What are Money Laundering Regulations?

Marlene Garcia
Marlene Garcia
Financial institutions are required to report suspicious financial activity.
Financial institutions are required to report suspicious financial activity.

Money laundering regulations consist of laws that make it a crime to transfer money or assets that come from illegal activity in an attempt to hide those transactions. Transporting or transferring money to avoid paying taxes is also part of money laundering regulations in some regions. Money launderers might try to conceal the location of assets, where the assets came from, and ownership of the money or property. Anti-money laundering efforts aim to stop criminals from making a profit on illegal behavior.

Some money laundering regulations are designed to address the trafficking of illegal drugs.
Some money laundering regulations are designed to address the trafficking of illegal drugs.

Most money laundering regulations include monitoring banks and other financial institutions for deposits and withdrawals that exceed a certain amount. Officers in each institution must report any suspicious transaction to the government regulatory agency where the activity occurred. This includes any transaction that involves foreign or interstate commerce.

Money laundering laws typically cover currency, stocks, bonds and certificates of deposit.
Money laundering laws typically cover currency, stocks, bonds and certificates of deposit.

In the United States, money laundering regulations apply to transfers from the U.S. to financial institutions outside the country with the intent to hide assets. If a person knows the money or property came from illegal activity, he or she commits a crime when transferring assets. The government must prove that the person involved in the transaction did it with knowledge that the funds originated from a crime.

Penalties attached to money laundering laws include prison time, fines, or both. U.S. law extends to foreign-born people if the transaction involves a financial institution located in the country. The law gives the government jurisdiction to seize assets in those circumstances after obtaining a court order.

In some countries, money laundering regulations require certain businesses to appoint a person to monitor all financial transactions. This person must be able to identify customers and document financial dealings for violations of laws. If suspicious activity is discovered, the transfer must be reported.

Money laundering laws typically cover currency, stocks, bonds, and certificates of deposit. In some regions, the regulations also apply to loans or credit, and safe deposit boxes. The transfer of titles to property, including cars, boats, or planes, is commonly considered criminal if the items were purchased with money earned illegally.

The laws were enacted to address drug trafficking, fraud, and violations of export laws. Many countries include the financing of terrorist activities in money laundering regulations. International agreements between countries generally fall under the International Banking Act.

In the U.S., the first money laundering laws were enacted in 1970. Money that moved in and out of the country began to be tracked. The government strengthened money laundering regulations in the 1980s to include real estate and auto dealerships. Later amendments to the law addressed terrorism financing.

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    • Financial institutions are required to report suspicious financial activity.
      Financial institutions are required to report suspicious financial activity.
    • Some money laundering regulations are designed to address the trafficking of illegal drugs.
      Some money laundering regulations are designed to address the trafficking of illegal drugs.
    • Money laundering laws typically cover currency, stocks, bonds and certificates of deposit.
      Money laundering laws typically cover currency, stocks, bonds and certificates of deposit.