Money Laundering is the process by which 'dirty money' i.e. money obtained as a result of criminal activity, whether organized or not, such as theft, fraud, embezzlement or other unlawful diversion, is 'washed' by means of various transactions, transfers, purchases and/or acquisitions so as to seemingly become 'clean' or appear to be legitimately acquired and/or invested.

The term 'money laundering' is said to have developed as a result of the activity of certain organized crime subjects who invested the proceeds of their criminal activity in actual laundry businesses during the Prohibition Era in the 1930's in order to disguise the source and nature of the money that provided the basis for the illicit investment and to frustrate law enforcement investigations of the financially lucrative criminal behaviour that generated the funds in question.

Some would view this term to also apply to situations where money is improperly acquired following the breach of a civil contract for goods and/or services, whether or not criminal activity is alleged or established by means of a report to a relevant law enforcement agency or following a trial and criminal conviction and whether or not a civil action is initiated or successfully concluded for such breach of contract leading to a judgment in favor of a plaintiff.

Money laundering occurs, therefore, whenever money is unlawfully acquired or diverted, whether by criminal activity, breach of contract or, in principle, in any circumstance where cash is allegedly inappropriately diverted.

Whether a situation involves cash that results from criminal activity such as prostitution, drug trafficking, gambling, pyramid schemes, extortion, investment fraud or illegal arms sales or whether the situation simply involves a spouse secretly diverting money without the knowledge of his or her partner from what are arguably joint matrimonial assets, money laundering can occur following the diversion of such currency and this money can be used in an infinite variety of ways, whether for the simple purchase of goods and services to terrorist financing.

While some of this money may remain in various financial institutions, whether locally or elsewhere, requiring consensual disclosure or legal process, often assets such as real property, motor vehicles, boats, aircraft, artwork, diamonds, jewellery and other property are purchased with some or all of the diverted currency to launder it and frustrate location and recovery initiatives. A recent Canadian report titled "Money Laundering in Canada: An analysis of the Royal Canadian Mounted Police (RCMP) cases" indicated that during a two year period from January 2000 to May 2002, of 149 laundering cases randomly chosen for the study, 55.7 % of the cases involved the real estate industry, and 76.5% involved deposit institutions such as banks'.

Lawyers have also been identified as money laundering agents. The August 6, 2007 issue of MacLean's Magazine entitled "Lawyers Are Rats", contains an exclusive interview by journalist Kate Fillion of ex-Bay Street lawyer Philip Slayton, a former Law Professor at McGill University and Dean of Law at the University of Western Ontario, and asked him, among other things, why lawyers are now so instrumental in money laundering operations. Mr. Slayton replied as follows:

"There's recently been a whole spate of national and international rules about money laundering, trying to get rid of it because it promotes organized crime. In Canada, lawyers have resisted, successfully, application of those rules to the legal profession. To simplify, they've said, "You cannot oblige us to report cash transactions to a government agency" - which, by the way, banks are now obliged to do - because to do that would be a fundamental violation of solicitor-client privilege. Meanwhile, those who know anything about this, like the auditor general of Canada and various high officials in the RCMP, have said that partly because they're largely exempt from these rules, lawyers can become, and some have become, agents of money laundering. You go to your lawyer with cash because he's exempt from these rules. The law society will say, "No, no, no, we have rules about this, any cash transaction over a certain amount has to be reported to the society." But there certainly isn't the full oversight by federal authorities that you find in all other areas where financial transactions happen. I think invoking solicitor-client privilege is nonsense. If you're a lawyer and somebody walks into you office and says he's going to buy a house and needs to put a $50,000.00 deposit down, and here's a briefcase full of cash, would you not think, Hmmm, this is very unusual? It's not some massive encroachment of solicitor-client privilege to address this issue. It's just plain common sense. (Emphasis by Internal Affairs)

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