Money laundering moves dirty cash through three stages: placement, layering and integration
Al Capone went down for tax evasion, so gangsters started paying their taxes, and law enforcement needed new tools. Those tools became anti-money-laundering rules, aimed at the process criminals use to make illicit funds look as if they came from somewhere legitimate.
The classic scheme runs in three steps. Placement slips cash into the financial system. Layering shuffles it through complicated transactions, such as wires bouncing across many accounts, to blur where it came from. Integration brings it back out as wealth that appears clean. Not every case needs all three; proceeds already sitting inside the banking system can skip placement entirely.
A favourite placement trick is structuring, nicknamed smurfing: chopping cash into small deposits, or into money orders, to stay under reporting thresholds. Others physically smuggle bulk cash to places with more secretive banks. Cash-heavy businesses make handy fronts, especially services such as car washes, parking garages, bars and arcades, whose low variable costs make it hard to spot a gap between takings and what the business ought to spend.
The phrase once covered only organized-crime transactions, but US regulators now apply it to any transaction that produces an asset from an illegal act, and British law does not even require money, only some economic good. Dedicated laws arrived in the 1980s with the war on drugs, alongside civil forfeiture, which lets authorities seize funds and makes owners prove they are clean; civil liberties advocates condemn it for reversing the burden of proof and letting agencies keep what they take. After the attacks of 11 September 2001, the G7 used the Financial Action Task Force to press governments into monitoring transactions and sharing what they found.
Banks paid dearly for lapses: HSBC took a $1.9 billion penalty in December 2012, and BNP Paribas one of $8.9 billion in July 2014. Australia's AUSTRAC system, set up in 2006, requires every financial transaction to be reported. Criminals adapted as well. Cybercriminals took an estimated US$14 billion in cryptocurrency in 2021 alone, and the US Financial Crimes Enforcement Network tied Chinese laundering networks to more than US$312 billion in suspicious transactions between 2020 and 2024.
Source: Money laundering
