Money laundering is a term generally associated with various types of financial transactions that are conducted by criminals to conceal the location, ownership, source, nature, or control of illicit proceeds. In the process, illicit proceeds are made virtually unrecognizable from proceeds derived from legitimate sources and, thus, are usable within the national and international financial system. Money laundering is not a new problem and efforts to stem such activity remain a global policy concern. Money l aundering occurs in three stages, which, in practice, may involve additional complexity. The first stage is "placement" and involves the introduction of illicit funds into the financial system. The second stage involves "layering," whereby illicitly placed funds undergo a series of processes to conceal their true source and ownership. The third stage is "integration," at which point illicit funds become indistinguishable from legitimately obtained funds and flow undetected through the financial system. Anti-money laundering (AML) policies are chiefly governed by national laws and regulations that establish the parameters of legal financial activity and the responsibilities of financial institutions and related sectors to comply with AML requirements. In the United States, a robust policy apparatus is in place to implement national laws through financial regulations, enforcement actions including prosecutions, and targeted sanctions. The U.S. government also supports the improvement of foreign government legal regimes and technical capacity for AML. International treaty instruments that address crime provide some tools to encourage international cooperation on financial crime matters. Several international institutions provide standard-setting guidance and maintain capabilities to monitor and assess the status of national AML policies. Multilateral institutions and donor nations also provide training and technical assistance to improve AML capabilities. Halting the introduction and circulation of criminally generated proceeds in the financial system, and, ultimately, depriving criminals from using illicit wealth remains a challenge. Despite the existence of long-standing domestic regulatory and enforcement mechanisms, as well as international commitments and guidance on best practices, policymakers are challenged to identify and address policy gaps and new laundering methods that criminals continue to exploit. Moreover, policymakers also may attempt to balance AML efforts with principles of financial inclusion, including providing access to financial services in developing countries, and avoiding unnecessary administrative and compliance burdens being placed on the public and private sectors. The scope of money laundering as a global problem is often framed in terms of the volume of illegal transactions, breadth of geographic concerns, and varied consequences resulting from such activity. Money laundering is a difficult phenomenon to accurately measure. In 1998, the International Monetary Fund (IMF) released a "consensus range" estimate of money laundering transactions totaling some 2%-5% of global gross domestic product (GDP). Based on 2009 data, the United Nations (U.N.) reviewed in 2011 existing national and international studies on money laundering and global crime proceeds to conclude that the scope of money laundering likely remained within the bounds of the IMF's rough estimate: approximately 2.7% of global GDP, or $1.6 trillion. Due to its global dominance, the U.S. dollar generates trillions of dollars daily in transactions through U.S. financial institutions, which in turn exposes the U.S. financial system to potential money laundering activity and cross-border illicit financial flows. The U.N. report further estimated that the United States, in 2010, likely generated some $300 billion in illicit proceeds (excluding tax evasion), or roughly 2% of U.S. GDP. In 2015, the U.S. Department of the Treasury confirmed that the U.N.'s estimates are "comparable to U.S. estimates." As in the United States, international surveys indicate that the most significant sources of illicit proceeds are generated through white collar crime (i.e., fraud, identity theft, and tax evasion) and organized crime, particularly drug trafficking. Smaller sums, which are nevertheless significant for political and security reasons, are associated with public corruption and international terrorism. In seeking to clean dirty money, launderers wield a wide range of methods to conceal from authorities the true origins, ownership, and volume of illicit proceeds. Particularly attractive are methods that preserve anonymity (e.g., use and movement of cash), avoid AML-related recordkeeping and reporting requirements (e.g., structuring bank deposit and withdrawal), and involve techniques that are hard for authorities to detect (e.g., trade-based money laundering). Money laundering may involve the use of complicit individuals (e.g., nominees, corrupt officials, banking insiders, front company business owners) and illegal financial service providers (e.g., unregistered money services businesses). Money laundering may also involve the exploitation of legal off-shore corporate structures that obscure beneficial ownership (e.g., shell companies) and permissive foreign jurisdictions, including those accessible by correspondent banking relationships and business sectors with potentially lax AML controls. "Beneficial owner" refers to the natural person who, directly or indirectly, controls or manages a legal entity and its assets. According to the Financial Action Task Force (FATF), an international AML standard-setting body, the lack of available information on the legal and beneficial ownership of corporate vehicles increases their vulnerability to exploitation for the purposes of laundering illicit proceeds. The Treasury Department describes money laundering as "a necessary consequence of almost all profit generating crimes and can occur almost anywhere in the world." As a global issue, the effectiveness of international AML efforts is often described as dependent on the international community's weakest links: countries or jurisdictions that fail to establish appropriate AML safeguards. Unchecked money laundering can have global consequences; it can: Undermine the integrity of the international financial system, reduce consumer confidence in the financial system, and damage the reputation of financial regulatory bodies. Introduce economic distortions that affect economic growth, international trade, business competitiveness, money demand, capital flows, foreign investments, exchange rates, and securities markets. Violate border and customs controls through the facilitation of bulk cash smuggling and trade-based laundering methods that evade duties, tariffs, and taxes—legitimate sources of government revenue that become unavailable for public expenditure. Contribute to and exacerbate state fragility by rewarding illicit behavior at the expense of transparency, good governance, the rule of law, and accountability of public and private institutions. Enable criminals to sustain their networks and realize profits generated by their illicit activities, including political corruption. Facilitate the financing of terrorism. In the United States, the legislative foundation for domestic AML originated in 1970 with the Bank Secrecy Act (BSA) of 1970 and its major component, the Currency and Foreign Transaction Reporting Act. Deriving from an emerging recognition that financial transaction records have a "high degree of usefulness in criminal, tax, or regulatory investigations or proceedings," the legislation authorized the Secretary of the Treasury to require financial institutions to establish and adhere to certain AML practices. Amendments to the BSA and related provisions in the 1980s and 1990s expanded AML policy tools available to combat crime, particularly drug trafficking, and prevent criminals from laundering their illicitly derived profits. Key elements to the BSA's AML legal framework, which are codified in Titles 12 (Banks and Banking) and 31 (Money and Finance) of the U.S. Code, include requirements for reporting, customer identification and due diligence, recordkeeping, and the establishment and maintenance of BSA/AML compliance programs. Bank examiners are required to probe banking entities on the effectiveness of AML policies and procedures. Substantive criminal statutes in Titles 31 and 18 (Crimes and Criminal Procedures) of the U.S. Code prohibit money laundering and related activities and establish civil penalties and forfeiture provisions (see text box below on enforcement actions). The establishment of a "follow the money" approach among federal law enforcement agencies in pursuing predicate offense investigations has contributed to, on average, 1,200 money laundering-related convictions annually. Moreover, federal authorities apply administrative forfeiture, non-conviction based forfeiture, and criminal forfeiture tools to confiscate assets, with more than $4.4 billion in assets confiscated in 2014. In response to the terrorist attacks on the U.S. homeland on September 11, 2001, Congress expanded the BSA's AML policy framework to incorporate additional provisions to combat the financing of terrorism (CFT). Legislation following the September 11 attacks, including Title III of the USA PATRIOT Act of 2001, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, provided the executive branch with greater authority and additional tools to counter the convergence of illicit threats, including the financial dimensions of organized crime, corruption, and terrorism. The BSA's AML policy framework is premised on the effective implementation, primarily by financial institutions, of suspicious activity monitoring systems. The accurate, timely, and complete reporting of suspicious activity to the Treasury Department ensures that situations that may warrant further investigation are flagged for law enforcement authorities. Other reports are variously required to be submitted by individuals transporting large amounts of cash internationally, persons with large foreign financial interests, and nonfinancial entities conducting large cash transactions. Other reporting requirements are unique to specific countries, jurisdictions, or situations. Among such reporting requirements are the following: FinCEN has issued regulations requiring various types of financial institutions to establish anti-money laundering programs. Such regulations require a financial institution to set internal policies, procedures, and processes for customer identification and due diligence, along with other requirements. FinCEN, for example, requires banks to have a customer identification program, including the verification of account holders' name and address. Implementing regulations specify that before opening a new account, banks must also obtain account holders' date of birth and either a taxpayer identification number for U.S. persons or a comparable government-issued identifying document for non-U.S. persons. Beyond customer identification and verification, regulators examine the appropriateness and comprehensiveness of financial institutions' customer due diligence (CDD) efforts. CDD includes assessing customer risk and conducting enhanced due diligence (EDD) on customers that pose greater risks and, in turn, greater money laundering exposure to banks.