Money Laundering 101
It's a good sign that you're not a criminal if you imagine dollar bills in the spin cycle. Money laundering is illegal. We do not condone, endorse, or sponsor illegal and unethical behavior.
Key Takeaways:
Federal law requires any deposit over $10,000 be flagged by bank officials. Criminals have to break that big chunk of bucks into bite sized deposits.
The two most common methods of money laundering are: simple and complex.1
When a criminal comes into ill-gotten money through, let's say political influence peddling or drug trafficking, they have to get creative to stay on the right side of the law. If they just pop it into a bank account, the feds are gonna be knocking on their door by sunset. So they use a process called “money laundering”, a process of cleansing “dirty money” from its criminal origins.
Investopedia.com breaks down the two most common methods you have simple and complex.
The first and more simple way to launder money.
Let's say a drug dealer has $5,000. And let's say his friend or associate owns a pizza parlor that restaurant congratulate marked up its earnings artificially by $5,000. Then deposit that dirty money in the bank without ever attracting suspicion, or at the very least have documentation to back up the earnings. Oftentimes, crime organizations own these front businesses serving as pass throughs for filthy dough.
The second more complex form of money laundering, it's called “smurfing.”
Since federal law requires any deposit over $10,000 be flagged by bank officials. Criminals have to break that big chunk of bucks into bite sized deposits (like on television shows Breaking Bad and Ozark, where illegal drug revenue is getting too much cash too quickly). They do frequent bank runs, placing all that cash into one or maybe many different bank accounts in smaller sizes to avoid attention.
As for that name, “smurfing,” the University of Kentucky law school explains:
The army of persons who scurried from bank to bank to accomplish these transactions became known as Smurfs, because like their little blue cartoon namesakes they were pandemic.
The last step to all this after criminals go to the simple or complex route, they have to decide how to get their money back:
They can simply pull it out of the bank in the guise of a legitimate personal or professional transaction. However, if they're concerned about detection, they can transfer the funds to yet another account onshore or off before withdrawing the money.
Or if they're super sneaky, make a big purchase, let's say buy an office building. Then they have a front business pay for that, giving them a paper trail, a giant profit and a pocket full of freshly laundered cash.
Here is a great explanation given by Marty Byrde (played by Jason Bateman):
https://www.investopedia.com/terms/m/moneylaundering.asp