Money laundering is a crime that involves taking money derived from criminal activities and moving it through different financial institutions to “clean” it up so authorities cannot trace its ill-gotten origins. The first stage of this process is placement. This is when money launderers first introduce their money into the financial system.
If you own a business or deal with money as part of a large company, you likely know that the federal government has requirements when it comes to depositing large sums of money. Money Crashers explains how government agencies try to uncover placement and how criminals attempt to avoid it.
Government efforts to detect placement
Since money launderers generally seek to clean up large amounts of money, the federal government has laws in place to detect these activities. If someone deposits more than $10,000 into a bank in a day, the Bank Secrecy Act requires the bank to report it to the Financial Crimes Enforcement Network. Cash withdrawals, money orders and cashiers’ checks exceeding $10,000 also merit reporting. In general, banks must keep records of unusual financial activities or even report them to the government.
Attempts to avoid government detection
Given that the government is on the watch for large transactions, criminals try to evade detection by breaking down large cash amounts into smaller portions and then depositing them into banks over time. They may also try to use electronic deposits to get around reporting requirements, although the banks could still notice the activity and notify the government.
Another alternative is to use other financing types such as cryptocurrencies since they are not subject to the same kinds of federal regulation. However, government scrutiny of money laundering sometimes ensnares a person who has made a small deposit or is using cryptocurrency with no ill intentions. It is crucial to keep good financial records as you may need them in a possible legal defense.