Money Laundering

Money laundering converts 'dirty' money — proceeds of crime such as fraud, drug trafficking, or corruption — into funds that appear to have a clean, legitimate source. The process is traditionally described in three stages: placement (introducing the cash into the financial system), layering (moving and converting it through multiple accounts, currencies, or jurisdictions to obscure the trail), and integration (reintroducing it into the legitimate economy as business income, property, or investment returns).

In the context of online fraud, money laundering typically involves networks of money mules whose accounts receive and rapidly forward stolen funds, preventing easy recovery. Cryptocurrency is frequently used in the layering stage because of the speed and pseudonymity of blockchain transactions, though blockchain analysis tools have become increasingly effective at tracing crypto flows.

Anti-money-laundering (AML) regulations require banks and financial institutions to monitor for suspicious transaction patterns and file Suspicious Activity Reports (SARs). Individuals who knowingly act as money mules face serious criminal penalties even if they were not the original fraudster.