Money laundering typically involves transferring money through several countries in order to obscure its origin. The expression first appeared in a judicial or legal context in 1982 in America in the case of US vs. $4,255,625.39.16 Money Laundering as a crime attracted the interest in the 1980s, essentially within a drug trafficking context. Money Laundering is a largely secretive phenomenon. The exact number of launders that operate every year, how much money they launder in which countries and sectors, and which money laundering techniques they use is not known. Although money laundering is impossible to measure with precision, it is estimated that US$300 billion to US$500 billion in proceeds from serious crime (not tax evasion) is laundered each year.

“Placement” refers to the physical disposal of bulk cash proceeds derived from illegal activity. This is the first step of the money-laundering process and the ultimate aim of this phase is to remove the cash from the location of acquisition so as to avoid detection from the authorities. This is achieved by investing criminal money into the legal financial system by opening up a bank account in the name of unknown individuals or organizations and depositing the money in that account moving money to offshore bank accounts in the name of shell companies, purchasing high value commodities like diamonds and transferring the same to different jurisdictions. Now, Electronic Funds Transfer (EFT) has become boon for such layering :

refers to the reinjection of the laundered proceeds back into the economy in such a way that they re-enter the financial system as normal business funds. The launderers normally accomplish this by setting up unknown institutions in nations where secrecy is guaranteed. Money launderers often send money through various “offshore accounts” in countries that have bank secrecy laws, meaning that for all intents and purposes, these countries allow anonymous banking. A complex
scheme can involve hundreds of bank transfers to and from offshore banks. According to the International Monetary Fund, “major offshore centers” include the Bahamas, Bahrain, the Cayman Islands, Hong Kong, Antilles, Panama and Singapore, n. The money-launderers appear to be serious researchers and the officials appear to be mere readers of research reports.
Money laundering is a ubiquitous practice. The United Nations Office on Drugs and Crime reckons that somewhere between $800 billion and $2 trillion goes through the rinse cycle every year [source: The Economist]. That’s in the neighborhood of 2 to 5 percent of the entire planet’s GDP! The rise of global financial markets makes money laundering easier than ever— countries with bank-secrecy laws are directly connected to countries with bank-reporting laws, making it possible to anonymously deposit “dirty” money in one country and then have it transferred to any other country for use. The most common types of criminals who need to launder money are drug traffickers,embezzlers, corrupt politicians and public officials, mobsters, terrorists and con artists. Drug traffickers are in serious need of good laundering systems because they deal almost exclusively in cash, which causes all sorts of logistics problems

1. Placement: At this stage, the launderer inserts the dirty money into a legitimate financial institution. This is often in the form of cash bank deposits. This is the riskiest stage of the laundering process because large amounts of cash are pretty conspicuous, and banks are required to report high- value transactions

2. Layering: This involves sending money through various financial transactions to change its form and make it difficult to follow. Layering may consist of several bank to -bank transfers; wire transfers between different accounts in different names in different countries; making deposits and withdrawals to continually vary the amount of money in the accounts; changing the money’s currency; and purchasing high value items (boats, houses, cars, diamonds) to change the form of the money. This is the most complex step in any laundering scheme, and it’s all about making the original dirty money as hard to trace as possible.

3. Integration: At the integration stage, the money re-enters the mainstream economy in legitimate looking form — it appears to come from a legal transaction. This may involve a final bank transfer into the account of a local business in which the launderer is “investing” in exchange for a cut of the profits, the sale of a yacht bought during the layering stage or the purchase of a $10 million screwdriver from a company owned by the launderer. At this point, the criminal can use the money without getting caught. It’s very difficult to catch a launderer during the integration stage if there is no documentation during the previous stages.

Drug trafficking and terrorist organizations. The effect of successfully cleaning drug money is clear: More drugs, more crime, more violence. The connection between money laundering and terrorism may be a bit more complex, but it plays a crucial role in the sustainability of terrorist organizations. Most people who financially support terrorist organizations do not simply write a personal check and hand it over to a member of the terrorist group. They send the money in roundabout ways that allow them to fund terrorism while maintaining anonymity. And on the other end, terrorists do not use credit cards
and checks to purchase the weapons, plane tickets and civilian assistance they need to carry out a plot. They launder the money so authorities can’t trace it back to them and foil their planned attack.

securing a bid by depositing a sum of money in a well established bank. When the buyer (money launderer) later backs out of the deal, thebank issues a check for the security, effectively sending back clean moneymoney laundering is all about disguising thesources of wealth “micro-laundering,” a practice that involves atomizing the money into quantities so small that by the time its reassembled, the electronic path it took is too dizzyingly complex to follow.

Crypto-cleaning is still in its infancy and is reckoned to account for just a fraction of all money laundering. After all, crypto-currencies, like Bitcoin, are really just forms of data. And if law enforcement officials are diligent and clever enough, they can follow that data back to its source.

This system, which has been called,”perhaps the largest, most insidious money laundering system in the Western Hemisphere,” came to light in the 1990s [source: Zill and Bergman]. A Colombian official sat down with people in the U.S. Treasury Department to discuss the problem of U.S. goods being illegally imported into Colombia using the black market. When they considered the issue alongside the drug- money-laundering problem, U.S. and Columbian officials put two and two together and discovered that the same mechanism was achieving both ends. This complex setup relies on the fact that there are businesspeople in Colombia — typically importers of international goods — who need U.S. dollars in order to conduct business. To avoid the Colombian government’s taxes on the money exchange from pesos to dollars and the tariffs on imported goods, these businessmen can go to black market “peso brokers” who charge a lower fee to conduct the transaction outside of government intervention. That’s the illegal importing side of the scheme. The money laundering side goes like this. A drug trafficker turns over dirty U.S. dollars to a peso broker in Colombia. The peso broker then uses those drug dollars to purchase goods in the United States for Colombian importers. When the importers receive those goods (below government radar) and sell them for pesos in Colombia, they pay back the peso broker from the proceeds. The peso broker then gives the drug trafficker the equivalent in pesos (minus a commission) of the original, dirty U.S. dollars that began the process. Structuring deposits: Also known as smurfing, this method entails breaking up large amounts of money into smaller, less-suspicious amounts. In the United States, this smaller amount has to be below $10,000 — the dollar amount at which U.S. banks have to report the transaction to the government. The money is then deposited into one or more bank accounts either by multiple people (smurfs) or by a single person over an extended period of time. Overseas banks: Money launderers often send money through various “offshore accounts” in countries that have bank secrecy laws, meaning that for all intents and purposes, these countries allow anonymous banking. A complex scheme can involve hundreds of bank transfers to and from offshore banks. According to the International Monetary Fund, “major offshore centers” include the Bahamas, Bahrain, the Cayman Islands, Hong Kong, Panama and Singapore. Underground/alternative banking:
Some countries in Asia have well established, legal alternative banking systems that allow for undocumented deposits, withdrawals and transfers. These are trust-based systems, often with ancient roots, that leave no paper trail and operate outside of government control. This includes the hawala system in Pakistan and India and the fie chen system in China

These are fake companies that exist for no other reason than to launder money. They take in dirty money as “payment” for supposed goods or services but actually provide no goods or services; they simply create the appearance of legitimate transactions through fake invoices and balance sheets.

Launderers sometimes place dirty money in otherwise legitimate businesses to clean it. They may use large businesses like brokerage firms or casinos that deal in so much money it’s easy for the dirty stuff to blend in, or they may use small,
cash-intensive businesses like bars, car washes, strip clubs or check-cashing stores. These businesses may be “front companies” that actually do provide a good or service but whose real purpose is to clean the launderer’s money.

This method typically works in one of two ways: The launderer can combine his dirty money with the company’s clean revenues — in this case, the company reports higher revenues from its legitimate business than it’s really earning; or the launderer can simply hide his dirty money in the company’s legitimate bank accounts in the hopes that authorities won’t compare the bank balance to the company’s financial statements. In two important respects, the art market is tailor-made for money laundering — it has long cultivated a tradition of secrecy and it often involves the transfer of large sums
of money. By contrast, in the world of real estate, the buyer, the seller and the broker are all subject to strictly enforced legal obligations to disclose who they are, what’s being bought and for how much. But in the art world, few such rules apply. Sometimes auction houses don’t know who owns the article they’re selling or even who they’re selling it too Fighting money laundering is like playing a vast game of whack-a-mole.