Money Laundering Definition
Money laundering is a way of disguising money that was earned through illegal means. This often requires the money to be filtered through other countries and other businesses in order to make it difficult to tell where it originally came from.
Money obtained through drug sales or other illegal activity is often obtained in cash, large amounts of which are suspicious to law enforcement. This is often done in small amounts in order to avoid suspicion. To make this cash look like it came from a legitimate source, and therefore avoid seizure, money laundering requires some type of financial institution to handle the money.
Once the money is in a bank account, it is then transferred to another and then to another, often to accounts that have different names. The money is transferred back and forth in varying amounts in order to make it harder to track. Some of the money is used to purchase high-ticket items like houses, in order to change the amounts of money in the accounts.
Money laundering often involves a legitimate business that the laundering party invests in. Sometimes, the launderer sells off the high-ticket items to get the money back into back into a legitimate financial institution. Local business investments result in a cut of the profits of these businesses, brining in money from legitimate businesses. With so much money coming from different sources, most of which appear legitimate, the money laundering is difficult to track and to prove.
Financial institutions are always developing new strategies for combating money laundering, but the practice continues widely. Virtually every country's financial institutions are affected by money laundering.