What Is Money Laundering?

White Collar Crimes / Wednesday, March 14th, 2018

We all have laundry in our house. But we stick to laundering our clothes. There is nothing illegal about that, nor is it illegal to launder our money in our clothes.

It ruins the money, but it is not illegal.

There is another activity that not only ruins or “soils” the money, but it is ironic in that it is illegal yet is worded as if it was a method of “cleaning” money.

The ‘Godfather’ for Real?

We have all heard about the stories from movies and TV shows about the mafia, drug dealers, gangs and casinos and their money – some of which didn’t arrive via legal means. If such money is illegal, it can be confiscated by authorities. In these cases, this “illegal” money has to go underground or find another way to be “legalized.”

Money Laundering, Defined

When criminal elements need to “clean” their “dirty” money so they can use their money in a legitimate economy, they may take to a practice known as “money laundering.”

To launder money, a criminal enterprise – a terror group, drug or human trafficking ring, or mob-run business – would develop a process of “cleaning” money by funneling the illegally obtained money through legitimate channels.

These enterprises usually deal in large sums of money, and they often want to use financial institutions for their money, but of course, these institutions won’t handle money that is obtained or transacted illegally. So these shell companies are meant to make the money seem legitimate, and these enterprises will create banking relationships through these companies.

How Does Money Laundering Happen?

Criminals can be clever, and the ways that money laundering happens can vary widely depending on the size of the criminal network and the numbers of shell companies involved. The tactics used to launder money vary from simple to quite complicated.

As one simple example, a drug organization may own a pawn shop and exaggerate the money it makes each day, moving that money into the pawn shop’s business accounts, and the manager or owner of the pawn shop gets a piece of the money as “salary.” This is the simple form called “fronting.”

There is another common money-laundering tactic is something called “smurfing,” where a large chunk of money is divided into smaller deposit amounts across many accounts in several institutions so they would not draw attention from financial regulators.

The Internet, and the advent of cryptocurrencies and online banking institutions have made money laundering in some ways easier to do and harder for authorities to track.

Learn about Money Laundering

Money laundering is a serious crime that undermines the economy and society. To learn more about the mechanisms of money laundering, especially if you suspect that your business may be targeted by a criminal enterprise, contact our attorneys to get a free consultation about your rights and get an education about how money laundering works and how it may impact your life.