Money laundering is the process of making criminal proceeds appear to have a legitimate source. That way, it looks like money earned through legitimate means, and no one can tell where it really came from.
For a criminal, that’s not a luxury but a necessity: profits you can’t spend without drawing attention are worth very little. Banks, accountants, notaries, and others AML-Regulated institutions must be able to identify money laundering. This isn’t an additional task; it’s required by law. Below, you’ll learn what money laundering is, how it works, and where your responsibility begins.
In a nutshell
- Money laundering gives money derived from crime an apparently legitimate source.
- It typically proceeds in three phases: placement, acclimatization, and integration.
- Indicators include transactions that lack economic rationale, unusual cash flows, and the use of front men.
- Money laundering is a criminal offense under Article 420bis of the Penal Code, punishable by up to 6 years in prison (8 years for habitual money laundering).
- AML-Financial institutions serve as gatekeepers: they conduct customer due diligence and report unusual transactions to FIU-Netherlands.
- Effective identity verification and customer due diligence at the outset make that role manageable.
Contents
- What is money laundering?
- How Does Money Laundering Work? The Three Stages
- Money Laundering Indicators: How Can You Spot Them?
- Is money laundering a crime?
- What does this mean for your institution?
- How DataChecker helps
What is money laundering?
Money laundering means concealing the criminal origin of money or goods. Think of profits from drug trafficking, fraud, or human trafficking. In its raw form, that money is unusable: as soon as someone spends it, its origin raises questions. Money laundering solves this by giving the money a story that does add up on paper.
Black money and money laundering are often confused. Black money is money on which no taxes have been paid. Money laundering goes a step further: it involves actively concealing the criminal origin of the money so that it can be spent normally again. All laundered money is black money, but not all black money is laundered.
How Does Money Laundering Work? The Three Stages
Money laundering rarely follows a single, straightforward path, but most methods can be broken down into three stages.
1. Placement. Criminal cash enters the financial system. For example, through deposits, a cash-intensive business such as a restaurant or car dealership, or the purchase of expensive goods.
2. Layering. The money is funneled through a web of transactions to cover its tracks: transfers between accounts, offshore arrangements, and the purchase and sale of assets. The more steps involved, the harder it is to trace its origin.
3. Integration. The money re-enters the legal economy under a false pretense—for example, as real estate, an investment, or business profits. From this point on, it is indistinguishable from legitimate assets.
The Three Stages of Money Laundering
From cash proceeds of crime to seemingly clean assets
Placement
Criminal proceeds in cash enter the financial system, often through a cash-intensive business.
Veiling
Countless transactions throw a wrench in the works: wire transfers, offshore arrangements, purchases, and sales.
Integration
The money flows back into the economy in a clean way: real estate, investments, corporate profits.
In short: The three phases are not a checklist that criminals neatly work through. In practice, they overlap. For an institution, what matters most is: at what point does this transaction affect my case file, and does the story behind it add up?
Money Laundering Indicators: How Can You Spot Them?
There is no single piece of evidence that proves money laundering. It’s about patterns that don’t match what you would expect from a customer. Common indicators:
- Transactions without a clear economic or business rationale.
- Unusually large or frequent cash deposits.
- Amounts that fall just below a reporting threshold (structuring).
- Payments made through third parties or front men.
- Fast turnover: money comes in and goes out almost immediately.
- A client who remains vague about the source of funds or the purpose of a financial arrangement.
Six Signs That Call for Attention
No single indicator proves money laundering; it's about the pattern
No economic logic
Transactions that make no business sense.
Unusual Cash Flows
Large or frequent cash deposits.
Structuring
Amounts just below a reporting threshold, split up.
Through front men
Payments processed through third parties.
Fast turnaround
Money comes in and goes out almost immediately.
Unclear origin
The customer remains vague about the source or purpose.
Context is key. A large cash deposit is normal for a market vendor but stands out for a consultant. That’s why recognizing the situation starts with knowing who your customer is.
Is money laundering a crime?
Yes. Money laundering is a criminal offense under the Penal Code. The law distinguishes between different levels of severity, with progressively higher maximum penalties:
- Money Laundering (Art. 420bis): up to 6 years in prison or a fifth-category fine.
- Money Laundering by Customary Practice (Art. 420ter): up to 8 years, if someone makes a habit of it.
- Money Laundering (Art. 420quater): up to 2 years, if a person should reasonably have suspected that the money was the proceeds of a crime.
- Simple money laundering (Art. 420bis.1): up to 6 months, for merely acquiring or possessing money derived from one's own criminal activity.
(source: Penal Code, Title XXXA, wetten.overheid.nl)
Important detail: You do not have to have committed the predicate offense yourself. Anyone who accepts, transfers, or uses money while knowing or having reason to suspect its criminal origin can be prosecuted for money laundering.
What does this mean for your institution?
The government combats money laundering not only through criminal law, but also by imposing safeguards on institutions. Among the Anti-money laundering (AML) Banks, accountants, notaries, real estate agents, and many other parties serve as gatekeepers.
This role involves two key responsibilities. You will client survey: You determine who your customer is, who the ultimate beneficial owner (UBO) is, and what the purpose of the relationship is. And you report unusual transactions to FIU-Netherlands, the agency that analyzes reports and forwards suspicious transactions to law enforcement agencies.
Tip: Recognizing money laundering doesn't start with the transaction, but with the onboarding process. If you carefully verify who your customer is right from the start, you'll be able to recognize much more quickly later on when a transaction doesn't match that customer's profile.
That is exactly where things go wrong in practice. Documents arrive in a scattered manner, identities are verified partly by hand, and files remain incomplete. The Dutch Central Bank (De Nederlandsche Bank) and the Public Prosecution Service have repeatedly shown that inadequate anti-money laundering controls lead to hefty fines.
How DataChecker helps
A strong gatekeeping function stands or falls on what you establish up front. That’s where DataChecker Customer due diligence:
- Automated identity verification: verify that a customer is who he claims to be;
- Customer Due Diligence (KYC), including identifying the ultimate beneficial owner;
- A complete and traceable file for each customer, ready for you AML-administration;
- re-evaluation when a customer's situation changes.
This way, you'll know who you're doing business with, document how you determined that, and have the foundation in place to identify unusual transactions sooner. DataChecker does not adopt the reporting requirement, but makes the customer due diligence process reliable and manageable.
Last updated: July 2026. This explanation reflects the current status as published on wetten.overheid.nl and FIU-Nederland.
Frequently Asked Questions About Money Laundering
What is the difference between illicit funds and money laundering?
Black money is money on which no taxes have been paid; money laundering is the act of concealing its criminal origin. So these are related but distinct concepts. Money laundering makes illicit or criminal money usable again in the legal economy.
What are the three stages of money laundering?
Placement, concealment, and integration. First, the money enters the system; then, through a series of transactions, its trail is obscured; and finally, it re-enters the economy under the guise of legality.
Is money laundering a crime, and what is the penalty?
Yes, money laundering is a criminal offense punishable by up to 6 years in prison under Article 420bis of the Dutch Criminal Code. In cases of habitual money laundering, the sentence can be up to 8 years. Even those who did not earn the money themselves but knew or should have suspected its source are liable to prosecution.
What are some examples of money laundering?
Laundering criminal proceeds in a restaurant or car dealership, or hiding them through real estate and investments. The purchase and sale of high-value goods and structures through foreign markets are also traditional methods.
What is an unusual transaction, and who is required to report it?
A transaction that deviates from a customer's normal pattern or triggers an objective reporting indicator. Institutions that fall under the AML If they fall under this category, they must report such transactions to FIU-Netherlands.
What is crypto money laundering?
Money laundering in which criminal proceeds are concealed using cryptocurrency. The three phases remain the same; only the channel changes. Crypto service providers are now also subject to anti-money laundering regulations.
What is the difference between money laundering and the AML?
Money laundering is a criminal offense; the AML is the law that requires institutions to help prevent it. The AML It governs customer due diligence and the reporting requirement, not the penalty for money laundering itself.
