Large scale money laundering is typically associated with drug cartels, organized crime and terrorism. But small-scale money laundering isn’t uncommon and the penalties can be severe. While money laundering investigations and trials are rare, many commonplace transactions will raise a red flag.
Indeed, you will likely raise a few money laundering red flags over the course of your life, resulting in at least a second glance by your bank. Most of these instances are quickly ruled out, though occasionally, there will be a more in-depth follow-up.
What is “money laundering?”
This refers to the act of taking “dirty” money, often in the form of cash, and making it appear “clean,” or laundered. Dirty money refers to money acquired through unlawful activities, like drug dealing or the sale of stolen items.
You can’t just deposit a massive pile of cash at your bank every week without attracting attention, and you can only do so much with large amounts of cash in daily life in this era of digital payments, so you hide the source of the money in various ways before depositing it in the bank. On a large scale, this can involve shell companies and fake transactions. But people can launder on small scales, sometimes unintentionally.
Let’s say you have $500 in cash earned at an under-the-table job. You want to buy your friend’s old TV for $250, but your friend is also leaving for a bachelor party in an hour and needs cash. So, you give your friend the whole $500 and they write you a check for the extra $250, which you deposit in your bank. You just laundered $250. At such a small amount, no one will notice, but add a few zeros under different circumstances and the bank will have questions.
There is no minimum amount that qualifies as “money laundering”
Surprisingly, the actual amount of money laundered may not make a huge difference when one is being prosecuted. What matters more to the judge is intention.
What activities will raise a red flag?
Commonplace activities that will raise a red flag include depositing more than $10,000 in cash into your bank account and spending more than $300,000 in cash in a real estate transaction. You’ll also be stopped if you bring more than $10,000 in cash into the U.S. without declaring it.
The rise of cryptocurrency
With cash becoming more and more difficult for criminals to work with, illicit transactions have moved to cryptocurrency. If you’re only making small transactions or investments in crypto, you are probably going to be fine. Large transactions will be deemed suspicious, so if you are ever involved in a transaction of that nature, be sure to keep exhaustive documentation.
If you are flagged for investigation
In the unlikely event that one of your transactions warrant a follow up with law enforcement, you’ll want to enlist the help of a lawyer.