It’s one of the most difficult issues that a financial institution has to face. With an increase in online fraud, it’s becoming a lot easier for criminals to fleece the public, and banks, from their money. One of the most common types of fraud is that of money laundering. It’s why companies invest in getting a good KNOW YOUR CUSTOMER process for onboarding in place. It’s where companies like w2 prove to be invaluable. They provide a system that allows you to be sure that whoever looks to sign up is a genuine article.
Money laundering is a process where the ill-gotten gains of criminals need to be cleaned. By cleaned we mean it enters the regular money market. For example, if they have stolen an item or a large amount of cash, then this is traceable. However, if they can sell the item and then deposit it into a bank account, the money generated is clean. The other idea is to use a sum of cash they have stolen and use it for a deposit on a home. The property is then sold sometime later; hence the money is cleaned for use again.
This is why the bank or financial institution should also be asking the customer where they got the proceeds for the deposit from. It’s a reasonable question and should be easily answered, unless it was gained from criminal activity.