Money laundering is the process of concealing money obtained from illegal means (crimes) by making its source appear to be from legitimate and legal transactions. Although the process of money laundering has come to the attention of the international community in recent years, the practice has long ago been present, dating back to the time of the pirates in European seas. But it was only in the 1920s that the term money laundering was used to refer to these kinds of activities. According to historians, the term was first coined in the United States, referring to criminal gangs who used business establishments such as car washes and laundry shops to mask their illegal activities. Going by this, some people place the origin of the term money laundering to mean the act of washing clean dirty money. Unlike earlier where money laundering was associated with criminal activities, today it has come to mean any financial transaction that generates income as the result of an illegal act such as tax evasion and false accounting.
Money laundering is often described as occurring in three stages: placement, layering, and integration. Placement: refers to the initial point of entry for funds derived from criminal activities. Layering: refers to the creation of complex networks of transactions, which attempt to obscure the link between the initial entry point and the end of the laundering cycle. Integration: refers to the return of funds to the legitimate economy for later extraction. Recent years saw the crucial role that money laundering has played in the cleaning of drug syndicate funds, organized crime groups and financing terror groups. As a result, much has been done in the last few years to combat this growing transnational crime. Fighting money laundering with information technology As money laundering techniques become more sophisticated, the techniques used to fight it are getting even better. Financial Crimes Enforcement Network (FinCEN), created by the US Treasury department, makes its databases available to 40 different agencies in the world. One of its strategic goals is to improve information sharing through eGovernment. It offers training and advice to organizations of foreign governments to help improve the efficacy of their anti-money laundering programs.
Some companies are beginning to offer anti-money laundering software packages. Prominent among them are Mantas, Searchspace and€I Worldwide The software primarily recognizes scenarios and finds relationships between accounts, suspected of abnormal behavior. Recently, a software and services products company claimed to have developed an anti-money laundering software by name AMLock, which facilitates financial institutions to keep check on the market. The software would cater to the requirements of mutual funds, brokerages, banks and the insurance sector. The software uses behavior detection and pattern recognition technologies to alert banks when blacklisted entities are up to something fishy. In the past, the term "money laundering" was applied only to financial transactions related to organized crime. Today its definition is expanded by government regulators to include any financial transaction, which generates an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting. As a result, the illegal activity of money laundering is now recognized as potentially practiced by individuals, small and large business, corrupt officials, members of organized crime (such as drug dealers or the Mafia) or of cults, and even corrupt states or intelligence agencies, through a complex network of shell companies based in offshore tax havens. The increasing complexity of financial crime, the increasing recognized value of so-called "financial intelligence" (FININT) in combating transnational crime and terrorism, and the speculated impact of capital extracted from the legitimate economy has led to an increased prominence of money laundering in political, economic and legal debate. In many jurisdictions, money laundering is seen as an "activity based" offense.