Understanding Money Laundering
Money laundering is a federal crime. It is officially defined as the practice of engaging in transactions with the intent of hiding the source or destination of financial resources. This can include fraudulent securities transactions, property transactions, and offshore investments. This practice is commonly used during drug transactions and tax evasion, but it can have other uses.
In the modern global economy, money laundering is becoming an increasingly serious problem. Law enforcement officials are hindered by legal conflicts, jurisdiction limits, and the dizzying number of channels through which “dirty” money can be routed.
Money launderers – whether individuals or organizations – may also engage in crimes such as:
- Securities fraud
- Real estate fraud
- Mail and wire fraud
Why Launder Money?
The goal of any money laundering operation is to make “dirty” money (i.e., money gained through illegal activities) look like “clean” money received through legitimate business operations. Otherwise, transactions conducted using dirty money would immediately draw the attention of law enforcement and government officials.
Money laundering occurs in three stages:
First, the dirty money is obtained through illegal means, such as drug sales, extortion, or embezzlement. This money is deposited into a financial institution – usually one located in a country with no bank-reporting laws.
Next, the money is diverted, divided, and routed through a variety of channels designed to disguise its origins. It may also be converted from cash into goods and back again.
Finally, the dirty money is “reassembled” in the target market or economy through legitimate-looking methods, such as business “investments,” sales of assets, or even simple wire transfers to unsuspecting banks.
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