From the US Dept. of State’s “Money Laundering and Financial Crimes”
People who commit crimes need to disguise the origin of their criminal money so that they can use it more easily. This fact is the basis for all money laundering, whether that of the drug trafficker, organized criminal, terrorist, arms trafficker, blackmailer, or credit card swindler.
Money laundering generally involves a series of multiple transactions used to disguise the source of financial assets so that those assets may be used without compromising the criminals who are seeking to use the funds. Through money laundering, the criminal tries to transform the monetary proceeds derived from illicit activities into funds with an apparently legal source.
Money laundering has devastating social consequences and is a threat to national security because it provides the fuel for drug dealers, terrorists, illegal arms dealers, corrupt public officials and other criminals to operate and expand their criminal enterprises.
In doing so, criminals manipulate financial systems in the United States and abroad. Unchecked, money laundering can erode the integrity of a nation’s financial institutions. Due to the high integration of capital markets, money laundering can also negatively affect national and global interest rates as launderers reinvest funds where their schemes are less likely to be detected, rather than where rates of return are higher because of sound economic principles.
Organized financial crime is assuming an increasingly significant role in money laundering that threatens the safety and security of peoples, states and democratic institutions. Moreover, our ability to conduct foreign policy and to promote our economic security and prosperity is hindered by these threats to our democratic and free-market partners.
