According to the business dictionary, money laundering brings mean Legitimization (washing) of illegally obtained money to hide its true nature or source (typically the drug trade or terrorist activities). Money laundering is effected by passing it surreptitiously through legitimate business channels by means of bank deposits, investments, or transfers from one place (or person) to another. Money laundering is in the Banking, Commerce & Finance and Corporate, Commercial, & General Law subjects. Money laundering also appears in the definitions of the following terms such as black money, bank secrecy, dirty money and laundering.
Whereas, money laundering definition according to the Wikipedia the free encyclopedia, it is the practice of engaging in financial transactions in order to conceal the identity, source, and/or destination of money, and is a main operation of the underground economy. In the past, the term "money laundering" was applied only to financial transactions related to organized crime. Today its definition is often expanded by government regulators to encompass 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 businesses, corrupt officials, members of organized crime (such as drug dealers or the Mafia), and even corrupt states, through a complex network of shell companies and trusts based in offshore tax havens.
Money laundering usually consists of three steps: placement, layering, and integration. Placement is the depositing of funds in financial institutions or the conversion of cash into negotiable instruments. Placement is the most difficult step. The easiest way to begin laundering large amounts of cash is to deposit them into a financial institution. Another option is to convert the cash into negotiable instruments, such as cashier's checks, money orders, or traveler's checks. Layering involves the wire transfer of funds through a series of accounts in an attempt to hide the funds' true origins. This often means transferring funds to others countries outside. Once deposited in a foreign bank, the funds can be moved through accounts of "shell" corporations, which exist solely for laundering purposes. The high daily volume of wire transfers makes it difficult for law enforcement agencies to trace these transactions. In the integration phase, it involves the movement of layered funds, which are no longer traceable to their criminal origin, into the financial world, where they are mixed with funds of legitimate origin.
To prevent money laundering activities form getting more serious, Anti-money laundering (AML) established, this is a term mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent or report money laundering activities. Anti-money laundering guidelines came into prominence globally after the September 11, 2001 attacks and the subsequent enactment of the USA PATRIOT Act.
In Malaysia, Bank Negara Malaysia (BNM) has given Anti-Money Laundering and Counter Financing of Terrorism Sectoral Guidelines 1 for Banking and Financial Institutions. The Anti-Money Laundering a n d Counter Financing of Terrorism (AML/CFT) Sectoral Guidelines 1, for banking and financial institutions (Sectoral Guidelines 1) is issued pursuant to Section 66E and Section 83 of the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (AMLA). The Sectoral Guidelines 1 is established and formulated to supplement the requirements of the Standard Guidelines on AML/CFT. These guidelines address the requirements that must be complied by the reporting institutions under the AMLA to effectively combat money laundering and financing of terrorism activities. This Sectoral Guidelines 1 is incomplete on its own and must be read together with the Standard Guidelines on AML/CFT that the reporting institutions are subjected to, except for those areas stipulated in this Sectoral Guidelines 1. The objective of the Sectoral Guidelines 1 is to provide guidance and minimum standards on AML/CFT measures in order to enable the reporting institution to develop its own internal AML/CFT policies, procedures and controls.
BNM also proceed with the Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Sectoral Guidelines 3 (Sectoral Guidelines 3) is issued pursuant to Section 66E and Section 83 of the Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (AMLA). The Sectoral Guidelines 3 is established and formulated to supplement the requirements of the Standard Guidelines on AML/CFT. These guidelines address the requirements that the reporting institutions under the AMLA must comply with to effectively combat money laundering and financing of terrorism activities. This Sectoral Guidelines 3 is incomplete on its own and must therefore be read together with the Standard Guidelines on AML/CFT that the reporting institutions are subjected to, except for those areas stipulated in this Sectoral Guidelines 3. The objective of the Sectoral Guidelines 3 is to provide guidance and minimum standards on AML/CFT measures in order to enable the reporting institution to develop its own internal AML/CFT policies, procedures and controls.