Trade-Based Money Laundering

Appendix A

Money-Laundering Primer

Outside of crime of passion (e.g., murder committed in a jealous rage), criminals and criminal organizations commit crime because they are motivated by greed. Greed is a vice as old as humanity and is considered in Christian ethics to be one of the “seven deadly sins.” And once greedy criminals start accumulating large sums of illicit money, they have to try to hide its origins.

Money laundering is the disguising or concealing of any criminally derived income to make it appear legitimate.¹

Nobody knows the origin of the term money laundering, but in the United States it is thought to have originated in the 1920s or 1930s during the era of Al Capone, Meyer Lansky, and other infamous gangsters. They took illicit cash that originated from a variety of criminal enterprises such as gambling and Prohibition-era alcohol sales, and mixed it with clean money in cash-intensive businesses such as laundromats and restaurants. In other words, they tried to wash their dirty money and make it appear clean and legitimate.

The term gained use in the early 1960s with the proliferation of the sale of illegal narcotics. It became more widely known during the Watergate investigation of the 1970s, in which suitcases of cash played a role in the eventual resignation of President Richard Nixon. The pithy and memorable term “follow the money” was reportedly coined ...