QS Study

Money Laundering

Money laundering is the process of transforming the proceeds of crime into ostensibly legitimate money or other assets. However, in a number of legal and regulatory systems, the term money laundering has become conflated with other forms of financial crime, and sometimes used more generally to include misuse of the financial system (involving things such as securities, digital currencies, credit cards, and traditional currency), including terrorism financing and evasion of international sanctions. It is the procedure of creating the appearance that large amounts of money obtained from illegal movements, such as drug trafficking or terrorist action, originated from a legitimate source. Most anti-money laundering laws openly conflate money laundering (which is concerned with the source of funds) with terrorism financing (which is concerned with a destination of funds) when regulating the financial system. The criminals need a way to deposit the money in financial institutions, yet they can only do so if the money appears to come from legitimate sources.

Money obtained from certain crimes, such as extortion, insider trading, drug trafficking, and illegal gambling is “dirty”. The laundering is done with the purpose of making it seem that the proceeds have come from a lawful source. It needs to be cleaned to appear to have been derived from legal activities so that banks and other financial institutions will deal with it without suspicion. Money can be laundered by many methods, which vary in complexity and sophistication.

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