What is money laundering?

Question

Accepted Answer

Money laundering is the process of making illegally obtained money appear to be legitimate.

It involves disguising the source of funds through a series of transactions.
The purpose is to hide the illegal origin of the money and make it usable without detection.
Common methods include using shell companies, offshore accounts, and cash businesses.
Examples include drug trafficking, embezzlement, and tax evasion.
Money laundering is a serious crime that can result in hefty fines and imprisonment.

Accepted Answer

Money laundering is the process of concealing the origins of illegally obtained money or assets, making them appear legitimate. It involves transforming "dirty" money, which is generated through criminal activities, into "clean" money that can be used without raising suspicion. Money laundering is typically performed in three main stages: placement, layering, and integration.

1. Placement: In this stage, the illicit funds are introduced into the legitimate financial system. It involves depositing cash into bank accounts, purchasing assets such as property or vehicles, or using money transfer services to move funds across borders.

2. Layering: In this stage, the aim is to create complex layers of transactions and financial activities to obscure the audit trail and make it difficult to trace the illegal funds' origin. This can involve multiple transfers between accounts, converting funds into different currencies, buying and selling assets, or conducting various financial transactions to confuse authorities.

3. Integration: In the final stage, the laundered money is reintroduced into the legitimate economy, appearing as legal funds. At this point, the money appears to have come from legitimate sources, making it difficult to distinguish it from other legitimate funds. The laundered money can be used for various purposes, such as investments, luxury purchases, or funding further criminal activities.

Money laundering is a serious crime with significant social and economic implications. It enables criminals to profit from their illegal activities, undermines the integrity of the financial system, and hinders efforts to combat organized crime, corruption, drug trafficking, terrorism financing, and other illicit activities. Governments, financial institutions, and regulatory authorities employ strict anti-money laundering (AML) measures and regulations to detect and prevent money laundering activities.

What is money laundering?

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