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What is money laundering?

On Behalf of | Mar 3, 2020 | White Collar Crimes |

If you are a fan of old mobster movies, then you may know a little something about money laundering, which is often talked about in such movies. However, films may not explain it clearly, leaving you wondering exactly what money laundering is and how it happens. You may also be unclear as to how money laundering is a crime.

According to Money Crashers, the basic idea of money laundering is taking money from an ill-gotten source and moving it through legitimate channels to not make the amount of money obvious and hide the source. Essentially, it is a way for someone to move money through the financial system without raising alarms.

Many times, money laundering occurs because it allows criminals to make a legitimate tax return for the money obtained through illegal means. This allows the person to freely spend the money without attracting the IRS’s attention, which would think it odd that someone living so nicely is not filing a tax return. It also makes it more difficult for law enforcement to trace the money back to the source and link the suspect to criminal activities.

The risks

Money laundering is illegal because of its ties with illegal activity. Those who launder money often work for large criminal organizations. It is a common act of terrorists and drug traffickers. However, money laundering may also happen when just one person embezzles money from an employer or another source that put him or her in a trusted financial position.

There is always a high risk of law enforcement or the IRS catching you. If caught, you could face a fine of at least $500,000, which will be difficult to pay because the government will seize your laundered funds. You may also face up to 20 years in prison. There are also civil penalties that add to the amount of fines and fees that you have to pay.