Money laundering
Money laundering
Money laundering (/ˈmʌni ˈlɔːndərɪŋ/) is the illegal process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source.
Etymology
The term "money laundering" is said to originate from Mafia ownership of Laundromats in the United States. Gangsters there were earning huge sums in cash from extortion, prostitution, gambling and bootleg liquor. They needed to show a legitimate source for these monies, so they bought Laundromats and other businesses to commingle their illicit earnings with the legitimate earnings they received from these businesses.
Process
The process of money laundering typically involves three steps: placement, layering, and integration.
- Placement refers to the process of introducing the illicit money into the financial system. This might be done by breaking up large amounts of cash into less conspicuous smaller sums that are then deposited directly into a bank account, or by purchasing a series of monetary instruments (checks, money orders, etc.) that are then collected and deposited into accounts at another location.
- Layering is the second step and typically involves a series of complex transactions that obscure the source of the money. This might involve transferring money to and from various accounts in different names or even different countries, changing the form of the money, or using it to purchase various assets.
- Integration is the final process where the 'clean' money is reintroduced into the legitimate economy. The money launderer might choose to invest the funds into real estate, luxury assets, or business ventures.
Related terms
- Black money - Money that is not declared to the tax authorities; the proceeds of an illegal transaction.
- Dirty money - Money obtained illegally, especially in a criminal activity.
- White collar crime - Non-violent crime committed by business or government professionals, often involving money laundering.
- Financial crime - Illegal act involving the use of deceit or a breach of trust, which is committed against an individual, group, or state, to gain a financial or professional advantage.
External links
- Medical encyclopedia article on Money laundering
- Wikipedia's article - Money laundering
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