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What is money laundering?

Money laundering is a crime wherein a criminal or criminals mask the real ownership as well as control of the income from criminal activities by making it appear that the funds came from a legitimate source.

There are many ways money launderers disguise ill-gotten money. Money laundering can happen even without the help of the financial sector. But, unfortunately, laundering billions of dollars from criminal activities happen within the various financial institutions.

How money laundering happens

There are different ways of masking ill-gotten money, but there are similar characteristics on how these transactions happen around the world.

Two key elements are present in any money laundering scheme.

First, is that there is an act of laundering such as the services provided by the financial institutions. And second is that there is some amount of knowledge or even suspicion about the source of funds being deposited by the client or even the behavior of the client.

Money laundering happens when an individual makes arrangements for the funds that were gotten through illegal means. The arrangements may pertain to different business transactions like investment management or even bank activities.

Experts have defined the ways in which money laundering takes place, and there are three stages of money laundering.

The first stage is the placement where the proceeds from criminal activities are placed in a financial system.

The second is layering which pertains to the act of masking the ownership or disguising the source of the funds.

The third stage is integration where the laundered money becomes part of the legitimate economy.

These stages are however simplistic since money laundering is a complicated process. The stages may overlap during the process of actual laundering of funds.

Each government has its laws and rules to address money-laundering in their jurisdiction.

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References :


[0]http://www.int-comp.org/what-is-money-laundering
[1]https://www.flickr.com/photos/lox/1236590751/

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Posted by on Oct 19th, 2014 and filed under Business, Finance & Investing. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.