Money laundering is illegal because it is a form of financial fraud. It is just done to disguise the source of certain funds. Someone opens a business, like a local restaurant, and then inflates charges and bills to make it look like all of their money came from that business.
But why do they need to engage in money laundering in the first place? They clearly already possessed the funds, whether they got the money legally or not. What is the point of laundering it to change the source?
Legitimate vs. illegitimate funds
The goal of money laundering is simply to make it so that the person can use the money and that it appears to be legitimate. This covers up the criminal activity that was actually the reason for those earnings in the first place.
For example, say that someone in West Virginia is making money selling illegal drugs on the side. They can’t report this income to the IRS, so it could raise serious questions if they suddenly start spending hundreds of thousands of dollars with no record of how they earned it. Maybe they technically have a part-time job where they just make $20,000 a year. If they buy an $80,000 sports car, it raises red flags.
By creating a shell company and running the money through it, however, the person makes it look like they legitimately earned the money that actually came from those drug sales. They can then report it as business income to the IRS, and they can spend it as they wish.
Are you facing charges?
Those facing accusations of money laundering or other financial crimes need to be well aware of the legal defense options they have moving forward.