criminal-law business real-estate currency money-laundering
Borrowing from a relative or friend without documentary evidence — is it money laundering?
<p>Suppose a person borrows money from a relative or friend, say, 10 million USD, without documentary evidence — the transaction is purely based on trust and cultural norms. </p>

<p>If the borrower invests the money in real estate and after 5 years returns the borrowed amount to the lender, can this be treated as money laundering?</p>

<p>According to the United States Treasury Department:</p>

<blockquote>
  <p>Money laundering is the process of making illegally-gained proceeds (i.e. "dirty money") appear legal (i.e. "clean"). Typically, it involves three steps: placement, layering and integration. First, the illegitimate funds are furtively introduced into the legitimate financial system. Then, the money is moved around to create confusion, sometimes by wiring or transferring through numerous accounts. Finally, it is integrated into the financial system through additional transactions until the "dirty money" appears "clean."</p>
</blockquote>

<p>I have no idea if the $10m are proceeds of crime so we apply the duck test - "If it looks like a duck, quacks like a duck and swims like a duck; its probably a duck"</p>

<ol>
<li>A person has gifted another person $10m - there is nothing illegal about giving someone a gift, however, this is a pretty substantial gift. I am calling it a gift because there is no enforceable contract that requires repayment.</li>
<li>There is an expectation that the receiver will invest this money for a period of time, hey, if I had $10m I'd probably invest it too.</li>
<li>And then return it to the giver; with or without the earnings (you do not say). Again there is nothing wrong with reciprocating a gift; reciprocity is a cornerstone of most societies, however, this is a pretty detailed understanding of what reciprocity means.</li>
<li>Quack, quack, quack - its money laundering.</li>
</ol>

<p>Many jurisdictions in the world have "unexplained wealth" laws which basically require a person to explain their unexplained wealth or have it confiscated. If it isn't money laundering it is certainly at risk of this.</p>

<p>As has been alluded to money laundering is a generic term for the process by which criminals make the proceeds of crime appear to be legitimately obtained.</p>

<p>Various jurisdictions have controls in place to identify <em>suspicious transactions</em>, however these are generally the responsibility of financial institutions to monitor and report - for example, many countries require financial institutions to report transactions over a certain threshold value.</p>

<p>However, a critical element of money laundering is that <strong>the funds have been obtained as a result of crime</strong>. If the money is obtained legally, then no money laundering can occur.</p>

<p>While the United States Treasury have provided certain descriptions of money laundering, by categorising actions that usually occur in the process, you usually don't need to undertake any specific actions, nor does the money need to be of any specified value: someone could just as easily give you $10 to bet on a coin toss, and if that were the proceeds of crime, it would still constitute money laundering (though you'd be unlikely to be prosecuted for it).</p>

<p>So, in short, and in answer to your question: <strong>it's only money laundering if the money is a proceed of crime</strong>.</p>

<blockquote>
<p>can this be treated as [being] money laundering?</p>
</blockquote>
<p>People can treat it however they want. The facts you present do not <em>constitute</em> money laundering, but they likely would <em>give rise to the suspicion</em> of laundering.</p>
