Money laundering: definition, methods used by fraudsters and legal framework in 2026

Key lessons

Money laundering now represents between 2% and 5% of global GDP, or around 2,000 to 5,500 billion dollars per year according to IMF and FATF estimates. This criminal phenomenon, at the heart of LCB-FT policies since the 1980s, continues to evolve with new technologies and changes in the global economy.

• Essential definition : money laundering consists in hiding the criminal origin of funds derived from illegal activities (drug trafficking, corruption, tax evasion, theft, extortion) in order to reintegrate them into the legal financial system.
• The 3 fundamental steps : placement (introduction of cash into the financial circuit), stacking or stratification (dispersion and complexity of flows), integration (reinjection into the legitimate economy in the form of investments).
• Related offenses : money laundering is closely connected to tax evasion, drug trafficking, corruption, the abuse of corporate assets and the financing of terrorism.
• Strengthened regulatory framework : the Financial Action Task Force (FATF), the European Union (anti-money laundering package of May 2024, creation of AMLA) and states such as France, Switzerland, Canada or Algeria impose strict obligations on banks, lawyers, notaries, notaries, notaries, casinos, casinos, the art sector, real estate and providers of cryptoassets.
• New technological challenges : cryptocurrencies, P2P payments, online games and neobanks open up new channels for the circulation of illicit funds, forcing the authorities to constantly adapt their controls.
• Major risks for businesses : severe criminal and financial sanctions, withdrawal of approval, indictments of managers, and lasting damage to reputation. Recent banking scandals (Danske Bank, Swedbank, Credit Suisse) illustrate the magnitude of the issues at stake.

Money laundering: definition, origin of the term and challenges

What is money laundering in practice? It is the process by which criminals transform capital derived from illegal activities — drug trafficking, corruption, cybercrime, tax evasion, theft — into apparently “clean” money that can flow freely in the legal economy. The objective is simple: to profit from the fruits of crime without attracting the attention of the authorities. This cover-up work allows criminal networks to use their earnings to buy goods, invest in legitimate businesses, or fund other illicit activities, including terrorism. Without this “cleaning” mechanism, dirty money would remain unusable because it would be immediately suspicious in the eyes of financial institutions and investigators.

White, Black, Dirty, and Gray Silver: Understanding the Distinctions

Type of silver Origin ExampleWhite silverDeclared and legally taxed incomeSalary of an employee, turnover of a regular companyBlack silverUnderground economy, undeclared workIllegal work, sales without an invoiceDirty moneyProceeds from criminal activitiesDrug trafficking, corruption, extortionGray silverAggressive tax optimization, tax evasionAssemblies via tax havens, under-declarationThese distinctions are essential because they determine the nature of offenses and the appropriate legal responses. Dirty money, which is inherently criminal, requires a money laundering process to be reintroduced into the legal circuit.

The global scale of the phenomenon

International estimates are staggering. According to the IMF and the FATF, money laundering represents between 2% and 5% of global GDP every year, or between 2,000 and 5,500 billion dollars. These numbers remain approximate — the very nature of money laundering makes it impossible to measure accurately — but they illustrate the colossal scale of the problem.

The fundamental challenges

The consequences of money laundering go far beyond the scope of financial crime:

• Destabilization of the financial system : massive injection of capital of dubious origin distorting market mechanisms
• Distortion of competition : “clean” businesses at a disadvantage compared to those fuelled by illicit funds
• Loss of tax revenue : massive tax evasion depriving states of essential resources
• Financing criminal and terrorist organizations : recycling of the proceeds of crime fuelling new illegal activities
• Attack on institutional trust : corruption of democratic and economic systems

Money laundering process: the three main steps

The FATF and regulators around the world use a classic three-step schema to analyze and understand the mechanisms of money laundering. This reading grid, although simplified, makes it possible to identify points of vulnerability and organize controls. These steps — placement, stacking (or stratification), integration — can overlap or be compressed according to the type of crime. Cyber scams using cryptocurrencies, for example, allow for almost instant placement and stacking.

Investing: Bringing Dirty Money Into the Financial System

The first step is to get criminal funds into the legal financial circuit. This is the riskiest phase for launderers, as large amounts of cash immediately attract the attention of banks and authorities.Common investment techniques:

• Smurfage (smurfing) : division of a large payment into hundreds of small payments made by multiple accomplices. For example, 100,000 euros divided into transfers of 1,000 euros each to bypass automatic reporting thresholds.
• Deposits in cash-intensive businesses : bars, restaurants, currency exchange offices, gaming lounges — these establishments make it possible to mix criminal cash and legitimate revenue.
• Casino chip purchases : conversion of cash into chips, minimum playing period, then cashing out as “winnings”.
• Fake bills : creation of fictitious transactions justifying movements of funds.

Placement remains the weak link in the process. It is at this stage that bank vigilance schemes and suspicion reporting requirements are most effective.

Stacking (stratification): confusing the waters

Once the funds are entered into the system, the objective is to make their traceability more complex through a series of sophisticated financial transactions.Stacking mechanisms:

• Multiple transfers between accounts in different countries
• Use of shell companies with falsified invoices and fictitious contracts
• Passage through tax havens and opaque jurisdictions
• International cascading transfers
• Use of complex financial products

A striking historical example: in the years 1980-1990, Colombian cartels transited cocaine money along a “route of sanctification” — United States, Panama, then accounts in Germany, Monaco, Luxembourg, Austria and France — before repatriation to Colombia via European companies before repatriation to Colombia via European companies. Money laundering based on international trade (TBML) is particularly dangerous at this stage, using over-shipping, under-shipping, overbilling or underbilling to move value between jurisdictions.

Integration: reinject “own” funds into the economy

The final phase reintroduces laundered capital into the legitimate economy, making it almost impossible to prove its criminal origin.Common forms of integration:Integration vehicleMechanismAdvantage for the laundererReal EstatePurchase of goods via companies screensHigh value, capital gains, respectabilityLegitimate businessesCreation or acquisition of businessesApparently legal incomesFinancial productsFinancial productsLife insurance, portfolios, securitiesComplexity and securityComplexity and privacyComplexity and confidentialityBacked loansDepository abroad as a guarantee of repatriated creditAppearance of legitimate debt “Earnings” from gamesConversion via casinosPlausible justification

Main modern money laundering methods and techniques

More than 150 money laundering techniques are identified around the world. This section focuses on the most frequent and most monitored methods in 2023-2025, with an emphasis on recent developments related to the digitalization of the economy. Launchers generally combine several of these techniques to make detection more complex. Faced with this growing sophistication, the fight against money laundering now relies heavily on data analysis, artificial intelligence and machine learning to identify atypical patterns.

International Trade-based Money Laundering (TBML)

Trade-Based Money Laundering uses international trade mechanisms to transfer value across borders in a hidden way.Main manipulations:

• Overbilling : overpayment in relation to the real value of the goods
• Underbilling : lower payment to maintain goodwill
• Wrong description : declaration of goods different from those actually shipped
• Over-shipping/under-shipping : declared quantities that do not correspond to the actual volumes

Concrete example : A criminal organization exports electronics from Asia to Europe, with 40% overbilling. The European buyer (accomplice) pays the inflated price. The difference — dirty money — is thus legally transferred to the Asian seller, who then pays it back via a complex banking circuit.Warning signs:

• Significant price differences from market prices
• Buyers/sellers with no verifiable trading history
• Atypical trade routes for the products concerned
• Inconsistent transport documents

The FATF has produced several typology reports on TBML, stressing that this method is particularly used for drug trafficking, smuggling and customs fraud.

Businesses that handle cash heavily (local shops, exchange offices, etc.)

Some businesses present an ideal profile for money laundering thanks to their intensive use of cash money: bars, restaurants, nightclubs, gaming lounges, retail shops, gas stations, exchange offices.The mechanism is simple:

1. Injecting criminal cash into daily cash registers
2. Bank deposit as legitimate “recipes”
3. Issuing fake invoices and creating fictional sales to align accounting

Warning signs to watch out for:

• Sudden increase in turnover that is not correlated to real activity or the economic context
• Unusually high profit margins for the sector
• Inconsistencies between bank deposits and operational expenses
• Regular payments calibrated just below the reporting thresholds
• Excessive use of cash for supplier payments

Tax authorities and anti-money laundering services are conducting joint investigations into these sectors, especially since the intensification of the fight against the shadow economy in 2015.

Casinos, Gambling, and Online Gaming Platforms

The gaming sector offers a breeding ground for money laundering thanks to the rapid conversion of cash into “winnings.”Classic operation:

1. Buying chips with dirty money
2. Minimum playing time (a few roulette games, poker)
3. Converting tokens into seemingly legitimate “earnings”
4. Cash or bank transfer with proof

Modern variants:

• Online casinos and offshore sports betting sites
• Fixed odds betting terminals
• Player accounts used as “passage accounts”
• Poker tournaments with significant flows

Criminal strategies observed:

• Accomplices simulating losses in the face of a player who “wins”
• Buying winning tickets from other players
• Creation of multiple accounts on different platforms

Since the 4th and 5th European Anti-Money Laundering Directives, KYC (Know Your Customer) rules have been strongly strengthened. Gaming operators are now entities subject to suspicion reporting requirements.

Money laundering through insurance contracts and products

The insurance industry, especially life insurance and capitalization products, can serve as a long-term investment vehicle to launder illicit funds.Misused mechanisms:

• Premium payments in cash or by split transfers
• Early redemption of contracts to recover apparently legitimate funds
• Use of opaque economic beneficiaries
• Creating fake policies in poorly regulated jurisdictions
• False claims

LCB-FT regulations impose specific obligations on insurers: customer profiling, monitoring of atypical payments, increased vigilance on early redemptions, and reporting to national financial intelligence units in case of suspicion.

Financial mules and “smurfing” networks

Financial mules are individuals — often students, unemployed people, vulnerable people or human beings in precarious situations — who lend their bank accounts in exchange for remuneration to receive and retransfer criminal funds.Smurfage (structuring) is based on the multiplication of payments calibrated under the reporting thresholds, made by several accomplices on different accounts. This dispersion bypasses banks' automated alert systems.The “cuckoo smurfing” (Cuckoo smurfing) is particularly pernicious: a legitimate transaction — for example a transfer from parents to their child studying abroad — is misappropriated. The student receives the expected money, but it actually came from criminal funds, while the parents paid their money into an account controlled by the network.Mule recruitment channels:

• Social networks with fake job offers
• Announcements for “money transfer jobs”
• Dating platforms
• Promises of “payment management” for foreign businesses

Peer-to-peer (P2P) payments and digital wallets

The rise of instant payment applications and e-wallets since the end of the 2010s has opened up new dimensions for money laundering.Techniques used:

• Splitting large amounts into multiple smaller P2P payments
• Successive use of several different platforms
• Association with sales on second-hand platforms as a cover
• Anonymous or pseudo-anonymous reloadable prepaid cards
• Recurring micro-payments between accounts controlled by the same network

The COVID-19 pandemic has accelerated the adoption of electronic payments, increasing the risks of non-compliance in this area. Some countries have reacted by imposing stricter ceilings, mandatory identification of wallet holders, and increased surveillance of atypical patterns.

Money laundering and cryptocurrencies

Cryptoassets (Bitcoin, Ethereum, stablecoins) and the ecosystem that surrounds them — exchanges, mixers, tumblers, DeFi protocols, NFTs — can be used to anonymize or muddle financial flows.Typical diagram:

1. Funds stolen during a cyberfraud transferred to an exchange
2. Conversion into various cryptocurrencies
3. Going through mixers to blur traceability
4. Conversion into stablecoins or other assets
5. Reinjecting via DeFi platforms or buying NFTs
6. Exiting in fiat currency on a regulated exchange

Recent regulatory developments:Many countries have extended their LCB-FT arrangements to digital asset service providers (VASPs). Since 2023, the bonds include:

• Strengthened KYC for customers
• Freezing of assets at the request of the authorities
• Mandatory Suspicion Report
• Significant penalties in case of non-compliance

It is essential to note that the majority of uses of cryptocurrencies remain perfectly legal. However, surveillance has intensified, and blockchain analysis tools now allow numerous suspicious transactions to be effectively traced.

Real estate and wealth investments

Real estate, particularly in major European and North American cities, remains a prime target for the integration of laundered capital.Why real estate attracts launderers:

• High unit values to absorb large amounts
• Capital gain potential
• Low asset turnover
• Social respectability associated with ownership

Typical montages observed:StructureMechanismDetection riskCompanies screenAcquisition via opaque structuresModerate (beneficiary registers) LoansPurchase on behalf of a third partyWeak if well organizedOpaque trustsComplex legal structuresVariable by jurisdictionVariable by jurisdictionVariable by jurisdictionUnder/overvaluationPrices manipulated to justify flowsHigh if significant varianceNotaries, real estate agents, lawyers and banks are now subject to strong origin verification requirements of funds and identification of beneficial owners. Nevertheless, the FATF 2023-2024 reports highlight that real estate sector compliance remains insufficient in many countries.

International framework for the fight against money laundering

The Financial Action Task Force (FATF), created in 1989 at the G7 Summit in Paris, is the cornerstone of the global system against money laundering and the financing of terrorism.

The 40 Recommendations: the global standard

The FATF's “40 Recommendations” define the AML/CFT framework that each country should adopt. Regularly updated (especially after 2001, 2008, and in the face of new crypto threats and international sanctions), they cover:

• The vigilance obligations of financial institutions
• Reporting suspicious transactions
• International cooperation
• The powers of the prosecuting authorities
• The transparency of legal persons

The mechanism of gray and black lists

The FATF regularly assesses jurisdictions and can place them on: List Criteria ConsequencesGrey listStrategic deficiencies identifiedIncreased oversight, commitment to correctBlacklistPersistent serious failuresCountermeasures, banking restrictions, isolationListing on these lists leads to an immediate deterioration in international reputation, difficulties in accessing banking correspondents, and considerable pressure from global financial institutions.

The assessment of France

The 2020-2022 evaluation cycle for France (report published in 2022) highlighted:Strengths:

• Robust legal framework
• Tracfin effective as an intelligence unit
• Expanded international cooperation

Areas for improvement:

• Supervision of non-financial sectors to be strengthened
• Effectiveness of sanctions to be improved
• Transparency of beneficial owners to be completed

Other international players

The global struggle also involves:

• ONU : Conventions against organized crime (Palermo) and corruption (Mérida)
• IMF and World Bank : Assessments and technical assistance
• Regional networks : GABAC (Central Africa), GAFISUD (South America), MENAFATF (Middle East and North Africa)

European system: directives, single regulation and the creation of AMLA

Since 1991 (1st Directive), the European Union has been building a regularly reinforced anti-money laundering arsenal, resulting in the “anti-money laundering package” adopted in May 2024.

The evolution of European directives

DirectiveYyearMajor contributions4th Directive2015Risk-based approach, registers of beneficial owners5th Directive2018Inclusion of cryptoassets, strengthening transparency6th Directive2020Harmonization of sanctions, criminal liability of legal persons

The 2024 anti-money laundering package

This sixth package includes:

• A single regulation directly applicable in all Member States, with no national transposition required
• A new directive harmonizing the powers of national authorities
• Uniform sanctions at the European level
• Strengthened obligations transparency on beneficial owners

AMLA: a European supervisory authority

The European Anti-Money Laundering Authority (AMLA), which will be headquartered in Frankfurt, represents a major innovation:

• Direct supervision of the riskiest financial entities in the EU
• Coordination national supervisory authorities
• Investigative power and sanctions at European level
• Harmonization control practices

Member States need to adapt their national law to this new framework. In France, DG Trésor plays a central role in transposition and internal coordination.

National Organization for the Fight against Money Laundering (French example)

France illustrates a structured national anti-money laundering system, comparable to those of Switzerland, Belgium, Canada or Algeria, with particularities specific to each jurisdiction.

The role of DG Trésor

The General Directorate of the Treasury:

• Develops national AML/CFT standards
• Represents France at the FATF and in international bodies
• Coordinate the actions of the ministries concerned
• Supervises risk sectors: finance, art, luxury, gaming, real estate, regulated professions

The COLB: steering and coordination

The Counter-Money Laundering and Terrorist Financing Steering Council:

• Pilot the national risk analysis
• Coordinates exchanges between supervisory authorities and subject professions
• Proposes strategic directions

Supervisory authorities

Authority/Perimeter/Main MissionACPRBanks, insurances, prudential control and AML/CB-FTAMFFinancial markets/Supervision of intermediariesTracfinAll sectors/Financial intelligence cell/Tracfin receives statements of suspicion from all reporting professionals and forwards files justifying in-depth investigations to the judicial authorities.

Non-financial sectors subject to

LCB-FT bonds extend well beyond the banking sector:

• Notaries : vigilance on real estate transactions
• attorneys (for certain transactions): advice on asset structuring
• Chartered accountants : detection of accounting anomalies
• Casinos and online gaming operators : player identification
• Real estate agents : verification of the origin of the funds
• Art dealers and antique dealers : transactions greater than 10,000 euros

These professionals must implement KYC procedures, keep supporting documents, and file suspicious statements with Tracfin in the event of a suspicious transaction.

Money laundering, embezzlement and other related offences

Money laundering is often linked to a “prior crime” — drug trafficking, fraud, corruption, embezzlement — but is a separate offence with its own criminal definition.

Misappropriation of funds vs money laundering: the differences

Criteria: Misappropriation of funds (Money laundering)Access to fundsLegitimate (then misappropriated) Criminal fundsbackgroundInternal offense within the organizationExternal concealment processObjectivePersonal ownershipReintegration into the legal economyTypical authorEmployee, manager, mandataryCriminal network, intermediaries

Offences that generate dirty money

Bleaching may involve products made from:

• Fraud and cyber fraud
• Tax evasion and tax evasion
• Misuse of social assets and embezzlement
• Corruption active and passive
• Terrorist financing
• Traffic of narcotics, of weapons, of human beings
• Flight, extortion, organized violence

Sanctions in France

Article 324-1 of the Criminal Code defines money laundering and provides for: Type of money launderingPrisonImpleFine Up to 5 years375,000 €Habitual or in an organized gangUp to 10 years750,000 €Linked to organized crimeUp to 20 years1,000,000 €Up to 20 years1,000,000 €Other European countries provide for comparable sanctions, with variations depending on severity and circumstances.

Non-criminal consequences

In addition to criminal sanctions, the persons and businesses involved risk:

• Forfeiture of assets acquired through money laundering
• Prohibition of exercise vocational
• Withdrawal of approval for financial institutions
• Reputational damage sustainable
• Executives indicted for lack of internal control

Money Laundering FAQ

How can an individual identify a risk of money laundering in their daily life?

Several situations should alert an individual:

• Proposals for “easy jobs” consisting in receiving money into your account and transferring it back against commission — this is recruitment as a financial mule
• Request to lend your bank account to a friend or acquaintance for “administrative reasons”
• Atypical purchases or sales : someone offers to buy you a property above the market price, or asks you to charge a fictitious service
• Suspicious job offers for “payment manager” or “transfer agent” with attractive remuneration

In all these cases, caution is required. Accepting may expose you to prosecution for complicity in money laundering.

What are the obligations of a small business or a liberal professional in the fight against money laundering?

The obligations vary depending on whether or not you are a “subject profession”:Subjected professions (notaries, accountants, lawyers for certain missions, real estate agents, art dealers for transactions > €10,000):

• Implement vigilance procedures (KYC)
• Identify and verify the identity of customers and beneficial owners
• Keep documents for a minimum of 5 years
• Report suspicions to Tracfin
• Train the employees concerned

Professions not subject to taxation :

• No specific legal obligation in the area of AML/CFT
• However, vigilance is still recommended to avoid any involuntary involvement

What is the risk of a person who agrees to serve as a nominee or financial mule without “knowing everything” about the origin of the funds?

The law does not require proof of precise knowledge of the criminal origin of the funds. Bleaching can be characterized when the person:

• Should have known that the funds had a dubious origin (serious recklessness)
• Has closed his eyes on obvious signs of crime

Financial mules, even recruited via fake job ads, can be sued. The penalties incurred are up to 5 years in prison and a fine of €375,000 for simple money laundering, not to mention civil damages and criminal records.

The “I didn't know” argument is generally not valid if the circumstances should have alerted a reasonable person.

Are cryptocurrency payments automatically suspicious?

No, cryptocurrencies are not inherently suspicious. The vast majority of crypto transactions are perfectly legal — investments, payments, payments, international transfers, participation in blockchain projects. However, cryptoassets are monitored just like any other payment method. Best practices include:

• Use regulated platforms with KYC procedures
• Maintain the traceability of your purchases and sales
• Be able to justify the origin of your funds in case of request
• Report your capital gains to the tax services

Authorities now have powerful blockchain analysis tools that allow flows to be traced, even through certain anonymization mechanisms. The regulation of VASPs (digital asset service providers) has been considerably strengthened since 2023.

What is the most important piece of advice for a company that wants to avoid any risk associated with money laundering?

Implementing a culture of compliance is critical. Concretely:

• Train regularly all employees in contact with financial flows or customers
• Document systematically The verifications carried out
• Report without delay any atypical transaction to your compliance manager
• Never give in to pressure of a customer in a hurry to conclude without providing the required supporting documents
• Update your procedures according to regulatory changes

Solving money laundering cases often starts with a simple internal report. A vigilant company not only protects the financial system, but also its own reputation and managers from the risks of criminal prosecution.In conclusion, money laundering remains one of the major challenges of our economic and judicial era. Between traditional methods and technological innovations, criminals are constantly adapting their techniques, requiring authorities and companies to be constantly vigilant. Whether you are a taxable professional, a business owner or a private citizen, understanding these mechanisms is the first step in contributing to a healthier and fairer economy.