Not everyone earns money by legitimate means. Some people acquire a lot of cash through illegal methods like fraud or selling dangerous substances. However, depositing that money in a bank may alert the authorities to the illegal nature of that money. This is why some white collar criminals engage in money laundering.
The idea behind money laundering is to move cash around so that law enforcement cannot tell that it came from an illegal origin. If the scheme works as the perpetrators intend, the process will launder or “clean” the money, allowing the perpetrators greater latitude to move the money or spend it.
How money laundering works
The Cornell Law School explains that money launderers will send money through a series of transactions that will try to wipe away the true origin of the money. A common way to launder money is by using a shell corporation. These companies claim to offer some kind of service but do not possess any real assets or perform actual services. Money launderers usually deposit their money into a shell corporation using cash payments, which the corporation may return to the launderer or transfer to another shell corporation in an effort to muddy the trail further before it goes back to the launderer.
Types of money laundering crimes
As FindLaw points out, the federal government has aimed its efforts to fight money laundering against various criminal elements like drug dealers, the Mafia, and recently, terrorists. In the 1970s, Congress passed the first round of money laundering laws, including the Bank Secrecy Act, a law that requires financial institutions to notify the Treasury Department of large transactions or of transactions they deem suspicious. Subsequent laws like the Money Laundering Control Act of 1986 and the Patriot Act have broadened the power of the government to fight money laundering.
Because the federal government has passed multiple laws to combat money laundering, a charge of money laundering is likely to be a federal crime. Since prosecutors often link money laundering to other crimes, no one should take a defense against money laundering charges lightly.