Imagine you’ve just gotten a few million dollars through something illegal. You can’t just roll up to the bank and deposit it, because then someone might start asking questions about where that money came from.
Now let’s say you happen to run a laundromat. You lump those millions, a little at a time, in with your money from the laundromat. After all, at the laundromat it’s normal for people to pay in cash and for you not to have a record of everyone who paid. You’re not expected to have a paper trail for the money anymore, and it won’t look as suspicious when you put it in the bank.
Of course, it costs money to run the laundromat, and you have to pay taxes on the money, so you don’t make out with quite as much, but the money is “legit” after it’s been laundered.
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