Globally and at home, money laundering is illegal, highly profitable—and a big problem.
As indicated by its quaint name, money laundering makes dirty money clean, and can also make clean money disappear into dirty enterprises. It is also an avenue for tax evasion. Money laundering is an international wash-and-rinse cycle of wealth that goes on 24/7 to launder roughly $2 trillion a year.
Why launder money?
A bottom-line aim of any criminal enterprise is to take the money and run. A problem arises when those ill-gotten gains are traced back to the illegal source, scheme, or hack from which they came. The Internal Revenue Service (IRS) offers a straightforward definition of money laundering as “the process of disguising criminal proceeds, and may include the movement of clean money through the United States with the intent to commit a crime in the future.” Cycles of laundering make dirty money clean and return it to the individual, crew, organization, or terrorist group that generated it.
Money laundering involves a host of activities and players, including foreign bank accounts, currency exchanges, nominees who hold assets and engage in activities to maintain the anonymity of the actual owner, offshore tax havens, and more.
The stages of money laundering
While there are endless ways to flow money around and around, the process generally has recognizable stages. Depending on the scheme, money may circulate several times, but the basic steps include:
- Placement: During placement, dirty money is moved away from the scene of the crime and placed into the local or global finance system. The goal is to return the money to the entity that generated the money without the taint of crime. Money may be divided up, blended with clean money, moved by money mules, or placed in various bank accounts in sums small enough to avoid reporting regulations.
- Layering: During this stage, dirty money is routed through layers of financial transactions utilizing offshore bank accounts, shell companies, and other financial tools. Money may be parked or circulated several times to different countries or accounts to gradually erase the original money trail.
- Integration: During the integration or extraction stage, the money is routed into legitimate sources, often through an anonymous or opaque shell company. The money may be invested in commercial entities, used for the purchase of real estate, or luxury items, vehicles, art, or an endless number of high-ticket purchase options. In this way, the money is reintegrated into a legitimate asset pool that is available to the individual or entity that originally generated the money through criminal means.
Movement of money by laundering rids criminal proceeds of its origins and usually, the necessity of paying taxes on the sums. Large or small, money laundering operations are often the focus of IRS Criminal Investigations (CI). If you have wealth associated with tax fraud and money laundering, speak with a skilled tax defense lawyer for information on your exposure and effective legal strategies.
Strategic guidance if you are involved in tax fraud
If you are involved in a money laundering scheme or in a tax controversy with the IRS, our legal team offers strategic guidance for recognizing and resolving challenges with the IRS. Set up a consultation or call us at 440-250-9709. We serve clients across the U.S. and internationally from our offices in Cleveland and Chicago.
For additional support, check out our comprehensive "Understanding Tax Fraud" eBook. This resource is an invaluable tool for anyone navigating the complexities of tax law. You can also learn more about tax evasion and money laundering before engaging with the IRS.
