. Knowing
that such a plan could be called on, the bidder could be disinclined to the takeover of the
corporation without the board's approval, and will first negotiate with the board so that the plan
is revoked.[1]
Shareholder rights plans, or poison pills, are controversial because they hinder an active market
for corporate control. Further, giving directors the power to deter takeovers puts directors in a
position to enrich themselves, as they may effectively ask to be compensated for the price of
consenting to a takeover.

History
The poison pill was invented by mergers and acquisitions lawyer Martin Lipton of Wachtell,
Lipton, Rosen & Katz in 1982, as a response to tender-based hostile takeovers.[2]Poison pills
became popular during the early 1980s in response to the wave of takeovers by corporate
raiders such as Carl Icahn. The term "poison pill" derives its original meaning from a poison pill
physically carried by various spies throughout history, a pill which was taken by the spies when
they were discovered to eliminate the possibility of being interrogated by an enemy.
It was reported in 2001 that since 1997, for every company with a poison pill which successfully
resisted a hostile takeover, there were 20 companies with poison pills that accepted takeover
offers.[3] The trend since the early 2000s has been for shareholders to vote against poison pill
authorization, since poison pills are designed to resist takeovers, whereas from the point of view
of a shareholder, takeovers can be financially rewarding.
Some have argued that poison pills are detrimental to shareholder interests because they
perpetuate existing management. For instance, Microsoft originally made an unsolicited bid

for Yahoo!, but subsequently dropped the bid after Yahoo! CEO Jerry Yang threatened to make
the takeover as difficult as possible unless Microsoft raised the price to US$37 per share. One
Microsoft executive commented, "They are going to burn the furniture if we go hostile. They are
going to destroy the place." Yahoo has had a shareholders rights plan in place since 2001.
[4] Analysts suggested that Microsoft's raised offer of $33 per share was already too expensive,
and that Yang was not bargaining in good faith, which later led to several shareholder lawsuits
and an aborted proxy fight from Carl Icahn.[5][6] Yahoo's stock price plunged after Microsoft
withdrew the bid, and Jerry Yang faced a backlash from stockholders that eventually led to his
resignation.

Common types of poison pills[edit]

Preferred stock plan

The target issues a large number of new shares, often preferred shares, to existing shareholders.
These new shares usually have severe redemption provisions, such as allowing them to be
converted into a large number of common shares if a takeover occurs. This immediately dilutes the
percentage of the target owned by the acquirer, and makes it more expensive to acquire 50% of the
target's stock.

Flipover rights plan

The target takes on large debts in an effort to make the debt load too high to be attractive -- the
acquirer would eventually have to pay the debts.

Ownership flip-in plan

The company buys a number of smaller companies using a stock swap, diluting the value of the
target's stock.

Back-end rights plan

Under this scenario, the target company re-phases all its employees' stock-option grants to ensure
they immediately become vested if the company is taken over. Many employees can then exercise
their options and then dump the stocks. With the release of the "golden handcuffs", many
discontented employees may quit immediately after having cashed in their stock options. This poison
pill is designed to create an exodus of talented employees, reducing a corporate value as a target. In

many high-tech businesses, attrition of talented human resources may result in a diluted or empty
shell being left behind for the new owner.
For instance, Peoplesoft guaranteed its customers in June 2003 that if it were acquired within two
years, presumably by its rival Oracle, and product support were reduced within four years, its
customers would receive a refund of between two and five times the fees they had paid for their
Peoplesoft software licenses. While the acquisition ultimately prevailed, the hypothetical cost to
Oracle was valued at as much as US$1.5 billion.

Voting plan

In a voting plan, a company will charter preferred stock with superior voting rights over that of
common shareholders. If an unfriendly bidder acquired a substantial quantity of the target firm's
voting common stock, it then still would not be able to exercise control over its purchase. For
example, Asarco established a voting plan in which 99% of the company's common stock would only
harness 16.5% of the total voting power.
In addition to these pills, a "dead-hand" provision allows only the directors who introduce the poison
pill to remove it (for a set period after they have been replaced), thus potentially delaying a new
boards decision to sell a company.