Money laundering

Money laundering is a catch-all term for any activity that tries to convert the proceeds of crime into legitimate money.

Money laundering is a catch-all term for any activity that tries to convert the proceeds of crime into legitimate money. Crimes that generate money illegally include drug dealing, terrorism, tax evasion and fraud. Having committed a crime, a criminal will want to hide the proceeds and make them difficult for the authorities to trace back. That's because criminal proceeds are usually subject to confiscation orders.

This can be done via "layering" transactions designed to conceal the origin of the "hot" money. A classic target for this type of transaction would be eurobonds, which are not personally registered, making ownership harder to trace. Having done a number of layering transactions, the criminal will aim to integrate the sale proceeds from the last one back into the economy by spending the now "clean" money.

Since money laundering is connected with serious crime, the penalties are stiff a maximum of 14 years in prison, coupled with an unlimited fine.

Watch Tim Bennett's video tutorial: What is money laundering?

Recommended

Modern monetary theory (MMT)
Glossary

Modern monetary theory (MMT)

Modern Monetary theory, or MMT, has become popular on the left, both in the UK and abroad. (Wags say that it stands for "magic money tree".) 
21 Sep 2020
Price to sales ratio
Glossary

Price to sales ratio

A company's market cap divided by the company's annual sales (or revenue) gives us the price/sales ratio.
28 Aug 2020
Too embarrassed to ask: what is a p/e ratio?
Too embarrassed to ask

Too embarrassed to ask: what is a p/e ratio?

Find out how to use the price/earnings ratio (p/e ratio for short) – a useful starting place for investors looking to value a company.
26 Aug 2020
Stock split
Glossary

Stock split

A stock split increases the number of a corporation's issued shares by dividing each existing share.
21 Aug 2020

Most Popular

This week’s rally in value stocks is just the beginning
Value investing

This week’s rally in value stocks is just the beginning

The arrival of a vaccine this week saw huge gains in the markets and investors switching out of big-tech growth stocks and into “value” stocks in more…
13 Nov 2020
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
13 Nov 2020
Time for investors to be fearful, not greedy – and sell?
Investment strategy

Time for investors to be fearful, not greedy – and sell?

The Covid-19 crash proved a great investment opportunity. Does the vaccine mean it’s time to sell?
23 Nov 2020