Money laundering is the process of disguising the origins of illegally obtained money, making it appear as if it comes from legitimate sources. It typically involves three stages:
- Placement: Introducing the "dirty money" into the financial system.
- Layering: Conducting complex transactions to obscure the money's illegal source.
- Integration: Reintroducing the laundered money into the economy as apparently legitimate funds
This process is used to "clean" money derived from crimes such as drug trafficking, human trafficking, insider trading, and illegal gambling, allowing criminals to use the proceeds without detection
Example of Money Laundering
A notable example is the Wachovia Bank case, where the bank laundered approximately $350 billion for Mexican drug cartels by allowing them to deposit drug proceeds into cash-intensive businesses and transfer funds through the bank's accounts. This facilitated drug trafficking operations and led to a $160 million penalty for the bank
. Another example involves real estate money laundering, where criminals purchase luxury properties through shell companies to hide their identity, then resell the properties to legitimize illicit funds. For instance, Zamira Hajiyeva laundered money through high-value real estate in London
. Other common methods include:
- Using "smurfs" to break large sums into smaller deposits.
- Blending dirty cash with legitimate business income.
- Creating shell companies to channel funds.
- Purchasing and reselling high-value goods
These examples illustrate how money laundering schemes exploit financial systems and businesses to make illegal profits appear lawful.
