How money laundering works
The usual description has three stages, though real schemes blur them.
- Placement: criminal money enters the financial system, as cash deposits, top-ups or purchases of crypto-assets.
- Layering: transfers between accounts, companies, countries or blockchains break the trail.
- Integration: the money returns as apparently lawful income, property or investment.
Money laundering through payment and crypto products
Payment products are used at every stage. Common patterns are money mule accounts, many small deposits kept under a threshold, shell companies invoicing for goods that never moved, and merchants processing payments for someone else's business.
A public blockchain records every transfer, which helps investigators, so launderers work to break the link between addresses. They use mixers, swap between assets and chains, pass funds through services with weak checks, and cash out through accounts opened in other people's names.
What the law says about money laundering
In the EU, the directive counts conduct as money laundering even where the underlying crime took place in another country, and lets knowledge and intent be inferred from objective facts (Article 1). In the UK, the Proceeds of Crime Act 2002 makes it an offence to conceal, disguise, convert or transfer criminal property, punishable with up to 14 years in prison (sections 327 and 334).
Regulated firms carry preventive duties on top: know the customer, monitor transactions and report suspicion. A firm can be penalised for weak controls even where no laundering is shown.
Money laundering, terrorist financing or fraud?
- Terrorist financing
- The money may be lawful in origin. What is criminal is its purpose, so the amounts are often small and the source clean.
- Fraud
- One of the crimes that produce the money. Laundering is what is done with the proceeds afterwards.
- Sanctions evasion
- Hides the involvement of a sanctioned party. No proceeds of crime are needed for a breach.
Where Money laundering shows up in a platform
Modules that do the work
- KYC / AMLIdentity checks, screening and ongoing monitoring, with the verification provider you choose.
- Fraud & riskReal-time fraud scoring, limits and case management, with the risk engines you already trust.
- Compliance reportingTransaction monitoring, the Travel Rule and regulatory reports, ready for your regulator.
- Analytics & monitoringProduct analytics, attribution, engagement and crash reports, on a tracking plan you control.
Platforms that need it
Where it is written
The laws and standards this page's facts come from.
- Directive (EU) 2015/849, the Anti-Money Laundering Directive, consolidated (EUR-Lex)
- Proceeds of Crime Act 2002, Part 7: money laundering (legislation.gov.uk)
General information, not legal advice: what applies to you depends on your services and your market.