What is money laundering?
Money laundering refers to the process of concealing financial transactions. Various laundering techniques can be employed by individuals, groups, officials and corporations. The goal of a money laundering operation is usually to hide either the source or the destination of money. Perhaps the best way to understand the concept is to take a look at some common examples. Suppose, for example, that an employee was stealing large sums of cash from her employer without getting caught. If she was to make large deposits into her bank account, some regulator (or computer program) might notice the unusually large deposits, thereby increasing the chances of getting caught. To launder the money, the criminal might simply use the cash to make purchases and then resell the items in a legitimate market. The revenue gained from these sales is ‘cleaner’ and the criminal is drawing less attention to herself. The example provided above is a particularly simple example that involves a non-cash step; actu
Money laundering, the metaphorical “cleaning of money” with regard to appearances in law, is the practice of engaging in specific financial transactions in order to conceal the identity, source and/or destination of money and is a main operation of underground economy. If done successfully, Money Laundering is the way in which criminals disguise the true origin and ownership of the proceeds of their criminal activities so that it appears to come from a legitimate source – thereby changing the proceeds from “dirty” money to “clean”.
The goal of a large number of criminal acts is to generate a profit for the individual or group that carries out the act. Money laundering is the processing of these criminal proceeds to disguise their illegal origin. This process is of critical importance, as it enables the criminal to enjoy these profits without jeopardizing their source. Illegal arms sales, smuggling, and the activities of organized crime, including for example drug trafficking and prostitution rings, can generate huge amounts of proceeds. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to “legitimize” the ill-gotten gains through money laundering. When a criminal activity generates substantial profits, the individual or group involved must find a way to control the funds without attracting attention to the underlying activity or the persons involved. Criminals do this by disguising the sources, changing the form, or moving the funds to a plac
Money laundering is the term used to describe the process by which criminals attempt to conceal the true origin and ownership of the proceeds derived from their illicit activities (such as fraud, drug trafficking, embezzlement, insider trading, computer fraud and theft) or attempt to use legally derived funds for illicit activities (such as terrorist financing). Legally, money laundering has been defined as “the movement of illicit cash or cash equivalent proceeds into, out of, or through the United States [or] … United States financial institutions.”1 The money laundering process is commonly described as involving a three-phase process of: placement, layering and integration. Placement involves the introduction of funds (which can be currency or equivalents, such as checks, money orders and wire transfers) acquired through criminal activities into the legal financial system. Layering involves the concealment or disguising of the source of the ownership of those funds through the cre
