Most people don’t really know what money laundering is. At first glance it’s pretty natural to assume it has something to do with laundering — you know, cleaning clothes, hanging them out to dry, the works. Money laundering has nothing to do with household laundry though, even if it does work on a spin cycle.
So, what is money laundering?
Money laundering is a white collar crime — essentially “business crimes” — which relates to taking money that is “dirty” and cleaning it up to throw anyone off the trail of how the money was obtained. Money is “dirty” when it’s obtained through illegal means such as drug dealing, fraud, or other ways. Money laundering schemes cover up this illegal activity to throw authorities off the trail of the money so it can be used in normal settings.
There are a few steps to a money laundering scheme. The first one is, of course, getting rid of the dirty or “hot” money by breaking it up into smaller sums to hide. The second step is the camouflage where the money is put through a bunch of smaller transactions so its true nature is, well, camouflaged. Finally, the money is “integrated” into the economy so the person running the scheme can actually use it.
Even though embezzlement, forgery, and identity theft are the most common types of white collar crime, money laundering is far more common than most people might think. One of the most famous examples of a money laundering scheme is Watergate. Another one of the largest money laundering schemes of all time was run by Wachovia bank with a total sum of $380,000,000,000.
Talk about chump change.
And while we’re on the subject of chump change, one of the tell-tale signs of a money laundering scheme is being able to pay for things in large amounts of cash. This isn’t to say when your cousin pays for dinner in $20 bills that they’re running a laundering scheme though.
Even though money laundering, and other white collar crimes, seem like they’re not hurting anyone, they’re still serious crimes.