The Spin Cycle of Money Laundering

Despite popular speculation that the term is derived from Al Capone having used laundromats to stash the goods, the term more likely refers to the process of making ill-gotten money appear legitimate. Money laundering has been around for a long time, but it was the American mobsters who perfected the “cleaning process,” primarily due to the pivotal contribution of a law passed in 1934, the Swiss Banking Act.

Soak the Load in Legitimate Suds
While there can be many variations to the money laundering process, there are three basic steps that have been identified. First of these is the need to insert the illegally gained money into a legitimate financial institution. This is perhaps the riskiest stage in the whole process, since huge sums of money will be pretty conspicuous. In the United States, a helpful safeguard has been placed in bank transactions, which require banks to report sums larger than $10,000 as well as any other related suspicious financial activity.

The Laundry Cycle Begins
In order to remove the money from its illegal origins as neatly as possible, it needs to go through a layering process. This stage will require a complex web of transactions, including bank-to-bank transactions, wire transfers between many different accounts with different names, withdrawals and deposits, and even purchases of high-value items that can be easily converted into cash later just to change the form of the money. The length of the layering stage can be as long as needed, in order to remove all traces of “dirt” from the “laundry.”

Spin-Dry, Press and Wrap the Show Up
Finally, when the money has been “washed and rinsed,” it is ready to go back into the normal circulation through a legal transaction. Final bank transfers can be made into accounts of an existing business of the launderer, the sales of high-valued items can be used to purchase products from a company of the launderer, and so on. If a money launderer reaches this stage successfully, he or she will be very difficult to track, if at all, especially if no documentation for the previous stages can be found.

Money laundering cases have surfaced in the United States in light of using offshore accounts to evade taxation. The United States has since initiated a voluntary disclosure program to promote greater compliance with tax laws among tax evaders.


This article is intended solely to offer general information on the subject. None of the content should be considered as legal advice.

More about offshore voluntary disclosure from the Thorn Law Group. Helping resolve international issues for clients in Washington, D.C.