Money laundering does not refer to the actual process of washing banknotes, though our Canadian friends may disagree.  Money laundering is defined as "financial transactions in which criminals, including terrorist groups, seek to conceal the revenues, origins, or nature of their unlawful operations," according to the US Department of Treasury. Money laundering is the process of making money that originated from source X appear to originate from source Y. But what causes money to become tainted in the first place?
Individuals who want to conceal the source of their income generally utilize money laundering, which is nearly always unlawful. Terrorism, embezzlement, and drug trafficking are examples since virtually all their revenues are in cash, which attracts unwelcome attention. Furthermore, those who earn large sums of money, whether legally or illegally, but do not want to pay taxes may be guilty of money laundering. They prefer to shift their money about via various procedures and parties to cover the precise amount of their profits, which is known as tax evasion. 
Money laundering usually requires three primary steps: placement, layering, and integration, regardless of how simple or complicated the procedures are. The first stage is to deposit the money into the financial system, which is generally done through a bank. This stage is difficult since banks are obligated to disclose suspected large-dollar transactions. As a result, some people divide their money into little amounts and deposit it in several banks or even countries, a practice known as smurfing. Layering is the second stage, which entails transferring the money via a series of subsequent transactions to make it harder for authorities to monitor. Finally, as a final attempt to appear entirely authentic, the money is withdrawn in cash and spent by the launderer. Investing and purchasing high-end real estate or paintings are typical behaviours. Money laundering acquired its name because a criminal decided to buy a laundry chain to conceal any illicit activity.
Unfortunately, the United Nations Office on Crime and Drugs estimates that over $2 trillion is laundered each year, with several negative economic consequences. Businesses and real-estate industries may suffer because of the resultant financial instability. Furthermore, attracting international investors would be more difficult in nations where money laundering is not tightly enforced. Furthermore, if tax receipts fall short of public spending, the economy would experience budget deficits, resulting in a slew of issues in the country.
Governments all around the world have enacted a slew of rules and regulations to combat money laundering, including those that oblige financial institutions to disclose suspected money transactions. In 1989, the Group of Seven (G-7) established the Financial Action Task Force (FATF), an intergovernmental group tasked with combating money laundering across the world. However, launderer tactics are always changing, and the ones listed above are simply those that police are aware of. As a result, greater effort will be necessary in the future to detect and control money laundering more effectively.