Why is money laundering necessary?
In: Economics
It isn’t necessary. It’s illegal.
If you are asking why people do it anyways, it’s because they have acquired money through some sort of improper means. They can also do this to avoid paying taxes, although that is called “tax evasion.”
Essentially, the goal of money laundering is to start with a pile of money that you don’t want to admit where it came from, and go through some kind of illicit process to end up with a “fresh” pile of money that seems to have come from somewhere legitimate. For instance, maybe you’re part of a gang and you’ve made some money selling drugs, or running an illegal casino, or something, but you don’t want to have to admit that if the IRS or the police ever ask how you got the money in your bank account. Usually this would involve moving the money through a company with a lot of cash transactions and poor records, or by shuffling it through a foreign offshore corporation, or that sort of thing.
Again, however, this isn’t “necessary.” It’s a crime. The people who do it are criminals who want to avoid leaving evidence of their crimes, or to cheat on their taxes.
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