Anti-Scam FAQ: What is reverse money laundering?


Reverse money laundering is a term used to describe the process of disguising legitimate funds that will be used to fund criminal activities.

Reverse money laundering is the opposite of typical money laundering schemes where criminals spread illegal gains to lower the odds of being found. With reverse money laundering, legal funds are removed from circulation and used to fund criminal activity, terrorism and tax evasion or bribery. Legitimate funds are used, which means that monitoring, identifying, and prohibiting reverse money laundering becomes extremely complex.

Combating reverse money laundering forms an integral part of the fiduciary duty of every financial institution, not only towards their clients but as responsible citizens. According to a report by the principal difference between reverse money laundering and regular money laundering is that the latter aims to conceal the origin of funds, while reverse money laundering attempts to conceal what the money will be used for.

This can involve a variety of activities, such as transferring money through a series of transactions to obscure its source, using shell companies or trusts to hide the ownership of the funds, or investing the money in legitimate businesses to give it the appearance of being legal.

Reverse money laundering is often used to fuel crimes, such as fraud, corruption, or tax evasion. It can also be used to fund illegal activities, such as drug trafficking or terrorism.

To combat reverse money laundering, governments and financial institutions have implemented a variety of measures, including anti-money laundering regulations, financial reporting requirements, and due diligence checks on financial transactions.

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