Money laundering is the process by which money that was obtained illegally is made to seem as though it is lawful income. Money laundering involves eliminating evidence and making it difficult for authorities to trace the money back to its illegal source. People launder money so that they can use the money without raising suspicions or attracting the attention of law enforcement officials. Organized crime groups, terrorist organizations, and other criminals may attempt to launder money generated by drug dealing, arms smuggling, or other forms of illegal activity. Many nations have laws that aim to prevent money laundering.
Money launderers may “wash” money in a variety of ways. For instance, a restaurant owner who sells illegal drugs on the side might include drug profits with the restaurant’s receipts. Thus, business records would indicate that the drug profits were earned from food sales. In a more involved operation, an organization might use a series of complex financial transactions to hide the source of the illegal money. Many money launderers move funds to foreign countries where the banking systems allow for greater secrecy. Some money launderers establish front groups—that is, apparently legitimate organizations or businesses that cover for illegal activities.
The United Nations, through its Global Programme against Money Laundering (GPML), helps nations develop laws and policies to prevent money laundering. In the United States, the Bank Secrecy Act of 1970 and its later amendments have been designed to help detect and prevent money laundering and other crimes. The act, often called the BSA, requires financial institutions to file reports on certain large cash transactions. The Financial Crimes Enforcement Network (FinCEN) receives BSA reports, analyzes them, and sends them to U.S. and international law-enforcement officials.
See also Clifford, Clark McAdams ; Convertibility ; Switzerland (Banking) .
