How money laundering works

Do you want to know what money laundering is and how it works? You can read about it here!

Money laundering is the process of the substitution of the real illegally earned money by the fictitious legal money. So what are the money laundering stages and how does it work?


The stages of money laundering

1. Placement. The criminals put their illegal money into the legitimate financial institutions as the bank deposits in cash.

2. Detachment. How online money laundering works? By using e-money, the transactions are sent between different accounts and are transformed into another currency, which is used to buy something in order to change the form of money.

3. Integration. This is the final stage. The laundered money are introduced into the economy as the legitimate by being transferred to the bank accounts of the companies which were used for laundering or by selling expensive goods, which were bought during the second stage.

Facts about money laundering

Money laundering takes place on a daily basis all over the world;


Billions of dollars are laundered through the financial institutions every year;

Money laundering involves the illegal activities of criminals responsible for the financial transactions to hide the true owner of money, making it look like as if the money came from a legitimate source;

Banks and other legal structures get really suspicious if people are constantly transferring large amounts of cash;

The transaction should look legitimate; otherwise, the legal structures will keep track of the money and freeze it.

READ ALSO: What is money?

Method 1. Structured deposits

Large amounts of money are divided into small parts (less than 10,000 dollars) and are deposited in different banks at different times. In the US it’s not allowed to make a transaction exceeding $10 000 at the same time. Otherwise, the bank is obliged to report these transactions to the federal government.

Method 2. Foreign banks

This method uses the underground banking system. The illegal money is transferred to offshore accounts to the countries, where it’s legal to keep bank secrecy. In other words, those are countries where you can transfer money anonymously.

The banks that are usually used for this purpose are situated in the Cayman Islands, Panama, the Bahamas, Bahrain, Singapore and Hong Kong.


In Asia they have banks that offer an alternative legal system that allows customers to deposit, withdraw and transfer money without any documentation, which makes it impossible to track it.

Who is usually responsible for money laundering?



Corrupted politicians;





Responsibility for money laundering

There are two main methods used by the government to detect and fight money-laundering: the legislation and the law.

money laundering

The main obstacle for catching the criminals is the so-called "Banking secrecy". However, even this privacy doesn’t work that well anymore. Every day we hear something about the revealed laundered money.

There are severe methods of punishing criminals in the US. They get the imprisonment or huge fines that they have to pay.

How money laundering works in India

The Indian laws provide severe penalties for money laundering; but in this case, the account holder won’t get imprisonment. As some investigators note, most of the criminals want to deceive the poor people.

They would pay them 10-15 thousand rupees per month in exchange of taking their documents. "It is a huge amount of money for the poor families. Moreover, they did not know how their personal data will be used", - explains the police.

Bank of Baroda is one of the three largest banks in India, which was used for money laundering. It was founded in 1908 in the principality of Baroda, Gujarat. Along with 13 others India's large commercial banks, it was nationalized by the Government in 1969.

This is one of the leading banks of India, headquartered in Mumbai. It represents a network of more than 3 thousand companies across the country. The bank has more than 34 million customers worldwide. It is represented on five continents in 26 countries. It can also be found in New York, London, Brussels, Hong Kong, Dubai, Singapore, Malaysia and Australia, and other huge cities and countries.


Methods of laundering "dirty" money

"Structuring" — an artificial fragmentation of financial operations across multiple isolated, in small amounts. In this case the funds are transferred, using not only banking institutions, and various post offices, pawn shops and other organizations. The end result is funds are accumulated in one or more accounts where transferred under the entirely legitimate reason a Bank in another country. Another common method of illegal movement of funds remains illegal conversion of funds.

The use of electronic payments , securities, futures and financial derivatives transactions , which are not necessarily directly related to real goods.

The extensive system of so-called fictitious companies. The state registration of such enterprises, as a rule, is carried out on lost and stolen passports or nominee. Further in preparing a complete package of documents submitted to the Bank for opening a current account. On account of the fictitious enterprise, for a certain period of time are accumulated non-cash funds are then transferred to the account of another fictitious firm (or received by check cash).

Answered 1 year ago.

Now and big money is made in ways to launder money. Because the honest way they will not earn much. Now a lot of bandits, who are simply ways squeeze money and it turns out they got them just so, and those people who IMW zarabotaldi honest way than were no s. And it certainly is not true, since there is no Government on these people, who may kill a man for money, or even posuchuvstvovat. That is my opinion, from someone else can. But I believe that this is not correct. Thanks for the article, I think it will be interesting to many.

Answered 1 year ago.

That's right, that there are penalties for money laundering. Although, if I were involved in such activities, and to me it would have been necessary, I would not say that. You know, my opinion is that money laundering involved politicians and civil servants who occupy high positions. And only then go to the bandits, drug traffickers and others. Of course, if eradicated the system of money laundering, the country would have been much richer in the country would remain a large part of the Treasury, which would was to improve living conditions and raise living standards. It is a pity that many think only of themselves and how others survive no one cares.

Answered 1 year ago.
Your comment
Add image

By posting your comment, you agree to the privacy policy and terms of service.