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Banking Term: Money Laundering

Find important banking term that is useful in upcoming banking exam.

Apr 7, 2015 14:20 IST
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Money Laundering can be described as the process of transforming illegal money into legal money. It is called so because it perfectly describes the washing business-illegal or dirty money is put through a cycle of transactions, or washed, so that it comes out at the other end as legal or clean money.

 

In other words, the course of illegally obtained funds is obscured through a successions of transfers and deals in order that those same funds can be eventually be made to reappear as legitimate income.

Common Factors of Laundering Operations

There are four factors of Money Laundering Operations, which are as follows:

  • The true ownership and the real source of the money is concealed. The purpose of laundering money gets defeated if everyone knows who owns it when it comes out of the other end.
  • The form it takes is changed. The laundered change the form of the proceeds in order to shrink the huge volume of cash generated by the initial unlawful activity.
  • The trail left by the process is obscured so as to make it difficult to follow the money from beginning to end.
  • Constant control must be maintained over the money.

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