Money Laundering Definition
Money laundering refers to the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions. The overall scheme of this process returns the “clean” money to the launderer in an obscure and indirect way.
Money Laundering Key Points
- Money laundering is a criminal practice of processing unlawfully gained proceeds to appear as if they were legal.
- This illegal process involves three main steps: placement, layering, and integration.
- Money laundering is closely linked with criminal activities like drug trafficking or organized crime.
- Blockchain technology could either facilitate or help prevent money laundering, depending on its use.
Why is Money Laundering significant?
Money laundering is significant because it allows criminals to hide their nefarious activities and enjoy their ill-gotten gains without raising suspicion. In effect, it fuels financial criminal activity by making it possible to exploit the financial systems for personal gain. Both the economy and society as a whole are negatively impacted by money laundering, as it alters the fair distribution of wealth and can enable corrupt regimes and destructive financial behaviors.
What is Money Laundering?
Money laundering involves the transformation of profits from illegal activities and corruption into ostensibly “legitimate” assets. The difficulty in tracking the origin of these funds enables criminals to enjoy the profit without suspicion, upsetting the balance of social and economic order.
When does Money laundering take place?
Money laundering typically takes place whenever a person, organization, or even a government engages in an illegal activity that generates substantial profit. This illegal income is then filtered through a series of transactions to obscure its origin and make it appear as though it was legitimately earned.
Where does Money Laundering occur?
Money laundering can occur practically anywhere in the world. It is especially prevalent in the banking world, online cyber channels, gambling facilities, and any place where financial transactions can be manipulated for this purpose. With the rise of digital cryptocurrencies, money laundering has also expanded into the realm of blockchain technology.
How does Money Laundering Work?
Money laundering typically involves three steps: placement, layering, and integration. Placement refers to the process of introducing the illicit money into the financial system. Layering is the act of hiding the origins of that money by way of series of complex transactions and bookkeeping gymnastics. Lastly, integration involves merging the now-clean money back into the legitimate economy. The money launderer is now able to access these funds without raising suspicion.
