Money Laundering definition and meaning | AML glossary
Money laundering definition: What it means in AML compliance.
Money laundering is the process of disguising the origins of illegally obtained money to make it appear legitimate. Criminals use this tactic to integrate illicit funds into the financial system without raising suspicion, often through complex layers of transactions and shell companies.
How money laundering works.
The process typically involves three stages:
- Placement: Introducing illegal funds into the financial system, often through cash deposits or purchasing high-value assets.
- Layering: Moving money through multiple transactions to obscure its origin – this can involve offshore accounts, shell companies, or trade-based laundering.
- Integration: Reintroducing laundered money into the economy as clean funds, making it difficult to trace back to criminal activity.
Why money laundering matters to compliance.
Firms subject to Anti-Money Laundering (AML) regulations must identify, prevent, and report suspicious financial activity. Failure to do so can lead to regulatory fines, reputational damage, and involvement in criminal investigations.
Common indicators of money laundering.
- Large cash transactions with no clear purpose.
- Use of third parties or intermediaries.
- Transactions inconsistent with a customer’s profile.
- Unusual international transfers or movement of funds.
How technology helps detect money laundering.
Firms can strengthen their AML efforts by using tools that:
- Screen clients and beneficial owners against global watchlists and sanctions.
- Monitor ongoing transactions for anomalies or suspicious activity.
- Maintain detailed audit trails for effective reporting and investigation.
- Support regulatory reporting through automated alerts and documentation.
By adopting robust AML controls, firms can meet their legal obligations and help protect the financial system from abuse.
We’ve worked with hundreds of regulated businesses. Let’s work together.
Book your free demo of our comprehensive ID&V, KYC, KYB and AML compliance management solution today.
Request Demo
Hi 👋 let’s schedule your demo.
Tell us a bit about yourself.
“
The system efficiently and effectively completes our KYC and KYB verification requirements during onboarding.
Robin Kear
Senior Account Executive
