» Money Laundering

Money Laundering

The simplest explanation for money laundering is that money (dubbed dirty money) from one source is made to look like it is really from another source. Usually, the first source is illegal and the goal is to make the money seem like it was obtained legally or legitimately. There are a variety of ways to accomplish this, and they range from very simple to very complex.

Various governmental agencies have tried to determine how much money is laundered, on average, each year. Despite their best efforts, they have concluded it is impossible to estimate that figure reliably. The best guess they have managed to come up with is that two to five percent of the global economy is actually laundered money. In other words, it is a lot of money, arguably billions, and that is a concern for the government.

Laundering money typically follows three steps:

  1. The money is brought into a financial system of choice (referred to as placement),
  2. complex financial transactions kick in to hide the source (called layering),
  3. and the launderer gets the money back from the transactions (called integration).

Additionally, there are different forms of money laundering, referred to as double invoicing, currency exchanges, bank methods and smurfing (structuring).