Legal Definitions - laundering

Laundering, in a legal context, typically refers to Money Laundering.

Money Laundering is the illegal process of concealing the origins of money obtained from illicit activities, such as drug trafficking, terrorism, or corruption, by making it appear to have come from a legitimate source. The goal is to integrate "dirty" money into the legitimate financial system so it can be used without suspicion of its illegal origin.

Here are some examples to illustrate money laundering:

• Example 1: The Restaurant Front

  A criminal organization generates substantial cash profits from illegal gambling operations. To make this money appear legitimate, they purchase a struggling but legitimate restaurant. Each day, they deposit the illegal cash into the restaurant's bank account, falsely recording it as revenue from food and drink sales. Over time, the "dirty" money is mixed with actual restaurant earnings, making it difficult for authorities to distinguish between the two. The organization can then withdraw or spend this money, claiming it as legitimate business income.

  This illustrates money laundering because the illegal gambling profits are being disguised as legitimate restaurant sales, thereby concealing their true, illicit origin and integrating them into the legal financial system.

• Example 2: High-Value Asset Purchases

  An individual involved in a large-scale fraud scheme accumulates millions of dollars in stolen funds. Instead of depositing the money directly into a bank account, which might raise red flags, they use the illicit cash to purchase expensive, easily transferable assets like rare artwork or luxury watches. They then sell these assets through legitimate auction houses or dealers, receiving clean, traceable payments. The individual can then claim the proceeds from the sale of the art or watches as legitimate investment gains, effectively washing the original stolen money.

  This demonstrates money laundering by converting illegally obtained funds into high-value assets, which are then sold through legitimate channels to generate seemingly clean income, obscuring the original source of the wealth.

• Example 3: International Shell Companies

  A corrupt government official receives large bribes in exchange for awarding lucrative contracts. To hide these funds, the official sets up a series of shell companies (companies with no real operations, only existing on paper) in different countries with strict banking secrecy laws. The bribe money is transferred through multiple accounts belonging to these shell companies, often disguised as payments for fictitious services or goods. This complex web of transactions makes it extremely difficult for investigators to trace the money back to the original bribe and the official.

  This is an example of money laundering because the illicit bribe money is moved through a complex international financial network, using shell companies to obscure its origin and make it appear as legitimate business transactions, thereby distancing it from the corrupt act.