How is money laundering defined?

Money laundering is best defined as a process that disguises the origins of funds derived from criminal conduct. This process typically involves three stages: placement, layering, and integration. In the placement stage, illegally obtained funds are introduced into the financial system. Layering involves separating the illicit money from its source through a series of complex transactions designed to obscure its origin. Finally, in the integration stage, the laundered funds are reintroduced to the economy as seemingly legitimate money, making it difficult for authorities to trace back to the original criminal activities.

Defining money laundering in terms of legalizing funds or as a method for increasing the value of funds does not capture the essence of the activities undertaken in laundering. Money laundering is fundamentally about concealing the illicit nature of the funds rather than making the funds legal outright or increasing their value. Additionally, suggesting that money laundering is a method to evade taxes on income limits the broader scope of the process, which encompasses a variety of criminal proceeds beyond tax evasion. Thus, the definition emphasizing the disguising of origins from criminal conduct captures the core purpose and mechanisms of money laundering most accurately.