How does money laundering work?

When a criminal comes into ill-gotten money through political influence-peddling or drug trafficking, they have to get creative to
stay on the right side of the law. If they just pop it into a bank account, the feds will be knocking on their door by sunset. So they use a process called money laundering, cleansing dirty money of its criminal origins. Investopedia breaks down the two most common methods: simple and complex. First, the easy way. Let’s say a drug dealer has $5,000. And let’s say his friend or associate owns
a pizza parlor. The restaurant can gradually mark up its earnings artificially by $5,000 and then deposit that dirty money in the bank without attracting suspicion, or, at the very least, have documentation to back up its earnings. Oftentimes, crime organizations own these front businesses, serving as pass-throughs for filthy dough. Now, the second, more complex route called “smurfing.” Since federal law requires any deposit over $10,000 be flagged by bank officials, criminals have to break that big chunk of bucks into bite-sized deposits. Like in the show “Claws,” where a pill mill is getting too much cash, too quickly, they do frequent bank runs placing that cash into one or many different bank accounts in smaller sizes to avoid attention. As for the name, smurfing, the University of Kentucky explains: Congress tried to stop the smurfs in 1987, but it hasn’t worked very well. The last step to all this? After criminals go the simple or complex route, they have to decide how to get their money back. They can simply pull it out of the bank in the guise of a legitimate personal or professional transaction. If they’re concerned about detection, they
can transfer the funds to yet another account, onshore or offshore, before withdrawing the money. Or, if they’re super sneaky, make a big purchase like an office building, and then have their front business pay for it, giving them a paper trail, a giant profit and a pocketful of freshly laundered cash.

Zane Wilson

36 Responses

  1. That's not illegal its cash money. Someone already payed tax on that. Nobody is asking this question why are we paying tax on same money over and over and ducking over

  2. THANK YOU so very much in explaining this “illegal” activity. I found this way more informative than the TED-Ed segment version of this and their Al Capone animation was too distracting, again many thanks!!!

  3. You could also gamble for a BIG jackpot and when you win, you report that as income, hiding behind your legitimate occupation. Now you have a bunch of legitimate cash sitting in your bank account acquired through illegitimate cash. If you use a debit/credit card and you have to use illegitimate cash, spend the cash instead (hiding behind your occupation of course) and your bank account will grow in size.

  4. Basic foundation into building a financial organization. Independent corporations. U have to start as a Incorporated private corporation. To minimize the fines and penalties. That comes from growing in multi Zillion Dollars market. Owner. Witch other companies can't compete. With buisness strategy. In marketing. Advertising . And technology.

  5. You should join us this March 20-22 for the Monterey Threat Financing Forum!
    Director of OFAC, Andrea Gacki will be our keynote speaker and attendees are eligible to earn 12 CAMS credits. Topics include terrorism financing, sanctions evasion, WMD proliferation financing, blockchain forensics, and more. You won't want to miss it!

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  6. OR– you could come live in B.C. Canada, the money laundry capital of N.America and maybe the world. You launder it by buying million
    dollar houses. Cash is ok, in B.C. we consider cash a lot better than mortgage money.
    BUT– Our new honest provincial government is trying to clean scum money up. But you have 9 more provinces left. The federal government is like the old scum government of B.C., so it makes it easy.
    In Canada, we see no evil, speak no evil and hear no evil. So what are you waiting for? We in B.C. have a huge underground economy also.
    Want to build a high rise? We have more work for cash workers than all of Canada except for Ontario.
    As they say on the game show:— COME ON DOWN!!!!!!

  7. Why wouldn't the criminal just keep the illegally obtained cash instead of depositing it into a bank and then having to pay income taxes on it?
    The crooks could then just travel to different countries and spend the cash lavishly there. Last time I checked, most places still accept cash.

  8. For an even easier method, try simply throwing your money in the washing machine with a hearty cup of bleach. Watch that dirty money come out sparkly clean.

  9. Does this count as money laundering?

    I have a business that uses a particular type of equipment that doesn’t depreciate. I buy way more of that equipment than is necessary so that my business revenue and expenses for the year is zero. But I go and sell that equipment for cash and pocket it tax free.

  10. This topic always interests me let’s say I have 20k from drugs or something

    Could I just go open 4 bank accounts with

    Citizens bank
    TD bank
    Wells Fargo

    And deposit 5K into each one without drawing attention?

  11. I do not understand this at all. What is the difference between Loan Sharking and money laundering it appears the Bank is involved like a Loan Shark. OK I would not want to get involved illegal money dealings.

  12. It's more complex your tube videos don't exactly explain it even though your money is laundered you still have to pay taxes on it

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