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What is money laundering? Why is it done?

Money laundering is the process by which the proceeds of criminal activities (“dirty” money) are moved into the financial system in a way that disguises its origins.

The objective is for the owner, the criminal, to retain control of the funds, but to make them appear as if their source is legitimate. This can be as simple as depositing small amounts into many different banks in different countries, or layering the transactions in a more complex way, including making investments. This process has been made easier with the advent of the Internet and electronic mail, since transactions can take place in many different countries in a very short time. It is estimated that globally, money laundering activities account for over $500 billion*. In Canada, the Proceeds of Crime (Money Laundering) Act stipulates, among other things, requirements for financial institutions to identify their customers and the maintenance of transaction records. In November of 2001, an organization called FINTRAC was created, to assist in identifying and stopping money-laundering activities. Established as an independent agency, The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has a mandate to collect, analyze, and if appropriate, disclose the information regarding suspicious transactions to appropriate authorities.