Money laundering laws include rules, regulations, and statutes intended to uncover and punish illegal cash transactions. Money laundering are efforts to make funds look legitimate. In other words, criminals want to appear as if they are earning the money from a legitimate source. Money laundering laws require banks and businesses to report certain transactions to the government.
In the U.S., money laundering laws include the Bank Secrecy Act, which requires banks and other financial institutions to report cash transactions over $10,000 U.S. dollars (USD) on a currency transaction report (CTR) to the government. It also requires financial institutions to obtain proper customer identification and maintain proper documentation of transactions. This allows the government to monitor the movement of money into or out of the country. It also makes it easier for the government to identify the persons involved in the transactions.
Money laundering regulations in the U.S. also apply to casinos, car dealerships, securities brokers, and individuals or companies involved in real estate transactions. Along with banks, these businesses are required to file CTR reports. Businesses and financial organizations must file CTR reports with the Financial Crimes Enforcement Network (FinCEN), which is an agency within the U.S. Treasury Department. FinCEN is responsible for implementing U.S. laundering laws. It collects information, analyzes data, and distributes reports to law enforcement agencies in the U.S. and other nations to combat money laundering.
Some individuals began structuring transactions to avoid CTR requirements. In response, money laundering laws were amended to require banks and other entities to file a suspicious activity report (SAR). This report is necessary even if a transaction does not exceed $10,000 USD. Instead, these organizations must file an SAR when they simply suspect that something appears unusual. In addition, money laundering laws make it a criminal offense to structure a transaction to avoid CTR requirements.
Penalties include fines, incarceration, and forfeiture of the proceeds. In some instances, failure to report suspicious activity could result in a violation of laundering laws and mandatory imprisonment in some nations. Money laundering laws in the U.S. impose fines on noncomplying financial institutions. U.S. banks may also lose insurance coverage from the Federal Deposit Insurance Corporation (FDIC) if they fail to comply with money laundering laws.
Critics of money laundering laws raise concerns that such laws are overly broad and violate privacy rights. U.S. law, for example, prohibits financial institutions and other businesses from informing customers that it is reporting them to the government. Individuals and businesses may even face criminal prosecution even when they have no knowledge that criminals are laundering money through their companies. This could result in innocent persons having to serve time in prison and/or paying substantial fines if found guilty. Even if a court finds individuals not guilty, in some cases they must endure criminal prosecution and possibly go bankrupt defending themselves in court.