What is Money Laundering?

Money laundering is a process whereby the proceeds of crime are transformed into apparently legitimate money or other assets.  It is said that the term ‘money laundering’ was coined from the practice of the American mafia who, at one time, channelled the cash proceeds of crime through laundrettes to legitimize the cash.  Whether this is true or not, the term ‘money laundering’ is now widely used.

Money laundering has traditionally been viewed as a three stage process.

  1. In the first, or placement, stage proceeds of crime are introduced into the Canadian financial system.  Placement usually occurs by breaking up large amounts of cash into smaller sums that are then deposited into various accounts at financial institutions or used to purchase a series of monetary instruments (travellers’ cheques, money orders, etc.).
  2. In the second, or layering, stage money is converted (or moved) through a web of transactions to disguise it from its source and ownership.  Money may be channelled through the purchase and sale of investment instruments, or wired through a series of accounts at various banks across the globe.
  3. In the third, or integration, stage the money is re-entered into the Canadian economy as apparently legitimate funds and may be used to purchase real estate or luxury assets or to invest in business ventures.