Profit is the motivation behind many types of illegal activity. However, large amounts of money obtained by illegal means can alert authorities to criminal activities. Money laundering is the process of disguising the source of these assets to introduce them into the legitimate financial system.
Money laundering is against the law in itself. Additionally, it also frequently goes to finance other criminal endeavors, often including terrorist activities. There are many methods used in money laundering with the end result of making it appear that the source of the funds is legal.
Offshore bank accounts
Some foreign governments allow U.S. citizens to open bank accounts in their countries. Some Americans do so for legitimate reasons. However, others open offshore bank accounts for money laundering and hiding assets from the U.S. government. Banking in another country makes this easier because there is no way to force foreign banks to report on the interest a U.S. citizen’s offshore bank account has earned.
A shell company presents itself as a legitimate business that provides services for which most people would typically pay cash. However, the company performs no significant operations and has no significant assets of its own. It creates fake receipts and invoices and deposits the money from illegal activities into the company’s accounts.
Evasion refers to the avoidance of paying taxes through illegal means. One could incriminate oneself by reporting profits from illicit activities. Money laundering charges could arise if an individual tries to represent the funds obtained through criminal activities as coming from legitimate sources on one’s taxes.
A holding company exists for owning stock in one or more other companies, whether in whole or in part. Despite the fact that a holding company typically provides no goods or services, it is different from a shell company. Holding companies are not inherently illegal and can serve many legitimate purposes. However, it is also possible to put a holding company to money laundering purposes.
In recent decades, Congress has passed legislation to deter money laundering, such as making it a federal crime in 1986.