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Obtaining the proceeds of crime has generally been but the first step for profit-motivated criminals. The use of those often has required a second step, whether it be to convert the money into form usable form for licit or illicit purposes, disguise its origins, avoid tax consequences, or make it possible to transport. As the quantity of money to be derived from illegal activity increases, the "laundering" of that money becomes more necessary with the internationalization of commerce, parallel markets, and increased technology. Money laundering has become more sophisticated as a consequence.

The International Financial Action Task Force, convened in 1989 by the G-8 Economic Summit, defines money laundering as "the process by which one conceals the existence, illegal source, or illegal use of the crime proceeds to make those proceeds appear legitimately derived." There are three steps to laundering funds: introducing the proceeds of criminal activity into the legitimate economy (commonly referred to as "placement"), engaging in financial transactions designed to limit the ability to trace the funds (commonly referred to as "layering"); and making the funds available for use (commonly referred to as "integration").

In fact, depending on the objectives of individual criminals as far as convenience and security are concerned, the laundering process can be effected with as few as one and as many as a dozen discrete steps. In its most familiar form, hundreds of thousands of dollars in drug proceeds are taken to a financial institution and exchanged for a cashier's check, which the trafficker can carry around (or out of the country) with much less suspicion than suitcases full of cash. A slightly more involved scenario entails taking the same cash to the same bank, where it is deposited into an account and then sent by wire transfer to a bank in a foreign country, probably a jurisdiction renowned for the relative secrecy it affords customers like the hypothetical drug dealer.

In even more elaborate schemes, the same funds are wire transferred around a circuit of accounts in different countries, bearing the names of legitimate businesses. After the transfer reaches its final destination abroad, the owner in the United States arranges a sham transaction to bring the funds back into this country, often as the proceeds of a purported loan. There are literally countless varieties of laundering schemes, limited only by the imaginations of criminals and a more widespread impatience with transferring one's funds too far away.

Traditionally money laundering was conducted by the same individuals who committed the underlying criminal activity. Today, the sophistication of the process has given rise to the professional money launderer. But as money laundering has become more invaluable for criminals and criminal networks, governments have increasingly come to see the process as a potential vulnerability in the business of crime and have increasingly sought to curtail and prosecute it.

The United States began its legislative efforts to crackdown on money laundering in 1970 by requiring the reporting of cash transactions as part of the Bank Secrecy Act. As now modified, $10,000 in cash deposited in a financial institution or paid to a business will trigger the reporting requirements by the recipient of the funds. And with the Money Laundering Control Act of 1986, codified as 18 USC 1956 and 1957, Congress made it a crime to move certain illegally obtained funds through the commercial or banking system. Enforcement of anti-money laundering legislation was not only accomplished through the traditional penalties of incarceration and fines, but enhanced with powerful forfeiture remedies. Finally, since 1988, federal legislation has required banks to report "suspicious transactions." Individual states have sought to control money laundering with their own statutory and regulatory schemes. Internationally, the Financial Action Task Force and Interpol have approved resolutions, protocols, and recommendations calling for nations to pass legislation that would make money laundering a crime, require reporting of suspicious transactions, permit forfeiture, and allow extradition in money laundering cases.

U.S. anti laundering legislation is complex and often controversial but, what is perhaps most remarkable is the fundamental change in enforcement policy it represents, wrought by the requirement that non-law enforcement entities be compelled to engage in the systematic reporting of potential illegal activity. As a result, compliance programs requiring the recipient of funds to know its customer's business and to establish baselines from which suspicious activities can be identified are now the norm. For better or for worse, money laundering has brought the private world of commerce into the public field of law enforcement.