What is Money Laundering?
Money laundering refers to the activity which involves the transfer of illegally obtained money into a legal institution, i.e. a bank. In this, money is obtained from criminal activity and carefully channeled into legitimate organizations and businesses in order to disguise its true origin and dodge alerting the authorities.
Occurrence: Money laundering occurs when someone attempts to conceal or disguise the nature, location, source, ownership, or control of the proceeds of crime. Money laundering usually involves two crimes:
· The initial crime from which criminals have benefitted, and
· The crime of trying to legitimize those proceeds by exploiting financial institutions.
Why illegal? Money laundering is illegal because it allows criminals to profit from crime, and it usually involves more than one illegal step to take place.
Law in place: Anti-Money Laundering (AML) refers to the rules and regulations designed to stop the practice of generating income through money laundering. For example, AML regulations require institutions to complete customer due-diligence checks to make sure they aren't aiding money laundering activities.
Global recognition around AML rules and regulations rose when the Financial Action Task Force (FATF) was formed because it set international standards in the fight against money laundering.