What are some examples of Money Laundering?

Typical money laundering processes include: cash businesses over-reporting their sales; cash used to purchase casino chips, which are then reported as winnings when the person cashes out; multiple people depositing small amounts into bank accounts to not trigger bank reporting requirements.

Money Laundering | Definition, Main Steps, and Misconceptions

Q: What is Money Laundering?

Money laundering is the process of making illegally earned money appear to be “clean,” often through complex bank transfers and transactions.

Q: How does Money Laundering happen?

Different stages of money laundering put in place legitimate business transactions to make it more difficult for an investigator to discover the real source of the money.

Money Laundering Definition

Money laundering is the process of making illegally earned money appear to be "clean," often through complex bank transfers and transactions.

Concealing the origin of money earned is often used in criminal enterprises so criminals can spend their earnings without raising the suspicions of the government, but it has also been used to hide money from debt collectors.

An estimated 3-5% of global GDP are actually money laundering transactions.

Three Main Steps

There are three main steps to money laundering:

Placement: putting the illegitimately earned money into the legitimate stream of commerce, often through a cash-only "front" business, such as a laundromat or bar.

Layering: placing the money continuously, in smaller chunks, through multiple legal transactions to make its origin harder to trace.

Integration: finally returning the money into the hands of the owner so it can be spent without drawing the suspicion of the legal authorities.

Each of these stages puts in place legitimate business transactions to make it more difficult for an investigator to discover the real source of the money.

Examples of money laundering techniques include:

Cash businesses over-reporting their sales.

Cash used to purchase casino chips, which are then reported as winnings when the person cashes out.

Multiple people depositing small amounts into bank accounts to not trigger bank reporting requirements.

Foreign investors in countries with loose laws taking cash owned by a launderer and investing it into the launderer's legitimate business.

Each of these stages puts in place legitimate business transactions to make it more difficult for an investigator to discover the real source of the money.

Common Misconceptions

Cryptocurrencies like Bitcoin and Ethereum are the newest frontier in money laundering tools, as they allow for funds to not be traced back to the original sender.

Money Laundering FAQs