Here is an example of data that might be used to detect a money laundering ring. This is a hypothetical example, but it illustrates some of the basic issues of money laundering detection. Since making this example, I've talked with several of the technical experts who worked at FinCEN when we did the study, and they confirm that the example, while hypothetical, is reasonably faithful to actual cases.

The case starts with Jim, shown in the upper left of the diagram. Jim is arrested in New York City on an unrelated assault charge. At arrest, he is carrying $8000 in cash. That's an unusual amount, but not in itself suspicious. He explains the amount of cash he is carrying by noting that he has made a number of deposits in several different bank accounts that day (shown in the upper portion of the diagram), and that he has made the deposits on the behalf of his employer, a pizzeria owned by Frank. From public records, Frank is known to do business with George, the owner of an import/export firm that is currently under investigation by the U.S. Customs Service for falsifying shipping manifests.

At this point, these facts appear relatively innocuous. Pizzerias are cash-intensive businesses, and they must make daily deposits of proceeds from their business. It is typical for business owners to have relationships with each other. Any single Customs investigation may find that no illegal activity has occurred.

However, let's examine these facts in light of some knowledge about money laundering...