How To Understand Money Laundering

When money is not used for proper means, or is invested in things that are illegal, it is considered dirty money. Money laundering is making dirty money appear to have been used for proper means, or to make it seem that the money has come from a legal source through several money transfers or transactions. Its definition differs from country to country, but in general it is defined as any type of financial transaction that generates a value or an asset that is the result of an illegal act that may involve actions like false accounting or tax evasion.

  1. Other definitions. Generally, money laundering is associated with organized crime. But as people became more creative in their ways to sneak around with money for illegal purposes, the law had to be refined. In UK law, they define the act of money laundering as taking any sort of action with any form of property that is either in part or wholly the proceeds from a crime that will conceal the fact that that property has been earned from a crime or hide the true ownership of said property. Anything that disrupts or harms the economy because of the use of money for illegal acts is considered money laundering.
  2. Fraud. Fraud is also a type of money laundering. Being given a false account in the bank or lying on your application for a mortgage loan is bank fraud and mortgage fraud, respectively. If you are not getting the deal you are supposed to get out of a transaction, then you have to be careful because you might become a victim of fraud. There is also credit card fraud, which can come in the form of withholding information in applying for a credit card loan, or for a credit card in general. Although on the other side of the coin, you can become a victim of fraud if you are not careful with your credit card information. Other people can use your information to get what they want with it.
  3. Hiding under business. There are cases of money laundering that go through businesses. Some are legitimate businesses, while others are what people call ‘shell businesses' where they accept the money given and list it as payment for some service they have done, but in truth, there had really been no business transaction. They just make it appear so by having balancing books, and all other necessities to appear to have a business. Sometimes they can exchange the money for a different type of currency and distribute it through international banking to keep it away from prying eyes and to make the money untraceable.
  4. Scams. A scam is also a type of money laundering where companies or groups of people can promise quick money by investing your money, but they do not deliver. Some hide in many forms, like scholarships, high positions in a job, or promos in a store. They can hide in many other forms, but all you have to keep in mind is to have a clear picture of what is being transacted and where all the money will go. If possible, you can ask for the breakdown of the expenses, or better yet, hold on to your money and do further research on the company's name.

With the state of countries these days, you have to be careful. What you need to do is to be careful of your transactions, and to be critical of dubious deals. It is better to be safe than sorry.


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