Busting Five Money Laundering Myths You Thought Were True

The simplest solution to money laundering requires the fewest assumptions. It is time to bust the myths.

Do you know how much illegal money was laundered in 2023? The shocking stats tell that it reached more than $3 trillion and lets not forget the fact that not all laundered money can be traced because of complex operations of mafia-style criminal groups.

The evolution of money laundering can be traced back to the 1920s when Al Capone’s laundromats mixed his drug money with legitimate cash-intensive businesses and invented the term money laundering.

From Al Capone’s saga to modern-day cryptocurrency laundering, there are numerous myths on money laundering and legislation to curb the crime. Are you ready to bust them with me? Let’s debunk them together.

Myth 1: Only Terrorists and Drug Dealers Launder Money

The diverse problem of money laundering can not be limited to drug dealers and terrorists as they present only a portion of the total laundered illegal proceeds which cost up to 5% of global GDP annually.

Money laundering happens to hide the origin of various crimes not limited to selling drugs or motives to support terrorism, the dirty money can be generated from human trafficking, fraud, corruption, tax evasion, and so on.

Myth 2: Only Large Sums of Money Is Laundered

Whenever the words money laundering are heard, it echoes a visual of a huge pile of cash stored in a warehouse or under the mattress but not all money is laundered in bulk as it can easily attract the federal investigating agencies.

Masterminds behind such proceeds of hiding the origin of their illegal money, know their job and design foggy but simple ways to launder the proceeds such as in several small transactions dubbed as Smurfing.

To do the job, fraudsters hire money mules or middlemen who facilitate anonymous small transactions for the placement of illegal money. The small and consistent transfer of money results in a huge amount of money that gets laundered, narrated by the FATF (Financial Action Task Force).

Myth 3: Money Laundering Happens Only In Developing Countries

Undoubtedly the shocking stats of money laundering risks in developing countries are concerning but the issue is affecting the stability of the global economy and financial systems in both developing and developed countries.

Developed countries are not free from the shackles of sophisticated crimes. In 2022, more than 1000 were sentenced in the federal system, as reported by the United States Sentencing Commission.

The failed AML in Denmark’s largest bank, Danske Bank, is just one of the examples showing increasing money laundering risks in developed countries like the United States, United Kingdom, and Europe.

Myth 4: Cryptocurrency Is The Mother of Money Laundering

Crypto is considered to be the modern originator of money laundering because of its anonymous operational nature and veiled identities of funds’ senders and receivers.

According to Chainalysis, the year 2023 witnessed a flow of illicit crypto transfers worth $22.2 billion which contributed merely 0.47% of total laundered illicit money in 2023.

What about the rest of it? Shell companies, cash transactions, and trade-based traditional money laundering ways are prevalent in causing chaos in the global financial system.

Myth 5: Impact of Money Laundering Does Not Reach Ordinary People

The general perception says that money laundering affects only those who launder them or the ones who fight against it. Contrary to that, the global issue has significantly deteriorating impacts on the economy and society.

The success of illicit proceeds getting laundered motivates criminals to expand their illegal activities including drug production, tax evasion, corruption, and fraud that directly influence the destabilization of societies and financial institutions.

Whether it’s a distant corruption by a politically influenced person or money laundering of drug proceeds, the impacts are far-reaching to the roots of societies with increased crimes and unstable financial operations.

The truth lies behind the myths and the need for ensuring anti-money laundering compliance is not a mere requirement to fill boxes on a paper but an ethical requirement by every institution involved in the global economy. Effective AML compliance solutions are the answers to this spreading epidemic.

The current situation of prevailing money laundering myths and challenges requires the implementation of a Greek Mythology — The Gordian Knot. Finding a solution to the problem requires out-of-the-box thinking and unconventional yet bold steps.

Follow us to uncover the underlying truths of the AML compliance world.