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How does money laundering work?

On Behalf of | Dec 20, 2023 | Criminal Defense |

Money laundering is an illegal process undertaken to hide financial assets that may have been illegally obtained. The United States government states that it involves “disguising financial assets to try to hide the source. By doing this “the criminal transforms the monetary proceeds derived from criminal activity into funds with an apparently legal source.”

When someone obtains money in an illegal fashion, they may realize that they can’t spend it without raising all sorts of questions about where it came from and how they obtained it in the first place. They need to make it look like it came from a legitimate source and that they did have a right to those financial assets. The schemes used to do this can be fairly complex.

A shell business

Often, what happens is that the individual sets up a shell company and runs the money through it. For instance, perhaps the person has actually made their money by manufacturing and selling illegal drugs. They don’t want that to come to light, so they start a business like a local car wash. They then funnel the money from the drug sales through the car wash, altering the paperwork to make it appear that the business was the source of all of this income.

Doing this is illegal on a few different levels. For one thing, the way that the assets were obtained initially may still be illegal. On top of that, this is a type of financial fraud because the reported transactions from the business are not legitimate.

Those who may have been accused of money laundering – even if they think it’s a mistake or a misinterpretation of their financial paperwork – need to know that there can be severe ramifications. It’s very important for them to understand all of their criminal defense options and the rights that they have at this time.