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Why do people engage in money laundering?

On Behalf of | Jul 25, 2024 | White-Collar Crimes |

When people engage in money laundering, they are taking money that they already possess and making it appear that they got it from a different source. For example, maybe they start a small business, such as a car wash. They then create fake expenses or exaggerate payments, falsifying the paperwork so that it looks like the business is earning more money than it actually is. Next, they just filter the money through this business.

This is a very basic breakdown of money laundering, and schemes can be vastly more complex and full of multiple layers. But what is the end goal? Why would someone need to create the business at all? Weren’t they already in possession of the money that was being laundered?

Changing the source

The goal of money laundering is not to earn more money, but to create a new apparent source for that money.

Often, the problem is that the money was illegally obtained in the first place. Maybe the person was selling illegal drugs that they manufactured themselves. They can’t disclose that activity without facing criminal charges, but they know that they are going to raise a lot of questions with the IRS if they just start spending or deposit that money in a financial account.

The small business, then, is just there to make it appear that they have a legitimate source for these funds. This way, they can actually use the money that they obtained illegally.

Money laundering is a very serious offense and may be compounded by other offenses, depending on how the money was obtained initially. Those facing such charges need to know as much as possible about their criminal defense options.