Money Laundering

Its modern form is credited to Prohibition-era US gangsters of the 1920s and 1930s, above all Meyer Lansky, who from the 1930s moved mob money through Swiss accounts; the term itself entered print during the Watergate scandal in 1973.

Hiding the source of criminal money is as old as crime, but the modern practice is usually traced to US Prohibition-era gangs; the popular story that the term comes from Mafia-owned laundromats is unproven folklore. Meyer Lansky is widely credited with moving mob money through offshore Swiss accounts from the 1930s, and the phrase 'money laundering' appeared in the press during the Watergate scandal in the 1970s. Governments responded with the US Bank Secrecy Act (1970), the Money Laundering Control Act (1986) and the creation of the Financial Action Task Force by the G7 in 1989. Today laundering runs through shell companies, trade invoices, real estate, 'money mule' accounts and, increasingly, cryptocurrency exchanges, mixers and stablecoins.

Laundering is usually described in three stages. 'Placement' puts criminal cash or crypto into the financial system, for example through small deposits, cash businesses or exchanges. 'Layering' moves it through many accounts, companies, countries or crypto wallets to hide the trail. 'Integration' brings it back as money that looks legitimate, such as property, luxury goods or company profits. Ordinary people are often drawn in as 'money mules' who let their accounts be used.

Every profitable crime needs it, so demand is unlimited, and the tools range from cash businesses and mule accounts to shell companies, trade invoices and crypto mixers. It succeeds most of the time: UNODC estimates 2-5% of global GDP is laundered each year and that much less than 1% (about 0.2%) of it is seized (UNODC, 2011). Prosecution of the launderers themselves is rare and slow, and even banks that admit failures usually settle for fines (TD Bank paid $3 billion in 2024) rather than face individual convictions.

UNODC estimates $800 billion to $2 trillion is laundered each year (2-5% of global GDP), and Chainalysis traced $154 billion in illicit crypto volume in 2025. The largest single cases include 1MDB, from which $4.5 billion was allegedly stolen and laundered worldwide (US DOJ, 2016), and Danske Bank's Estonian branch, through which about EUR 200 billion in suspicious flows passed (Danske Bank, Sept 2018). The harm is indirect but vast: laundering keeps drug cartels, scam compounds and sanctioned states in business.