What Is Money Laundering?

6 min

The United States Treasury Department defines money laundering as:

The process of making illegally-gained proceeds (i.e., "dirty money") appear legal (i.e., "clean")

The key distinction is that money laundering deals with money that comes from criminal activity

The most common perpetrators of money laundering schemes are criminals involved in: drugs or trafficking, organized crime, white collar crime, or corruption and bribery.

Money laundering occurs across multiple industries at various levels of sophistication.

Even if you work in an industry that isn’t high profile, you should take anti-money laundering efforts seriously.

Time for a quiz.

Jessica has made money photographing weddings over the summer. Her clients, who were all friends and family, paid entirely in cash and she has no documentation for her income.

Would this be considered money laundering?

Quiz 1 of 1

Would Jessica's actions be considered money laundering?

Yes, Jessica didn’t report that income and didn’t pay any taxes on it.
No, you can’t launder money from your friends or family.
No, the money wasn’t obtained through criminal activity.
No, Jessica is just a teenager and doesn’t have to worry about money laundering laws.

Answer C: No, the money wasn’t obtained through criminal activity.

Money laundering is specifically applicable to money obtained through criminal means. This money was obtained legally through wedding photography and would not be considered “dirty” or part of a money laundering scheme.

Consider This:

Many of the techniques used by money launderers are also used by white collar criminals looking to hide their assets. There is quite a bit of overlap between anti-money laundering practices and anti-fraud and having a greater understanding of both will make you more effective and vigilant in your day-to-day tasks when dealing with shady business practices.

Lesson complete

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