How to Launder Dirty Money
If you’re like me, you’ve gone through Money Laundering 101 on popular shows like Ozark and Breaking Bad .
Money laundering, of course, does not refer to the literal disinfection of your money – laundering is the process of making illegally obtained money look like it came from seemingly legitimate business transactions in order to avoid the wrath of the IRS or law enforcement. While we here at Lifehacker never dreamed of supporting financial crime, here’s what you need to know about how people launder money these days.
What is money laundering?
As we have said before , money laundering is the process of displaying money obtained illegally, such as from the sale of drugs, as if it were earned legally. There are several different channels for clearing dirty money, but there are usually three main steps: placement, layering, and integration. Here is a quick overview of how each stage works:
1. Accommodation. This is where dirty money is put into seemingly legitimate assets. This is where criminals initially invest their wealth in the financial system, and this is where they are most vulnerable to capture.
2. Layering. This move should further distance the money from its dirty origins. These can be transfers between several bank accounts, as well as making expensive purchases. Casinos are a prime example of stratification, as large sums of money will change hands, essentially being laundered over and over again every night. A savvy money launderer will create a complex network that is difficult to trace, such as transferring money to one offshore account, then transferring it to a shell company, then to another shell company, and so on and so forth.
3. Integration. Once the money is cleared, it can be integrated into the main financial channels. The original criminal can now access his money through perfectly “legitimate” channels, such as buying property or another shell company for even more laundering.
Money laundering methods
The most obvious image of money laundering is some kind of cash business, like a car wash or a strip club. There are countless ways to launder money, and the digital age has only made it easier for professionals to launder money. Here are some of the most common methods and channels that people use to launder money:
- Masking dirty money through gambling in casinos, investing in real estate, or opening shell corporations.
- The use of “smurfs”, in other words, the exchange of dirty money in small chunks, to make it difficult to detect a large amount of funds.
- Trade laundering when they mess with the price and quantity of imports and exports to create a paper trail of false profits.
- Owning a bank or mortgage company where they can transfer money between financial institutions quite easily.
- Opening foreign accounts and using exchange rates.
- Perpetrating online banking fraud by transferring money directly to the victim’s account and then making unauthorized payments from their account.
- Download and redeem online payments, such as prepaid gift cards.
Fundamentals of money laundering
Money laundering is a key operation of organized crime and it is evolving: new technologies and cryptocurrencies give launderers new ways to get around the ever-changing system. At the same time, law enforcement and government agencies continue to adapt to the detection of money laundering schemes. And while we had some fun here today, remember that money laundering is a highly illegal activity. Not every “how to” article is an endorsement.