Money laundering is the illegal process of disguising the origin of money obtained from criminal activities, such as drug trafficking, terrorism, corruption, or embezzlement, to make it appear as if it comes from a legitimate source. This "dirty money" is processed to look like "clean" money that can be freely used in the financial system without raising suspicion.
Money laundering typically works through three key stages:
- Placement: Introducing the illicit money into the financial system, often by depositing cash into banks, purchasing assets, or investing in businesses.
- Layering: Conducting a series of complex financial transactions like moving money between multiple accounts, buying and selling financial instruments, or dealing through shell companies to obscure the money's original source.
- Integration: The laundered money is returned to the criminal in a form that appears legitimate, such as investments, property, or business revenues, making it difficult to trace back to its illegal origins.
These stages help criminals to avoid detection, legal consequences, and enable them to use the proceeds of crime for personal gains or further criminal enterprises.
