Money laundering occurs when someone funnels a large amount of illegally gained cash through a seemingly legitimate source. The name is derived from taking “dirty” money and making it look “clean,” or laundered.
Large amounts of money can’t be deposited in the bank account of someone who, for a year, for example, has averaged $700 a month in their checking account without raising suspicions. A cash deposit of thousands of dollars draws the attention of a bank teller, and banks are required by law to inform authorities of large cash deposits or other financial transactions that look suspicious.
Both criminal organizations, such as drug-trafficking rings, and individuals can launder money.
To do so, the offender first must put the “dirty” money into a legitimate account, such as that of a business. Then, the offender must falsify paperwork, such as the books of the business, to hide the source of the money. Finally, once the money has been made “clean,” the money can be withdrawn from the legitimate account.
Money laundering also can be accomplished by dividing the money into smaller amounts and depositing those into multiple accounts. Some offenders also will smuggle the money into another country to put it into an account there. Some countries aren’t looking out for money laundering the way the United States is.
Money also can be laundered electronically through online auctions, gambling or cryptocurrencies.
While some might consider it a victimless crime, money laundering isn’t harmless. It’s a federal crime because it allows offenders to hide wealth, evade taxes and often fund criminal activity.
The criminal penalty for a money-laundering conviction is stiff: a maximum 20-year prison sentence and a $500,000 fine or twice the amount of the transaction, whichever is greater, according to the Department of Justice. That’s per count. Anyone charged with money laundering needs strong legal representation.