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What Is Money Laundering? Why Is It So Important To Stop It?
Some Frequently Asked Questions On the Subject.

Since 9/11 money laundering has become one of the media’s favourite themes. Yet money laundering has been one of the largest global socio-economic problems for many years. However there is still a substantial amount of ignorance – and misinformation – on this subject. To try and explain the problem, these are the kinds of questions that are usually asked on the washing of dirty money.

What is money laundering?

The perception that still endures of money laundering is that of a suspicious character turning up at the counter of a bank with a suitcase (probably helpfully labelled Swag) overflowing with used notes. Until recently even more sophisticated analyses of the problem have attempted to reduce the process to a neat three stage technique (placement, layering and integration). It is perhaps only now that it is becoming clear that money laundering is a robust, corrosive, all consuming and dynamic activity that has far reaching consequences and effects. Traditionally money laundering has been viewed (in isolation) as the cleaning of dirty money generated by criminal activity: in the collective mindset these crimes are probably associated with the drugs trade. Of course, money laundering is this, but it is also a whole lot more. To understand and appreciate the all consuming power and influence of money laundering one needs to go back to the purpose of crime. The vast majority of illegal acts are perpetrated to achieve one thing: money. If money is generated by crime, it is useless unless the original tainted source of funds can be disguised, or preferably obliterated. The money laundering dynamic lies at the corrupt heart of many of the social and economic problems experienced across the globe.

Why is this process called "money laundering"?

The phrase probably originated in the United States in the 1920s. Criminal gangs were trying to disguise how they got their money so they took over businesses with high cash turnovers such as launderettes and car washes. Then they mingled their dirty money with genuine "clean" cash receipts. Thus whilst the term laundering is associated today with washing criminal funds, the original use of the phrase was because of the actual use of the real laundering business.

Where does the dirty money that needs to be laundered come from?

Every kind of criminal activity on a global basis. This includes the drugs (illegal narcotics) trade, illegal arms trading, illegal prostitution, corruption, fraud, forgery, armed robberies, blackmail, extortion, arts and antique fraud, smuggling, VAT fraud and trafficking in human beings.

What amounts of money are involved?

In truth nobody knows how much dirty money is being laundered (or attempted to be laundered) on a global basis. Think of it like this: every criminal act anywhere that involves obtaining money illegally produces funds that need to be laundered. In 1999 the United Nations Development Report estimated that organized criminal syndicates made $1.5 trillion each year. So this is a good base figure to work from – but remember this is probably just a start point!

Why is money laundering such a global problem?

Money laundering is an essential follow on from many criminal activities including such hideous acts as human trafficking, the sex trade, extortion, blackmail: but more crucially once the funds have been cleaned they are reinvested in such activities thus perpetuating the most vicious of circles.

Crime can only succeed if the funds generated can be utilized without their true source being known. Moreover, criminal activity continues to expand because the washed funds are then reinvested in the business. Money laundering is the critical tool to enable this. It is a dynamic and robust circular process.

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