TABLE OF CONTENTS The primary objective in 'laundering' money is to conceal the source of the funds acquired illicitly and convert the funds so that they appear to have been obtained by legal means. This generally involves mixing of illicit funds with the clean funds to avoid detection by the authorities concerned. The stages widely recognised in money laundering are placement of money in the banking system, layering by creating complex structures (usually entailing a chain of bank accounts to throw the authorities off the paper trail) and integration by investing in legitimate business.
It is difficult to estimate the amount of money being laundered across the world. According to the International Monetary Fund (IMF) the aggregate size of money laundering in the world is between two and five per cent of the world's gross domestic product. Using 1996 statistics, the Financial Action Task Force (FATF) (see 3.3)x calculated the money laundered to be in the range of $US 590bn and $US 1.5 trillion.
The term money laundering is believed to have originated from the laundromats owned by the mafia. The funds earned from gambling, prostitution, extortion etc were mixed with the cash earning of the laundromat. These laundromats thus offered an opportunity to wash or launder the tainted funds into clean funds.
In the US a criminal investigation into money laundering was first established in 1919. Tax evasion was rampant during those times as it was not customary for a bank to ask about the source of funds...
