What is Money Laundering?

Money laundering occurs when funds from an illegal/criminal activity are moved through the financial system in such a way as to make it appear that the funds have come from legitimate sources, according to the National Futures Association. Money Laundering usually follows three stages. First, cash or cash equivalents are placed into the financial system. Second, money is transferred or moved to other accounts (e.g. futures accounts) through a series of financial transactions designed to obscure the origin of the money (e.g. executing trades with little or no financial risk or transferring account balances to other accounts). Finally, the funds are reintroduced into the economy so that the funds appear to have come from legitimate sources (e.g. closing a futures account and transferring the funds to a bank account). Trading accounts that are carried by FCMs (Forex Capital Manager) are one vehicle that can be used to launder illicit funds or to hide the true owner of the funds. In particular, a trading account could be used to execute financial transactions that help obscure the origins of the funds.