Money Laundering Prevention: Deterring, Detecting, and Resolving Financial Fraud

Chapter 1

Understanding the Process of Money Laundering

What Is Money Laundering?

People often see money laundering as an exotic process, an objective whose very name evokes some mysterious and nefarious financial crime. In reality, it is one of the most common—and commonly misunderstood—financial activities connected to illicit financial schemes, including fraud, tax evasion, narcotics, human smuggling, corporate fraud, government corruption, and terror financing. The beauty and danger of money laundering is that it touches them all.

Anti-fraud professionals, criminal investigators, tax auditors, government prosecutors, and corporate compliance professionals are all focused on different aspects of these actions, oftentimes missing the larger picture due to an incomplete understanding of what money laundering is, how it works, and who is involved. It is important to understand the meaning, role, and history of this kind of activity to see how it began and evolved to impact a wide range of business functions. Today money laundering is a criminal business, with the emphasis on the business aspect. To merely look at one statute or another, or focus on the criminal elements involved, significantly misses the point. Today the attraction to money laundering is profit—it is a service-oriented business where readily available knowledge can position people to make significant profits with little perceived risk.

This chapter explores the origins and evolution of money laundering, tracing ...