Definition
Money laundering is the process of making illegally obtained funds appear legal or legitimate.
Sources of Illegal Funds
Examples include:
- Proceeds from drug trafficking
- Human trafficking and organized crime activities
- Bribery and corruption
- Fraud schemes
- Tax evasion
How Money Laundering Works
Money laundering involves disguising the true source of funds to make them seem like they came from legitimate sources. Criminals accomplish this through creating complex transactions to obscure the money’s origin.
Prevention Guidance for Investment Groups
Consider these critical questions:
- Do I know the source of funds for each investor?
- Have I received documentation or proof to verify the source of funds?
- Is the fund owner in a position to have legally obtained the funds?
Answering “no” to these questions represents a red flag.
