2

launder

2 informal Conceal the origins of (money obtained illegally), typically by transfers involving foreign banks or legitimate businesses.

(from here)

Suppose, I have illegally obtained money (I don't). So, basically, everything I can do with it, other than spending, would be laundering, is that correct (putting them into a bank account, investing in a business, etc.)?

Improve this question
1

2 Answers 2

Reset to default
4

Laundering physical money

Let's say a career criminal committed a couple crimes and is now in possession of a large heap of money in form of coins and paper currency. They want to use that money to buy themselves a nice house. But showing up with a huge bag of money at a bank or real estate agency would look very suspicious. It is very likely that they will get reported and then investigated by law enforcement. What do they do? They need some explanation where that money comes from.

A good way to turn that dirty money into apparently clean money is by running a legitimate cash-based business. The criminal then goes to the bank each week and deposits a chunk of their ill-gotten cash claiming it's income from their business. Common choices are restaurants, casinos or the name-giver laundromats which were famously used by crime boss Al Capone to launder his illegal income. But they can use any business for this purpose which takes payment in cash and doesn't leave easy to analyze evidence how much business they really performed.

Now the criminal has all that ill-gotten money on a regular bank account and can use it to buy what they want without raising any further suspicion.

Laundering electronic money

Another category of money laundering which got very relevant in the age of online banking is to launder illegally obtained money which can be found on bank accounts. For example by hacking online banking accounts or running scams. If the criminal would just send that money to their personal account, then the investigators would just need to subpoena their bank and their real identity would be revealed. So they need some way to move that money which is hard to trace. Common methods are:

  • Transfering money to accounts in foreign countries in order to tie up investigators with the bureaucracy of international investigations.
  • Transferring money in ways which are hard to trace, like cryptocurrency, gift cards, private money transfer services or private people they recruited to forward money through their personal accounts.
  • Buying, transfering and selling virtual assets in online games.
  • Buying physical items from online stores using false identities and selling them again under their real identity.

Fortunately none of these methods of money laundering are completely untraceable. They make the work of law enforcement more difficult, but not completely impossible. The criminals usually hope to frustrate law enforcement to the point that they give up and prioritize "larger fish".

Improve this answer
4
  • This is somewhat off-topic for this site, but if you could add a link to some citation for the notion that the term arises from the use of literal laundromats, I'd really appreciate it.
    – Roger
    Commented Feb 26, 2020 at 15:41
  • In Germany, when you buy a house, or an expensive car, the German Inland Revenue will look at the purchase price, and at your tax returns, and if they think that you don't have enough money according to your tax returns, they will investigate. Lottery or game casinos where you could gain a large amount of untaxed money legally will give you a receipt.
    – gnasher729
    Commented Mar 14, 2023 at 14:45
  • Money laundering through restaurants etc. obviously means that the restaurant will end up with profits that will be taxed.
    – gnasher729
    Commented Mar 14, 2023 at 14:51
  • @gnasher729 The purpose of money laundering is not to avoid taxes. It is to provide a reasonable explanation of where illegally obtained money comes from. Which usually involves paying taxes for it. Better to have 850,000€ in clean, taxed money than one million € in cash you can't explain where it comes from. A particularly greedy criminal might try to launder money through a channel that's tax-exempt, but that's probably a lot harder to pull off.
    – Philipp
    Commented Mar 14, 2023 at 14:55
0

No

If you make a million dollars selling drugs say, you have a million dollars in cash. If you put that much cash in your bank account, your bank will report the transaction and law enforcement will be interested in where the cash came from. They probably aren’t going to ask you directly but they will look at you. Drug dealers don’t like law enforcement looking at them.

Money laundering is a catch all term for turning “dirty” money into “clean” money that won’t attract the attention of law enforcement. Hopefully. There are lots of techniques.

Improve this answer
5
  • How exactly do you do it? What's the difference between "dirty" and "clean" money?
    – Sergey Zolotarev
    Commented Feb 25, 2020 at 7:36
  • Did you read the link? It explains several ways.
    – Dale M ♦
    Commented Feb 25, 2020 at 8:15
  • @SergeyZolotarev "How exactly do you do it?" We aren't in the white collar crime training business. "What's the difference between "dirty" and "clean" money?" Dirty money is money from an illegal source or from a source not allowed to be used for the purpose in question (e.g. undisclosed money from a foreign government given to a political campaign in violation of campaign finance laws).
    – ohwilleke
    Commented Feb 26, 2020 at 21:09
  • So you pay for your car insurance with cash, simply turn up at the broker and hand over $500. A week later, you go back and tell them you want to cancel the policy. The broker says "ah, time on risk is $20 and there's a cancellation fee of $50".....at which point he writes you a nice clean cheque for $430. That money has no dodgy associations as you can verify its source. You've just turned $500 iffy money into $430 clean money.
    – Tim Richards
    Commented Oct 29, 2022 at 15:21
  • @TimRichards Of course, if you do this on a regular basis your broker is going to get suspicious pretty quickly, at which point they're in the unenviable position of having to check with their legal advisor as to how big a liability they're running if they keep pocketing the money they now suspect is dirty without reporting it...
    – Shadur-don't-feed-the-AI
    Commented Mar 14, 2023 at 8:29

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .