How Money Laundering Works

Key takeaways

• Money laundering means making money from crime look like money earned legally. It works like a washing machine in three steps: soak (placement: getting cash into the system), spin (layering: moving it until the trail disappears) and dry (integration: bringing it back as profit, salary or property).
• Al Capone was never convicted of murder or bootlegging; in 1931 he was convicted of tax evasion and sentenced to 11 years, for money he could not explain. The story that "money laundering" comes from his laundromats is widely considered a myth; the term appears in the US press around 1973 (Watergate).
• In the US, banks must report cash deposits over $10,000 a day, and splitting deposits to avoid that report (structuring, or "smurfing") is a crime in itself, even with clean money.
• According to the US Justice Department, at least $881 million of drug money from the Sinaloa and Norte del Valle cartels moved through HSBC's US bank in 2006–2010, some of it in boxes shaped to fit HSBC Mexico teller windows. In December 2012 HSBC agreed to pay about $1.9 billion under a deferred prosecution agreement; no bank executive was charged.
• The US Justice Department alleges more than $4.5 billion was taken from Malaysia's 1MDB fund in 2009–2015 and turned into a superyacht, mansions, art and even the film The Wolf of Wall Street. Najib Razak was convicted in Malaysia; Jho Low is charged but has not been tried and denies wrongdoing.
• Today's newest machine needs ordinary people: money mules who lend, rent or sell their bank account, ID or e-wallet, or receive and forward money. The account is in their name, so they are often the first to be found. Never lend your account, never forward money for strangers, treat a job that pays for doing nothing as a trap, and ask: where did this money come from?