It is often hard for criminals to openly use the funds gained from criminal activities, especially if they are carrying out monetary transactions where they can be questioned as to where the money came from. Tax avoidance may also be an issue here.
So that criminals can use the proceeds of illegal activities or undeclared income without their original source being detected, they will resort to money laundering. The process will also attempt to make the funds appear perfectly ‘clean’ with an apparently legitimate reason for their existence.
A possible definition of money laundering is
‘the process by which criminals convert the proceeds of illegal activities into legitimate funds’
Crimes associated with money laundering include drug trafficking and terrorism but the illegal proceeds could be from any activities. There are several forms of money laundering and it is an international problem which can affect all industries.