--- title: "How To Do Crime: Money Laundering" description: "Imagine, for a minute, that you are *Breaking Bad*'s Walter White. You've been producing copious amounts of meth for quite some time now, and you're raking in fat stacks of cash. But there's a problem: What do you do with all that money? You can't stash it in the bank without explaining where it came from. You can't buy property, cars, or anything of substantial value without attracting unwanted attention. And without legitimate proof of income, your hard-earned piles of dirty cash are at permanent risk of being seized. So, you decide to launder it. But how? How do you make dirty money look clean?\n\nWell, in the case of Walter White, he invests in a car wash, a seemingly legitimate enterprise designed to launder drug money by disguising it as legal profit. This fairly well-known concept is called a front company, something we'll explore in much more depth later. And thanks to shows like *Breaking Bad*, this method is probably the most famous way of laundering money, but it is by no means the only way.\n\n## What is money laundering?\n\nAt its core, money laundering is the process of making illegally obtained funds appear legal. But this crime comes in all shapes and sizes and encompasses an enormous variety of schemes and techniques. Additionally, as technology and anti-money laundering regulations advance, so do the methods used by money launderers. One thing that is widely agreed upon, however, is the basic model that the majority of large money laundering operations follow. At least in part. This model is divided into three main stages: The first is called **placement**, which is the stage where dirty money is first introduced into the legitimate financial system. **Layering** is the second stage, whereupon a series of complex transactions are made in an effort to obscure the source of the funds. And **integration** is the final stage where the laundered money is reintroduced into the economy, having been cleaned.\n\n## Starting Small\n\nTo illustrate some of the most common ways in which criminals might launder money, let's create our own. Meet Craig. Craig lives somewhere in the US and works as a bartender to support himself, but as is the case for many, this isn't always enough. Strapped for cash one night, Craig sells $50 worth of the devil's lettuce to his roommate. Later that week, Craig spends that $50. Technically, and on a very small scale, Craig has now successfully laundered $50, both placing and integrating his dirty cash in one foul swoop. In all likelihood, he could probably do the same with $100, maybe even $500. But let's fast-forward a few weeks. Spotting a money making opportunity, Craig starts selling his little green baggies for a profit, quickly earning himself $1,000 in cash.\n\nThis is where things might start to get a bit more complicated, so let's begin with the basics: Why can't Craig just put his $1000 in the bank? Well, in almost all countries, banks are required by law to report any \"suspicious transactions.\" But exactly what counts as a suspicious transaction varies from bank to bank and country to country. Precise figures are also purposely difficult to ascertain, as banks don't want you to know them. However, after speaking with several experts in the field, the general consensus seems to be that in the US, any transaction exceeding $5,000 would likely raise alarm bells, but only if the source of the income wasn't immediately obvious. For countries in the European Union, the official limit is set at €15,000, but almost all countries and banks will exercise their own significantly lower limits in accordance with their own anti-money laundering policies.\n\nSimilarly, if Craig was feeling extra bold, he might start taking bank transfers or accepting payments through services like CashApp or PayPal. As long as the amounts were small enough, these services probably wouldn't pay much attention. But, like banks, every money transfer service has its own limits on how much and how often you can transfer money before someone starts asking questions. Specially designed algorithms also aid in spotting patterns associated with money laundering as well as key word recognition. While specific trigger words aren't known for sure, referencing a transfer with something like \"nuclear missiles saving pot\" or \"cash for crack\" probably isn't the best idea.\n\n## Structuring and Smurfing\n\nSo, how does Craig get his money in the bank? One very common method for achieving this is called **structuring**. This is the term given to the process of splitting large sums of money into smaller amounts that fall below whichever reporting threshold the money launderer is beholden to. In Craig's case, this could be as simple as splitting his $1000 into two sets of $500 to deposit into two different accounts or into even smaller amounts to deposit into the same account over a prolonged period of time. This may work initially, but there is no guarantee for Craig that these repeated cash deposits won't eventually get flagged up. Even if he's using multiple different banks, financial institutions have the ability to share information, in large part to comply with anti-money laundering regulations and to stop the Craigs of the world from doing just this.\n\nSo, instead, Craig employs a method known as **'smurfing'**. This is similar to structuring, with the key difference being that multiple people's accounts are used to move money as opposed to just one. Also strapped for cash, Craig's roommates both agree to take $500 each in cash, which they will then deposit into their accounts minus a fee for the deed. Say $50 each. They then transfer their respective remaining $450 back to Craig, who's now successfully laundered $900. The dirty money that was placed when Craig's roommates deposited it into their accounts is then integrated when it's returned to Craig. As these transactions are still relatively small, the money sent to Craig could realistically be for things like rent, bills, or even a random financial gift.\n\nUp until this point, Craig's schemes have consisted of placement followed more or less immediately by integration. But as his profits increase, so does his risk of detection. Should authorities start poking around, it would be relatively easy for them to trace the dirty money back to Craig within just a few simple steps. So he's going to want to make things a bit more complex. This is where the idea of **layering** comes in, the purpose of which is to confuse and convolute the financial trail, making it as hard as possible for authorities to trace the money back to its source.\n\n## Gambling\n\nA popular, but still relatively small scale means of doing this is through gambling. High Street betting shops like William Hill or Betfred are attractive options for money launderers as they allow them to place bets with small amounts of dirty cash that can then be exchanged for clean winnings—along with a receipt to prove it. Craig will likely choose fixed-odd betting games, which means he knows the odds of winning prior to playing, so he can keep losses to a minimum. He can also take advantage of an array of similar online betting games, walking away with a digital receipt in the process. Once again, as long as he keeps his amounts low, it is unlikely that these institutions will have any cause for concern.\n\nBut what if they aren't small amounts? Say Craig discovers that he's actually really good at dealing drugs. It's a few months down the line, and now he's sitting on $5,000 in cash that needs to be cleaned. Being in the US, he may choose to visit a casino, as they can usually facilitate higher cash transactions without the need for reporting. Casinos are only obligated to report customers' transactions if they exceed $10,000 per day or if they have any other reason to be suspicious. This means that, in theory, Craig could visit a casino every single day, placing bets of up to $9,999 to then cash out as clean winnings. Though, in reality, this might look a bit suspicious. So he's likely to use a combination of structuring and smurfing to split his money up and distribute it amongst both himself and his friends to gamble through multiple different casinos. Again, walking away with all the necessary receipts to give his money that much needed layer of legitimacy. In addition to this, if authorities did want to trace this money, they'd now have to look through multiple transactions by different individuals and institutions. Which is annoying for them.\n\n## Cryptocurrency\n\nTo add further layers of legitimacy to his money and make it even more annoying for authorities to trace, Craig might add cryptocurrency to the mix. This topic is no doubt deserving of an entire video in itself. But in simple terms, Craig begins by using his illicit money to buy cryptocurrencies like Bitcoin, Ethereum, or Dogecoin—to name just a few. This is appealing due to the decentralised nature of cryptocurrencies, which means that no single entity, like a bank or government, controls them. Instead, they work on blockchain technology, where transactions are recorded on databases that function across a network of computers. Although these databases are publicly available, they are also pseudonymous, meaning users do not work with their real names. Rather, they use wallet addresses, which are just chains of numbers and letters that are very difficult to trace back to the actual user. So, Craig is essentially free to invest, sell, and trade these currencies over and over again, creating a lengthy chain of transactions that puts distance between him and that initial deposit. He then cashes them all out as legitimate crypto earnings from one of his wallet addresses. For extra peace of mind, though, Craig could again employ smurfing, enlisting his friends to conduct transactions on his behalf. Or he could deliberately move his cryptocurrency through different jurisdictions, which would make tracing the transactions even harder as authorities would have to contend with multiple different countries' privacy laws and financial regulations.\n\nIn the last few years, though, various services have popped up that go one further, offering total and complete anonymity for people like Craig. Platforms like Tornado Cash allow users to deposit multiple types of cryptocurrencies into one large, shared pool. Once the deposit has been made and everything's mixed together, users can then withdraw funds from the pool back to their personal wallets, having totally removed themselves from the initial deposit. Recently, realizing how easy it is to launder money through these services, authorities have begun to crack down on them. However, much like money laundering itself, there are always new services and loopholes to be found and exploited.\n\n## Front Companies\n\nLet's journey forward even further, though. It's a few years later, and Craig has become quite the drug-dealing prodigy. Having moved into more lucrative substances, he's now making more money than he can reasonably launder through the aforementioned means. The cash volume is simply too great to complete these processes in a timely manner, and so he must find a new strategy that accommodates his ever-growing endeavours.\n\nIt's at this point that he decides to start a **front company**. As mentioned, this is a business that is used primarily as a cover for illegitimate earnings. For obvious reasons, cash-rich businesses tend to work best with companies like car washes, casinos, and laundromats, proving particularly popular. But as a bartender, it makes sense for Craig to choose a bar. The problem is Craig can't afford to buy a whole bar with drug money alone. Neither would he want to, as this would raise questions as to how he could afford to do this on bartender wages. So, Craig gets some of his more affluent friends to invest some clean money in the business. Meanwhile, he draws up a really great business plan, which includes healthy profit projections. He presents this to a bank, which lends him $20,000 as a small business loan, which he can use in conjunction with his friend's money to buy the bar.\n\nSo far, everything is above board, but prior to opening, the bar's going to need equipment, and supplies, and products—all normal bar things—which Craig is going to purchase with a mixture of clean and dirty money. Suppose he buys some furniture for $5,000. He pays $4,000 in clean money and $1,000 in dirty money, but records the purchase as only having cost $4,000—the amount of clean money that's left the bar's account. This is a process he can repeat with any number of items, either making genuine use of them or reselling them at a later date to make a profit.\n\nIn terms of day-to-day operations, the majority of dirty money will be accounted for through inflated sales and those all important fake receipts. For instance, on opening night, the bar legitimately earns $1,000 in profit. However, Craig adds another $1,000 in dirty cash to the register, showing a total profit of $2,000. To justify this additional income, he creates fake bar tabs marked as paid in cash and whips up the fake receipts to match. If everything lines up, he's then free to deposit all of this money back into the bar's business account, where it can be used for all manner of purposes. Some of these will be legitimate: Craig pays his staff and himself, he orders stock, and he generally maintains the bar. But it will also be continually mixed with dirty money. As his business seems to boom, Craig is also able to pay back that bank loan with interest, which makes the bank very happy. They even give Craig a glowing report, as he appears to be such a diligent businessman, which makes it easy for them to say yes when he approaches them for an even bigger loan. With this loan, he then expands the business, maybe even turning it into a chain. He can also start legitimately investing in other companies and business ventures, putting yet more distance between the initial dirty deposit and what Craig eventually makes back.\n\n## Shell Companies\n\nBut let's skip forward even further. Thanks to his various enterprises, both legal and not, Craig is now a very wealthy businessman. He's invested in lots of different companies, one of which happens to be a consulting firm based in Panama. Craig also happens to be the owner of this firm, but you might not know that at first glance. This is because the company has been set up by a group of directors and shareholders acting on Craig's behalf. Due to strict privacy laws concerning company ownership, Craig's name doesn't technically need to appear on any official documentation. This is entirely legal in several jurisdictions, many of which actually offer services specifically to facilitate these kinds of arrangements. Aside from murky ownership, however, the key difference between this company and the bars is the active business operations, or lack thereof. This alleged consulting firm is what's known as a **shell company**. This is a type of company that exists primarily on paper. It doesn't occupy a physical space. It doesn't employ a proper workforce, and most importantly, it doesn't actually provide any consulting services.\n\nA service like consultancy, which can be conducted in person but paid for via online transactions, is a popular option for money launderers because it's almost impossible to prove that these services were never actually provided. For example, the consulting company might send a $100,000 invoice to one of Craig's bars for some consulting work they say they did. The bar records this expense on their end and then transfers the money—already partially mixed with clean funds—to the company in Panama. They then record this as legitimate profit, which can be funnelled back to Craig both as the owner of the company and through the initial investment his bar business made in it. Again, all with the goal of adding as many layers of separation and legitimacy to the dirty money as possible before it's spat back out at Craig.\n\nBut it doesn't end there. Of the $100,000 the consulting firm received, $25,000 was loaned to a different, completely legitimate company based in Switzerland. Lending money between companies is a common and legal practice for various valid reasons, so no alarms are raised. Another $25,000 is paid as a bonus to one of the company directors, who then transfers it to a trust fund in the Cayman Islands. Although Craig is the ultimate owner of this trust fund, he again employs other people to manage it on his behalf in order to maintain anonymity. This kind of arrangement is again, entirely legal through the use of lawyers, accountants, and financial services. A further $25,000 is used to purchase property in Mauritius in the company's name, which can be sold or rented out to generate legitimate profit. And finally, the remaining $25,000 is sent to another shell company in the Cayman Islands that Craig also happens to own.\n\n## The Trail\n\nSo, at this point, if authorities did get wind of Craig's illegal activities, in order to conclusively prove he was laundering money, they would first have to gain access to his numerous bank accounts. Suppose they discover that in the past month, Craig has received 20 different payments from 20 different sources, each of which they now have to trace. But let's focus on just one for now. Authorities see that a business account based in the Cayman Islands has sent Craig $100,000 as a loan repayment. So, they now have to determine where this money originated, which means launching an international investigation in which they are reliant on local authorities' cooperation and are at the will of varying stringent privacy laws. Assuming they manage this, their next job is combing through the hundreds of transactions made by this company in the Cayman Islands. That's hundreds more lines of investigation. But say they pick one payment of $500,000 from the consulting firm in Panama, they now have to negotiate Panamanian privacy laws to gain access to the hundreds of transactions made by that company. They see an invoice that was paid from one of Craig's bars, so they look into those accounts, where hundreds of other payments have been made by both real and fake customers, as well as Craig's other shell companies. And so the cycle continues as the investigation grows exponentially—all in effort to at least delay, if not entirely prevent, the money from being traced back to its origins. Believe it or not, this is a relatively simplified version of possible events. In reality, high level criminals can own or be associated with hundreds of different shell companies across the globe, all of which are working together to create and extend this ridiculously complicated web of transactions.\n\n## Highest Level\n\nBut let's make one final stop in Craig's adventure. It's been a few more years, and he now sits at the head of one of the world's most notorious drug cartels. Think Pablo Escobar levels. He has an enormous criminal network that functions internationally, and he's turning over billions of dollars worth of profit. He's also very much a wanted man. This is the point at which, in order to carry on with his illegal activities relatively undisturbed, Craig's going to need certain institutions and bodies to be complicit in his operations. Being a major drug kingpin, he's wealthy enough to pay off whomever he wants now, so this is doable.\n\nBanks are a popular target as they can exercise **wilful blindness**, ignoring suspicious transactions and obvious red flags in order to keep their high-value clients happy. In practice, this might involve Craig's accomplices depositing huge amounts of money into one specific bank branch, who then purposely don't perform the correct checks because they want this money in their branch. Banks can also actively facilitate money laundering by helping clients structure transactions to avoid detection and by offering guidance on how to circumvent anti-money laundering regulations. This, they can do by assisting clients in setting up shell companies and offshore accounts, knowing full well that the funds they are working with are not legitimate. But if this money accounts for enough of the bank's big business or some lucrative backroom deal has been struck—they probably won't mind.\n\nRather distastefully, Craig can also make use of politicians or entire governments that are vulnerable to corruption. This could involve bribery or campaign donations in return for overlooking Craig's financial crimes or even making policy changes with the express purpose of protecting known money laundering operations taking place in their jurisdiction. Governments can also award contracts to Craig's companies at inflated prices as means of layering his money for him, or they can set up fake projects and fundraisers through which Craig's illicit money can be moved.\n\n## Getting Caught\n\nUnfortunately for Craig though, even the most sophisticated money laundering schemes can eventually be exposed. At the level these kinds of criminals operate, their crimes usually extend far beyond money laundering, encompassing a wide array of illegal endeavours. As a result, authorities will often spend years investigating individuals like Craig for their more severe crimes, either prior to or in conjunction with money laundering. But, if we're focusing solely on Craig's financial crimes, then there are several ways in which his money laundering operation could be brought down. For example, if he's been laundering money through banks, he could be exposed during routine or special audits. While it's possible to bypass checks, regulations, and thresholds with the cooperation of individual branches or even whole banks, these institutions are ultimately accountable to higher authorities. This means there will always be opportunities for oversight that can trigger investigations into the banks and, by extension, their clientele.\n\nAs part of their money laundering investigation, undercover agents may infiltrate Craig's networks by posing as fellow financial criminals. Agents will often spend years living and working under an alias, slowly gaining criminals' trust and even becoming key players in their money laundering operations in an effort to gather indisputable evidence.\n\nCraig's downfall may even come from within. Every one of his hundreds, or possibly thousands, of employees is also at risk of getting caught. If this happens, then there's every chance that they could turn on him in return for reduced sentences and some much needed protection.\n\nWhichever way Craig is caught, whether through one or a combination of the above methods, he will most likely never see the light of day again. Being the head of an international drug cartel usually comes with a pretty hefty life sentence, making the extra 14 or so years for money laundering seem somewhat insignificant.\n\nAnd while it may seem like money laundering is a relatively victimless crime, this is far from the truth. In actuality, this process facilitates some of the world's most egregious criminal acts. We're talking human trafficking, terrorist funding, arms dealing, and pretty much any other crime you can think of that involves making or exchanging money.\n\nThere are also knock-on financial implications that stretch far beyond the money laundering process. The clandestine nature of the practice makes it difficult to determine the full scope of these, but UN estimates suggest that approximately **$1.6 trillion is lost annually** to money laundering operations worldwide. This not only represents a significant drain on global resources but also paves the way for corruption at the highest levels.\n\nSo, in answer to the question, how do you make dirty money look clean?—It's complicated. And it encapsulates an infinite spectrum, from $50 dodgy cash to billions of dollars travelling through an unfathomably complex network of deception. From smurfing to gambling to cryptocurrency, every time one scheme is uncovered, a multitude of others rush in to fill its place in this perpetual game of criminal whack-a-mole.\n\nAnd as for Craig, it's safe to say he probably should have stopped after that $50.\n\n## Key Takeaways\n\n- Money laundering transforms illicit funds into seemingly legitimate money through complex processes.\n- The three main stages of money laundering are placement, layering, and integration.\n- Small-scale money laundering can involve simple transactions like buying and selling drugs.\n- Structuring and smurfing are methods used to deposit large sums of money without triggering bank alerts.\n- Front companies and shell companies are used to disguise illegal earnings as legitimate business profits.\n\n## Frequently Asked Questions\n\n### What is money laundering?\n\nMoney laundering is the process of making illegally obtained funds appear legal. It involves three main stages: placement, layering, and integration.\n\n### What is the placement stage in money laundering?\n\nThe placement stage is where dirty money is first introduced into the legitimate financial system.\n\n### What is the layering stage in money laundering?\n\nThe layering stage involves a series of complex transactions made to obscure the source of the funds.\n\n### What is the integration stage in money laundering?\n\nThe integration stage is where the laundered money is reintroduced into the economy, having been cleaned.\n\n### What is structuring in money laundering?\n\nStructuring is the process of splitting large sums of money into smaller amounts that fall below reporting thresholds to avoid detection.\n\n### What is smurfing in money laundering?\n\nSmurfing is similar to structuring, but it involves using multiple people's accounts to move money, making it harder to trace.\n\n### How can gambling be used in money laundering?\n\nGambling can be used to place bets with small amounts of dirty cash that can then be exchanged for clean winnings, along with a receipt to prove it.\n\n### What role do cryptocurrencies play in money laundering?\n\nCryptocurrencies can be used to buy, sell, and trade, creating a lengthy chain of transactions that puts distance between the initial deposit and the launderer.\n\n### What is a front company in money laundering?\n\nA front company is a business used primarily as a cover for illegitimate earnings, often used to disguise dirty money as legal profit.\n\n### What is a shell company in money laundering?\n\nA shell company is a type of company that exists primarily on paper, often used to facilitate money laundering by creating layers of separation and legitimacy.\n\n## Sources\n\n- [Original Into the Shadows video: How To Do Crime: Money Laundering](https://www.youtube.com/watch?v=8YOLuCRxKXY)\n- [Hero image source](https://upload.wikimedia.org/wikipedia/commons/5/5e/Meeting_of_European_Law_Directors_during_the_Belgian_Presidency_of_the_Council_of_the_European_Union_2024_%28EU2024BE%29_on_19_June_2024_-_3.jpg) by belgium24.eu / openverse, by.\n\n## Related Coverage" url: https://intotheshadows.pub/article/how-crime-works-money-laundering.md canonical: https://intotheshadows.pub/article/how-crime-works-money-laundering datePublished: 2026-06-28 dateModified: 2026-06-28 author: - name: Simon Whistler url: https://intotheshadows.pub/author/simon-whistler publisher: Into the Shadows image: "https://media.intotheshadows.pub/cdn-cgi/image/width=1600,height=900,fit=cover,quality=80,format=auto/articles/8YOLuCRxKXY/hero.jpg" type: Article contentHash: 09c2616929003efed3f40be31b3bdd2c4dcb107e0ff8d341077849956f5dbd69 tokens: 6748 summaryUrl: https://intotheshadows.pub/article/how-crime-works-money-laundering.md.summary.md --- Imagine, for a minute, that you are *Breaking Bad*'s Walter White. You've been producing copious amounts of meth for quite some time now, and you're raking in fat stacks of cash. But there's a problem: What do you do with all that money? You can't stash it in the bank without explaining where it came from. You can't buy property, cars, or anything of substantial value without attracting unwanted attention. And without legitimate proof of income, your hard-earned piles of dirty cash are at permanent risk of being seized. So, you decide to launder it. But how? How do you make dirty money look clean? Well, in the case of Walter White, he invests in a car wash, a seemingly legitimate enterprise designed to launder drug money by disguising it as legal profit. This fairly well-known concept is called a front company, something we'll explore in much more depth later. And thanks to shows like *Breaking Bad*, this method is probably the most famous way of laundering money, but it is by no means the only way. ## What is money laundering? At its core, money laundering is the process of making illegally obtained funds appear legal. But this crime comes in all shapes and sizes and encompasses an enormous variety of schemes and techniques. Additionally, as technology and anti-money laundering regulations advance, so do the methods used by money launderers. One thing that is widely agreed upon, however, is the basic model that the majority of large money laundering operations follow. At least in part. This model is divided into three main stages: The first is called **placement**, which is the stage where dirty money is first introduced into the legitimate financial system. **Layering** is the second stage, whereupon a series of complex transactions are made in an effort to obscure the source of the funds. And **integration** is the final stage where the laundered money is reintroduced into the economy, having been cleaned. ## Starting Small To illustrate some of the most common ways in which criminals might launder money, let's create our own. Meet Craig. Craig lives somewhere in the US and works as a bartender to support himself, but as is the case for many, this isn't always enough. Strapped for cash one night, Craig sells $50 worth of the devil's lettuce to his roommate. Later that week, Craig spends that $50. Technically, and on a very small scale, Craig has now successfully laundered $50, both placing and integrating his dirty cash in one foul swoop. In all likelihood, he could probably do the same with $100, maybe even $500. But let's fast-forward a few weeks. Spotting a money making opportunity, Craig starts selling his little green baggies for a profit, quickly earning himself $1,000 in cash. This is where things might start to get a bit more complicated, so let's begin with the basics: Why can't Craig just put his $1000 in the bank? Well, in almost all countries, banks are required by law to report any "suspicious transactions." But exactly what counts as a suspicious transaction varies from bank to bank and country to country. Precise figures are also purposely difficult to ascertain, as banks don't want you to know them. However, after speaking with several experts in the field, the general consensus seems to be that in the US, any transaction exceeding $5,000 would likely raise alarm bells, but only if the source of the income wasn't immediately obvious. For countries in the European Union, the official limit is set at €15,000, but almost all countries and banks will exercise their own significantly lower limits in accordance with their own anti-money laundering policies. Similarly, if Craig was feeling extra bold, he might start taking bank transfers or accepting payments through services like CashApp or PayPal. As long as the amounts were small enough, these services probably wouldn't pay much attention. But, like banks, every money transfer service has its own limits on how much and how often you can transfer money before someone starts asking questions. Specially designed algorithms also aid in spotting patterns associated with money laundering as well as key word recognition. While specific trigger words aren't known for sure, referencing a transfer with something like "nuclear missiles saving pot" or "cash for crack" probably isn't the best idea. ## Structuring and Smurfing So, how does Craig get his money in the bank? One very common method for achieving this is called **structuring**. This is the term given to the process of splitting large sums of money into smaller amounts that fall below whichever reporting threshold the money launderer is beholden to. In Craig's case, this could be as simple as splitting his $1000 into two sets of $500 to deposit into two different accounts or into even smaller amounts to deposit into the same account over a prolonged period of time. This may work initially, but there is no guarantee for Craig that these repeated cash deposits won't eventually get flagged up. Even if he's using multiple different banks, financial institutions have the ability to share information, in large part to comply with anti-money laundering regulations and to stop the Craigs of the world from doing just this. So, instead, Craig employs a method known as **'smurfing'**. This is similar to structuring, with the key difference being that multiple people's accounts are used to move money as opposed to just one. Also strapped for cash, Craig's roommates both agree to take $500 each in cash, which they will then deposit into their accounts minus a fee for the deed. Say $50 each. They then transfer their respective remaining $450 back to Craig, who's now successfully laundered $900. The dirty money that was placed when Craig's roommates deposited it into their accounts is then integrated when it's returned to Craig. As these transactions are still relatively small, the money sent to Craig could realistically be for things like rent, bills, or even a random financial gift. Up until this point, Craig's schemes have consisted of placement followed more or less immediately by integration. But as his profits increase, so does his risk of detection. Should authorities start poking around, it would be relatively easy for them to trace the dirty money back to Craig within just a few simple steps. So he's going to want to make things a bit more complex. This is where the idea of **layering** comes in, the purpose of which is to confuse and convolute the financial trail, making it as hard as possible for authorities to trace the money back to its source. ## Gambling A popular, but still relatively small scale means of doing this is through gambling. High Street betting shops like William Hill or Betfred are attractive options for money launderers as they allow them to place bets with small amounts of dirty cash that can then be exchanged for clean winnings—along with a receipt to prove it. Craig will likely choose fixed-odd betting games, which means he knows the odds of winning prior to playing, so he can keep losses to a minimum. He can also take advantage of an array of similar online betting games, walking away with a digital receipt in the process. Once again, as long as he keeps his amounts low, it is unlikely that these institutions will have any cause for concern. But what if they aren't small amounts? Say Craig discovers that he's actually really good at dealing drugs. It's a few months down the line, and now he's sitting on $5,000 in cash that needs to be cleaned. Being in the US, he may choose to visit a casino, as they can usually facilitate higher cash transactions without the need for reporting. Casinos are only obligated to report customers' transactions if they exceed $10,000 per day or if they have any other reason to be suspicious. This means that, in theory, Craig could visit a casino every single day, placing bets of up to $9,999 to then cash out as clean winnings. Though, in reality, this might look a bit suspicious. So he's likely to use a combination of structuring and smurfing to split his money up and distribute it amongst both himself and his friends to gamble through multiple different casinos. Again, walking away with all the necessary receipts to give his money that much needed layer of legitimacy. In addition to this, if authorities did want to trace this money, they'd now have to look through multiple transactions by different individuals and institutions. Which is annoying for them. ## Cryptocurrency To add further layers of legitimacy to his money and make it even more annoying for authorities to trace, Craig might add cryptocurrency to the mix. This topic is no doubt deserving of an entire video in itself. But in simple terms, Craig begins by using his illicit money to buy cryptocurrencies like Bitcoin, Ethereum, or Dogecoin—to name just a few. This is appealing due to the decentralised nature of cryptocurrencies, which means that no single entity, like a bank or government, controls them. Instead, they work on blockchain technology, where transactions are recorded on databases that function across a network of computers. Although these databases are publicly available, they are also pseudonymous, meaning users do not work with their real names. Rather, they use wallet addresses, which are just chains of numbers and letters that are very difficult to trace back to the actual user. So, Craig is essentially free to invest, sell, and trade these currencies over and over again, creating a lengthy chain of transactions that puts distance between him and that initial deposit. He then cashes them all out as legitimate crypto earnings from one of his wallet addresses. For extra peace of mind, though, Craig could again employ smurfing, enlisting his friends to conduct transactions on his behalf. Or he could deliberately move his cryptocurrency through different jurisdictions, which would make tracing the transactions even harder as authorities would have to contend with multiple different countries' privacy laws and financial regulations. In the last few years, though, various services have popped up that go one further, offering total and complete anonymity for people like Craig. Platforms like Tornado Cash allow users to deposit multiple types of cryptocurrencies into one large, shared pool. Once the deposit has been made and everything's mixed together, users can then withdraw funds from the pool back to their personal wallets, having totally removed themselves from the initial deposit. Recently, realizing how easy it is to launder money through these services, authorities have begun to crack down on them. However, much like money laundering itself, there are always new services and loopholes to be found and exploited. ## Front Companies Let's journey forward even further, though. It's a few years later, and Craig has become quite the drug-dealing prodigy. Having moved into more lucrative substances, he's now making more money than he can reasonably launder through the aforementioned means. The cash volume is simply too great to complete these processes in a timely manner, and so he must find a new strategy that accommodates his ever-growing endeavours. It's at this point that he decides to start a **front company**. As mentioned, this is a business that is used primarily as a cover for illegitimate earnings. For obvious reasons, cash-rich businesses tend to work best with companies like car washes, casinos, and laundromats, proving particularly popular. But as a bartender, it makes sense for Craig to choose a bar. The problem is Craig can't afford to buy a whole bar with drug money alone. Neither would he want to, as this would raise questions as to how he could afford to do this on bartender wages. So, Craig gets some of his more affluent friends to invest some clean money in the business. Meanwhile, he draws up a really great business plan, which includes healthy profit projections. He presents this to a bank, which lends him $20,000 as a small business loan, which he can use in conjunction with his friend's money to buy the bar. So far, everything is above board, but prior to opening, the bar's going to need equipment, and supplies, and products—all normal bar things—which Craig is going to purchase with a mixture of clean and dirty money. Suppose he buys some furniture for $5,000. He pays $4,000 in clean money and $1,000 in dirty money, but records the purchase as only having cost $4,000—the amount of clean money that's left the bar's account. This is a process he can repeat with any number of items, either making genuine use of them or reselling them at a later date to make a profit. In terms of day-to-day operations, the majority of dirty money will be accounted for through inflated sales and those all important fake receipts. For instance, on opening night, the bar legitimately earns $1,000 in profit. However, Craig adds another $1,000 in dirty cash to the register, showing a total profit of $2,000. To justify this additional income, he creates fake bar tabs marked as paid in cash and whips up the fake receipts to match. If everything lines up, he's then free to deposit all of this money back into the bar's business account, where it can be used for all manner of purposes. Some of these will be legitimate: Craig pays his staff and himself, he orders stock, and he generally maintains the bar. But it will also be continually mixed with dirty money. As his business seems to boom, Craig is also able to pay back that bank loan with interest, which makes the bank very happy. They even give Craig a glowing report, as he appears to be such a diligent businessman, which makes it easy for them to say yes when he approaches them for an even bigger loan. With this loan, he then expands the business, maybe even turning it into a chain. He can also start legitimately investing in other companies and business ventures, putting yet more distance between the initial dirty deposit and what Craig eventually makes back. ## Shell Companies But let's skip forward even further. Thanks to his various enterprises, both legal and not, Craig is now a very wealthy businessman. He's invested in lots of different companies, one of which happens to be a consulting firm based in Panama. Craig also happens to be the owner of this firm, but you might not know that at first glance. This is because the company has been set up by a group of directors and shareholders acting on Craig's behalf. Due to strict privacy laws concerning company ownership, Craig's name doesn't technically need to appear on any official documentation. This is entirely legal in several jurisdictions, many of which actually offer services specifically to facilitate these kinds of arrangements. Aside from murky ownership, however, the key difference between this company and the bars is the active business operations, or lack thereof. This alleged consulting firm is what's known as a **shell company**. This is a type of company that exists primarily on paper. It doesn't occupy a physical space. It doesn't employ a proper workforce, and most importantly, it doesn't actually provide any consulting services. A service like consultancy, which can be conducted in person but paid for via online transactions, is a popular option for money launderers because it's almost impossible to prove that these services were never actually provided. For example, the consulting company might send a $100,000 invoice to one of Craig's bars for some consulting work they say they did. The bar records this expense on their end and then transfers the money—already partially mixed with clean funds—to the company in Panama. They then record this as legitimate profit, which can be funnelled back to Craig both as the owner of the company and through the initial investment his bar business made in it. Again, all with the goal of adding as many layers of separation and legitimacy to the dirty money as possible before it's spat back out at Craig. But it doesn't end there. Of the $100,000 the consulting firm received, $25,000 was loaned to a different, completely legitimate company based in Switzerland. Lending money between companies is a common and legal practice for various valid reasons, so no alarms are raised. Another $25,000 is paid as a bonus to one of the company directors, who then transfers it to a trust fund in the Cayman Islands. Although Craig is the ultimate owner of this trust fund, he again employs other people to manage it on his behalf in order to maintain anonymity. This kind of arrangement is again, entirely legal through the use of lawyers, accountants, and financial services. A further $25,000 is used to purchase property in Mauritius in the company's name, which can be sold or rented out to generate legitimate profit. And finally, the remaining $25,000 is sent to another shell company in the Cayman Islands that Craig also happens to own. ## The Trail So, at this point, if authorities did get wind of Craig's illegal activities, in order to conclusively prove he was laundering money, they would first have to gain access to his numerous bank accounts. Suppose they discover that in the past month, Craig has received 20 different payments from 20 different sources, each of which they now have to trace. But let's focus on just one for now. Authorities see that a business account based in the Cayman Islands has sent Craig $100,000 as a loan repayment. So, they now have to determine where this money originated, which means launching an international investigation in which they are reliant on local authorities' cooperation and are at the will of varying stringent privacy laws. Assuming they manage this, their next job is combing through the hundreds of transactions made by this company in the Cayman Islands. That's hundreds more lines of investigation. But say they pick one payment of $500,000 from the consulting firm in Panama, they now have to negotiate Panamanian privacy laws to gain access to the hundreds of transactions made by that company. They see an invoice that was paid from one of Craig's bars, so they look into those accounts, where hundreds of other payments have been made by both real and fake customers, as well as Craig's other shell companies. And so the cycle continues as the investigation grows exponentially—all in effort to at least delay, if not entirely prevent, the money from being traced back to its origins. Believe it or not, this is a relatively simplified version of possible events. In reality, high level criminals can own or be associated with hundreds of different shell companies across the globe, all of which are working together to create and extend this ridiculously complicated web of transactions. ## Highest Level But let's make one final stop in Craig's adventure. It's been a few more years, and he now sits at the head of one of the world's most notorious drug cartels. Think Pablo Escobar levels. He has an enormous criminal network that functions internationally, and he's turning over billions of dollars worth of profit. He's also very much a wanted man. This is the point at which, in order to carry on with his illegal activities relatively undisturbed, Craig's going to need certain institutions and bodies to be complicit in his operations. Being a major drug kingpin, he's wealthy enough to pay off whomever he wants now, so this is doable. Banks are a popular target as they can exercise **wilful blindness**, ignoring suspicious transactions and obvious red flags in order to keep their high-value clients happy. In practice, this might involve Craig's accomplices depositing huge amounts of money into one specific bank branch, who then purposely don't perform the correct checks because they want this money in their branch. Banks can also actively facilitate money laundering by helping clients structure transactions to avoid detection and by offering guidance on how to circumvent anti-money laundering regulations. This, they can do by assisting clients in setting up shell companies and offshore accounts, knowing full well that the funds they are working with are not legitimate. But if this money accounts for enough of the bank's big business or some lucrative backroom deal has been struck—they probably won't mind. Rather distastefully, Craig can also make use of politicians or entire governments that are vulnerable to corruption. This could involve bribery or campaign donations in return for overlooking Craig's financial crimes or even making policy changes with the express purpose of protecting known money laundering operations taking place in their jurisdiction. Governments can also award contracts to Craig's companies at inflated prices as means of layering his money for him, or they can set up fake projects and fundraisers through which Craig's illicit money can be moved. ## Getting Caught Unfortunately for Craig though, even the most sophisticated money laundering schemes can eventually be exposed. At the level these kinds of criminals operate, their crimes usually extend far beyond money laundering, encompassing a wide array of illegal endeavours. As a result, authorities will often spend years investigating individuals like Craig for their more severe crimes, either prior to or in conjunction with money laundering. But, if we're focusing solely on Craig's financial crimes, then there are several ways in which his money laundering operation could be brought down. For example, if he's been laundering money through banks, he could be exposed during routine or special audits. While it's possible to bypass checks, regulations, and thresholds with the cooperation of individual branches or even whole banks, these institutions are ultimately accountable to higher authorities. This means there will always be opportunities for oversight that can trigger investigations into the banks and, by extension, their clientele. As part of their money laundering investigation, undercover agents may infiltrate Craig's networks by posing as fellow financial criminals. Agents will often spend years living and working under an alias, slowly gaining criminals' trust and even becoming key players in their money laundering operations in an effort to gather indisputable evidence. Craig's downfall may even come from within. Every one of his hundreds, or possibly thousands, of employees is also at risk of getting caught. If this happens, then there's every chance that they could turn on him in return for reduced sentences and some much needed protection. Whichever way Craig is caught, whether through one or a combination of the above methods, he will most likely never see the light of day again. Being the head of an international drug cartel usually comes with a pretty hefty life sentence, making the extra 14 or so years for money laundering seem somewhat insignificant. And while it may seem like money laundering is a relatively victimless crime, this is far from the truth. In actuality, this process facilitates some of the world's most egregious criminal acts. We're talking human trafficking, terrorist funding, arms dealing, and pretty much any other crime you can think of that involves making or exchanging money. There are also knock-on financial implications that stretch far beyond the money laundering process. The clandestine nature of the practice makes it difficult to determine the full scope of these, but UN estimates suggest that approximately **$1.6 trillion is lost annually** to money laundering operations worldwide. This not only represents a significant drain on global resources but also paves the way for corruption at the highest levels. So, in answer to the question, how do you make dirty money look clean?—It's complicated. And it encapsulates an infinite spectrum, from $50 dodgy cash to billions of dollars travelling through an unfathomably complex network of deception. From smurfing to gambling to cryptocurrency, every time one scheme is uncovered, a multitude of others rush in to fill its place in this perpetual game of criminal whack-a-mole. And as for Craig, it's safe to say he probably should have stopped after that $50. ## Key Takeaways - Money laundering transforms illicit funds into seemingly legitimate money through complex processes. - The three main stages of money laundering are placement, layering, and integration. - Small-scale money laundering can involve simple transactions like buying and selling drugs. - Structuring and smurfing are methods used to deposit large sums of money without triggering bank alerts. - Front companies and shell companies are used to disguise illegal earnings as legitimate business profits. ## Frequently Asked Questions ### What is money laundering? Money laundering is the process of making illegally obtained funds appear legal. It involves three main stages: placement, layering, and integration. ### What is the placement stage in money laundering? The placement stage is where dirty money is first introduced into the legitimate financial system. ### What is the layering stage in money laundering? The layering stage involves a series of complex transactions made to obscure the source of the funds. ### What is the integration stage in money laundering? The integration stage is where the laundered money is reintroduced into the economy, having been cleaned. ### What is structuring in money laundering? Structuring is the process of splitting large sums of money into smaller amounts that fall below reporting thresholds to avoid detection. ### What is smurfing in money laundering? Smurfing is similar to structuring, but it involves using multiple people's accounts to move money, making it harder to trace. ### How can gambling be used in money laundering? Gambling can be used to place bets with small amounts of dirty cash that can then be exchanged for clean winnings, along with a receipt to prove it. ### What role do cryptocurrencies play in money laundering? Cryptocurrencies can be used to buy, sell, and trade, creating a lengthy chain of transactions that puts distance between the initial deposit and the launderer. ### What is a front company in money laundering? A front company is a business used primarily as a cover for illegitimate earnings, often used to disguise dirty money as legal profit. ### What is a shell company in money laundering? A shell company is a type of company that exists primarily on paper, often used to facilitate money laundering by creating layers of separation and legitimacy. ## Sources - [Original Into the Shadows video: How To Do Crime: Money Laundering](https://www.youtube.com/watch?v=8YOLuCRxKXY) - [Hero image source](https://upload.wikimedia.org/wikipedia/commons/5/5e/Meeting_of_European_Law_Directors_during_the_Belgian_Presidency_of_the_Council_of_the_European_Union_2024_%28EU2024BE%29_on_19_June_2024_-_3.jpg) by belgium24.eu / openverse, by. ## Related Coverage