Money laundering is the process by which the true origin and ownership of unjustly obtained money is concealed. It often involves the use of anonymous legal persons, shell companies, offshore bank accounts, and other financial instruments to disguise the source of the money and make it appear to have been obtained legally. It is a criminal offence in most countries and carries severe penalties. Criminals may also use money laundering to move large sums of money across international borders in order to evade taxation or to avoid detection by law enforcement authorities.
The different steps involved in money laundering include placement, layering, integration and structuring. Money laundering is implemented in a practical setting by the placement of cash or other monetary instruments into the financial system, usually by making deposits in a bank or other financial institution. Money then moves through a series of financial transactions to obscure the source of the funds and make it difficult to trace the money back to its original source. Said funds are the reintroduced into the legitimate financial system in a way that makes it appear to be a legitimate business transaction. A series of small deposits or transfers of money is often made in order to avoid detection by law enforcement or financial institutions.
Money laundering is typically enabled by criminals, financial institutions, and other professionals who help to conceal the origin of illicitly obtained money. To protect the integrity of the financial system, transparency and good governance is promoted whilst wrongdoers get penalized. These wrongdoers are not exclusively limited to the beneficiary of the funds. Handling the proceeds of crime may trigger liability. This is where financial institutions all around the world are being penalized or even closed for failure to protect the integrity of the financial system. There has also been an increase in prosecutions or civil recovery actions against professionals such as real estate agents, corporate service providers and lawyers.
If a bank is found to be involved in money laundering, it could face serious consequences, including liquidation or receivership. Regulators can take action against banks that are found to be involved in money laundering, including civil or criminal penalties, restrictions on activities, or the forfeiture of assets. In some cases, the regulator may decide to close the bank and liquidate its assets to recoup any money that may have been laundered. The regulator and the other creditors of the bank then come into conflict over the repayment of account deposits and the collection of civil penalties.