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Why do people engage in money laundering?

On Behalf of | Jun 25, 2024 | Criminal Defense

Money laundering is a tactic used to disguise the source of financial assets. Essentially, it’s done to make it appear that illegally obtained funds actually came from a legal income source.

For example, say that someone has been illegally selling marijuana. While marijuana itself is legal in the state of California, for both recreational and medicinal purposes, it still has to be sold by a licensed dispensary. It is illegal for someone to make personal sales, and all they can do is share small amounts with friends – without receiving compensation.

The person who has been selling marijuana understands that this is an illegal source of income. But they may have made a significant amount of money, such as $100,000. If they just start spending this money, it will make the criminal activity clear, especially to the IRS – which will have no record of that income.

Setting up a shell company

As such, the person may establish a shell company or a fake business that they claim to be running. They then invent costs and expenses, along with sales. But they are really just creating an artificial paper trail for sales that never occurred or that were intentionally inflated. Then they are running their $100,000 from marijuana sales through the business to make it look like that’s how they earned the money.

Criminal charges

In the example above, the individual could find themselves facing numerous charges. Money laundering is illegal, as is selling marijuana without the proper license. A conviction on either count could have long-term ramifications. Those who are facing serious criminal charges must be aware of their defense options.