Money Laundering in the United States


Money laundering is defined as the processing of criminal proceeds to camouflage their unwarranted origin. Money laundering is one of the significant challenges faced by the United States in the current times. It entails the Act of giving money in an illegitimate process. Criminals have mastered committing such fraudulent crimes, where banks are the most used platforms for committing the crimes. Each year the U.S. loses between $500 billion and a trillion dollars. Most of this money is generated through international banks and financial institutions (Shashiashvili, 2012). This is an issue faced by many countries worldwide and hence ought to be comprehensively addressed to ensure that sustainable solutions to the challenge are attained. Nevertheless, numerous efforts have been made to disguise the nature and origin of the illicit income generated and integrated into the financial system without drawing attention to the tax authorities or the law enforcement agencies. Most laundered money is from illegal criminal activities, including cybercrime, trafficking, and corruption, among many other crimes, where there is the concealment of the income from the public authorities.

One of the most severe problems faced by the United States is money laundering. The primary source of laundering funds comes from the accessibility of the country’s financial system.  Criminals have mastered the art of committing such fraudulent crimes, where trade-based money laundering is one of the most used methods by criminals.Trade-based money laundering is the operation of disguising the crimes earnings and moving money by using trade transactions to validate their interdicted source. Banks are the most platforms used for money laundering in the country. As a result, the government has undertaken advanced measures to combat terrorist financing and money laundering (Lam & Greenlees, 2017). One of the government’s measures was enacting The USA Patriot Act of 2001, which requires all banks to establish Anti-Money Laundering (AML) programs (Mackinnon, 2020). Such an act was intended to help prevent, detect, and prosecute money laundering cases.

Given the nature of the issue, the best approach to use is the Law Enforcement perspective. There should be more laws and regulations enacted to help minimize the surging cases of money laundering. The issue of money laundering is a significant challenge faced by the U.S. and the entire globe and hence needs sustainable solutions, which help curb this crime rate. Many of the criminals evade paying the taxes and use e of the cash initiative business such as casinos in concealing the origin of the funds. Despite numerous acts and legislation passed in the U.S., there remains a gap in the laws. It could significantly help ensure that money laundering cases are minimized (Le Nguyen, 2018). Having a well-laid system and regulations in place can also help the country provide the financial systems’ stability. It can also help the country quickly collaborate with other nations to develop and initiate a coordinated response to tackle money laundering. Therefore, the legislature needs to enact more acts by the legislature to provide sustainable solutions that will help minimize the money laundering cases in the country (Young & Woodiwiss, 2021). There are also more strategic measures both by the state and other non-state actors to ensure that action plans are in place to help curb the crime. Excellent laws and regulations will ensure that it is easy to arrest and prosecute the preparators through excellent procedures and make sure that they are severely punished for their acts.

Background of money laundering in the United States

Money laundering was first coined at the beginning of the 20th century. The term was used to define and label the operations intended to illegally conceal the incomes derived from illicit activity, hence facilitating the entry of such money into the economy’s monetary flow.  Money laundering appears like a simple activity that launderers use to cover their financial criminal activities proceeds. However, money laundering has three stages, as stated by United Nations Office on Drugs and Crime (UNODC). The three stages are Integration, Placement, and Layering. In the placement stage, launderers transform cash into assets like checks or postal orders to cover up the connection between the source and the cash. In Layering, the mission is to conceal the source, ownership of funds, and the audit trail. Thelaunderers form different financial transactions and create complex layers to achieve their mission. During the last stage, Integration, assimilation of the cash with other assets of the financial system by the launderers is achieved.The center of money laundering processes is the banking system. Therefore regulation and policies used in the banking system are the main factors to fight money laundering activities.

Money launderers have various methods to launder money obtained through illegal activities. Structuring is one of the methods used by launderers whereby they transfer capital to other countries. Structuring is performing varying transactions to avoid reporting obligations such as Bank Secrecy Act. Launderers prefer countries reporting and detecting large money transactions is less controlled. Shell corporations and offshore is the other method money launderers use to launder money. Banking Secrecy Act, its legal immunities, and taxing have advantaged money launderers in free zones and offshore centers.Money laundering could be build-up from shell corporations. Shell corporations conduct undersized businesses, and they exist only on the papers. Money launderers use both shell corporations and offshore centers to launder money. For example, a money launderer can buy assets and real estate and later sell them to the same shell corporations.

Informal economic values in the most country have greatly supported the evolution of money laundering activities. An informal economy is defined as a set of economic activities, jobs, enterprises, and workers who are not regulated by the state. The informal economy could be associated with: corporate and personal taxes, inflexible markets, tax burdens, and corporate and personal taxes. Informal economies negatively affect a country’s economy. Some of the informal economy effects are; society’s legal foundation’s values decreases and registered companies invest out of the country due to unfair competition. Black money is the origin of funds for criminal activities. Crime, Black Money, Money Laundering is the cycle of black money. The motive of criminal laundering money is to cover up the source of funds. Money laundering activity can be covered through; formalizing money gained from illegal activities, “washing” money gained illegally, and converting illicit money into acceptable funds. Criminals gain financial power from money laundering.

The United States implemented Bank Secrecy Act (KBA) to stop money laundering activities. BSA requires the enterprise to keep files reports that have useful tax, criminal and regulatory matters. BSA also helped other governments to control money laundering activities and has control on financial transactions. Financial institutions have regulations and policies to control illegal transactions. These policies prevented criminals from using financial institutions for money laundering transactions.Money launderers do not fund terrorist organizations. However, financing activities from terrorists requires money laundering to legalize their money.

Consequently, forced surveillance, control, and inspection entities were forced to establish priorities and developed measures of preventing the laundering of illicit income through the economy’s financial sector (Cooper, 2018). This practice has been in existence since the Middle Age, when usury was declared a crime. The merchants and money lenders tended to evade laws, more so usury, by covering it up by applying ingenious mechanisms. According to Ryder (2012), over 2 trillion dollars of money get laundered through the financial system annually.   As a result, it causes significant damage to the world economy. The U.S. aimed to ensure that it closed all the gaps and loopholes that allowed for money laundering activities through the anti-money laundering laws. The rules provided penalties and punishments to any individual, company, or institution that failed to comply with the regulations in place.

In the U.S., the classic money laundering commenced in the early 20th century, where it was a result of organized crime leaders such as the famous Al Capone. Al Capone used to launder proceeds of illegal liquor and prostitution through a chain of literal Laundromats. As a result, the term money laundering was born. Therefore, the United States came up with combating such crimes by establishing specific agencies such as the Financial Crimes Enforcement Network (FinCEN). This was at the treasury department used to attack and work to prevent money laundering and other financial crimes and financing of terrorism (Tsingou, 2018). It established the body in 1990, where it sits active and is guided by the money laundering acts and laws in place. It also recommends amendments based on the changing tactics and ways used by the launderers.

FinCEN Was established to fight money laundering, where it tracks and works to prevent the surging cases of money laundering in the country. Found it to fight other financial crimes and terrorism financing (Ryder, 2012). The network was also required to act as an information collection and analysis office.  It is a branch within the U.S. treasury department office, where it was launched to collect and analyze financial transactions on domestic and international money laundering and financial crimes.FinCEN practices regulatory functions under the Financial and Currency Transactions Reporting Act of 1970, which legislation and Title III of USA PATRIOT Act amended, referred to as “Bank Secret Act” (BSA). The U.S. Secretary of the Treasury delegated FinCEN authority to administer and enforce compliance with the regulations of BSA. All the financial institutions within the U.S. are required to report any suspicious activity reports to FinCEN. Through the office and other stakeholders in the government, the development of the Anti-money laundering laws helped keep up with the constant threats that money laundering poses.

Since the coining of the term money laundering, there have been multiple anti-laundering laws. Since half a half-century ago, there have been many adaptations to keep up with the constant threats that money laundering poses. According to the United Nations, it is estimated that internationally, between $800 billion and $2 trillion is lost to money laundering (Shashiashvili, 2012). The first money laundering legislation in the U.S. was in 1970, whose intention was to combat crime. As the nature of money laundering evolves over the decades, so has been the legislation that aims to fight it.

Since the first legislation, some of the acts that have been in place include; The Money Laundering Control Act of 1986. The Act was designed to encourage foreign nation’s cooperation towards eradicating the drug trade. The law hence ensured that it assists in cases where BSA became vulnerable to civil forfeiting. It also compelled banks to follow and maintain BSA reporting and record keeping (Rafay, 2021). Other laws included the Anti-Drug Abuse act of 1988. This was mainly enacted to help fight against drugs and the traffickers laundering their money to hide their activities. Other Acts included The Money Laundering and Financial Crimes Strategy Act (1998) and The Intelligence Reform and Terrorism Prevention Act (2004), among many others (Rafay, 2021). The money laundering problem was also highlighted in 1998 by the IMF, where it estimated that the amount laundered in the U.S. falls between 2-5% of the global GDP.

When banks become a good zone for money laundering, the Annunzio-Wylie Anti-money Laundering Act of 1992 increased the bank’s stake. Penalties were increased for financial institutions found with an offense of money laundering.  The Act also started the Bank Secrecy Act. BSAAG consisted of law enforcement agencies, nominated financial institutions, non-federal regulators, and trade groups.Money laundering was made a federal crime by the Money Laundering Control Act of 1986, which purposed to encourage drug trade eradications by foreign countries. The law also formulated payment for more than $10000 reporting requirements. The law also encouraged banks to maintain BSA recordkeeping and reporting requirements.


Money laundering is as old as time itself.Money laundering is deeply rooted globally, and launderers have fully established mechanisms to conduct their activities in a very secret means(Bryans, 2014).  Money laundering is growing at high speed.  Money laundering in most countries are attached to the political and government officers. The highest risks in the regulatory area are politically exposed persons (PEPs). Because of their power in government or access to those in power possess a high risk to money laundering regulation. If they decide to misuse power, they can accept bribes, embezzle money and benefit from insiders’ knowledge. Corrupt officers use money laundering methods to move wealth and accumulate fortunes in the country. Some financial organizations assume risks because they take politically exposed persons as their customers.

Financial institutions must process and conclude the payment process in a single day while maintaining a risk-based approach to every person. This consumes time and is very costly hence making it less efficient. Lack of reliable information of persons involved in daily financial transactions makes it challenging to identify individuals. This makes the battle to combat money laundering activity challenging. Immunities in some anti-money laundering agencies also prevent effective control of money laundering.

The Law Enforcement perspective, such as law enforcement officer (LEO) to combat money laundering, is the most suitable method of minimizing the surging cases of money laundering(Gnann, 2019). Anti-money laundering policies and procedures will be the best way of reducing the instances of money laundering crimes and counter-terrorism financing in the United States. This is since they will help stop criminals from engaging in transactions to disguise the origins of the finds connected to illegal activities. As much as the United States has multiple laws and regulations in place, there is a need for constant legislation, which will ensure that that the new ways and measures used by the criminals are easily detected and combatted before they cause any harm, which adversely affects the economy of the country (Lam & Greenlees, 2017). An example is the Bank Secrecy Act, which will require banks to have an effective AML compliance program and establish appropriate customer due-diligence systems and programs (MACKINNON, 2020). More laws will compel the banks to screen against the Office of Foreign Assets Control (OFAC) economic and trade sanctions, where they will form effective suspicious activity monitoring and reporting processes.

Better policies can help ensure that financial institutions comply with the regulations in place, which will help curb the increasing threat of money laundering. The guidelines help in testing the tones of the organization and also reinforce a culture of compliance. When the government constantly updates its policies, then the financial institutions are reminded of the need to be keener and more observant when dealing with large columns of transactions that they process (Cooper, 2018). Relying on the policies helps the financial institutions and banks prevent, investigate, and report any suspicious transactions to the law-enforcing agencies, hence helping to curb the threats. There are no signs of financial crimes ending, where the criminals have innovated new methods of dealing with the crimes. As a result, implementing more laws will ensure that the niches in the fields of crime are well dealt with, where organizations will hence be required to comply with the regulations as a way of strengthening their reputation, which will consequently help in enhancing customer happiness and also aid in avoiding heavy financial penalties.

Other methods the U.S. uses to control money laundering are; Board of Governors of the Federal Reserve, federal banking regulators, and Federal Deposit Insurance Corporation (FDIC), Also bank regulators have delegated authority from FinCEN as independent enforcement authority and federal function regulators.Methods that are used to combat money laundering in other countries are such as criminalization by the government, Holding Periods whereby deposits remain in an account, Know Your Customer policy, knew technology and software filtering, and management of records. Businesses and financial institutions keep transaction records and install software that can detect suspicious activities.

Money laundering is a challenge to offshore centers and major world’s financial markets and is also a problem to the emerging markets. Emerging markets open financial sectors and their economies; this makes a viable target for launderers. Money launderers shift their activities to emerging markets due to increased effort by offshore centers and authorities. Unfortunately, the negative effect of launderers tends to be magnified (Walton & Dinnen, 2016). Money laundering is a threat, especially in emerging markets, as explained by examination of negative impacts in both macro and microeconomic. Money laundering primarily affects private institutions.Money laundering causes economic instability and distortion; launderers invest in protecting their proceeds but not to generate profit. Therefore they invest in businesses that are not beneficial to the country.

Money laundering is associated with social risks and costs. Money laundering allows smugglers, drug traffickers, and other criminals to extend their activities. This makes government undergo cost in treatment expenditures and the need for law enforcement. Amongst other socioeconomic effects, economic powers are transferred from citizens, markets, and governments to criminals. Generally, money laundering exposes the community to dynamic and complex challenges.

The worldwide nature of laundering activities needs international corporations and world standards to reduce the chances of launderers to conduct their criminal activities.Money laundering is a severe challenge in the United States. The financial system is the primary source of laundered money; another method used in the USA to launder money is trade-based money laundering(Naheem, 2017). $500 billion of laundered money yearly is obtained through financial institutions and international banks. Half of this laundered money is made through USA banks. There is currently economic suffering in the United States, making congress offer an economic stimulus plan to not fall into a recession.Implementation regulations of Bank Secrecy Acts must be followed strictly by the firms.

This will help the Ant-Money Laundering detect and report suspected activities such as financing terrorists and money laundering be achieved. Many other countries and states have formed their AML laws consistent with federal AML laws including, Criminal and Civil forfeiture, Predicted crime, criminalization of terrorist financing and money laundering, and Supervision of NBFIs.

Global citizens understanding the money laundering concept is critical and plays a significant role in controlling money laundering. For instance, if an individual gives $3000 and asks for a check less than the amount of money he/ she gave, there is a likelihood that that person wants to legalize cash. Citizens should also report such cases to the law enforcement authorities(Skogan, 197). Citizens should file suspicious activities even without the involvement of the citizens. For the last couple of years, there has rapid advancement of technology. Because of this rapid growth, information can be transferred faster in and out of the country.  This advancement makes it challenging to freeze, monitor, and identify money laundering financial transactions. Many financial institutions don’t have technical systems to obtain and store customers report required to file suspicious activities.


Money laundering is committed through different ways such as gamble, underground banks, shell companies, smuggling, and insurance policies, etc. Ways such as multiple transactions multiple channel and different groups to achieve a goal of illicit money appears like legal money.To promote stability and integrity in emerging markets, anti-money laundering controls must be influential. Combating terrorist financing regimes and anti-money laundering is essential to protect global financial progress and protect market integrity.

Given the nature of the issue, the best approach to use is the Law Enforcement perspective. There should be more laws and regulations enacted to help minimize the surging cases of money laundering. The enactment of new laws and policies is one of the most suitable methods of fighting crimes. This will ensure that there are practical directives and strategies to detect, investigate, and ensure that the crimes are combated before they cause any harm to the country’s economy. The approach will also ensure that companies, financial institutions, and banks are continually careful to handle vast transaction sums. The money launderers target to hide their criminal dealings and proceedings mainly from drug trade and terrorism.

MLA regulations can be improved to increase awareness on how AMLs activities are managed by financial institutions and MLAs negative financial consequences to the country’s economy. MLA regulations might also inform about methods used to launder money and way to mitigate them. Money laundering activities can also emanate from financial activities but not only in criminals and terrorists. For every financial corporation to meet the requirements of the law, it is necessary to apply anti-money laundering activities. Money launderers use different types of money transactions to launder their money. Exchange of currency and transferring money into another country are some of the ways launderers use to attain their goals, resulting in financial instability.

Money laundering activities also decrease the welfare of the people in a country. Citizens will not be happy and comfortable in their country. Dissimilarity in people’s living standards affects people emotionally as well. High money laundering activities make people unhappy and unsatisfactory. People should support government policies and regulations to stop illegal political and financial activities. People would be encouraged by illegal activities to create more solutions to end or prevent money laundering. Researching the financial organizations in detail before receiving or sending money should be done.

Money laundering is a problem that affects the whole world system. States with money laundering affect one another. People need to be aware of the negative impact of money laundering activities and support the government and financial organizations without hesitating. One way to build and develop the economy of every country is by combating money laundering activities. Drug trafficking and financing terrorists affect the socioeconomic of citizens.

Generally, the prevention of money laundering is a corrective responsibility of every financial institution, citizen, government law enforcement agencies, and law enforcement departments such as police officers.If money laundering can be combated, most of the crimes can be dispelled in the world. Almost every crime that generates profit results in the form of money laundering.


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