What does money laundering entail in banking?

Money laundering in banking refers to the process of concealing the origins of money obtained through illicit means, making it appear as though it comes from legitimate sources. This practice is a significant concern for financial institutions because it can facilitate criminal activity and poses serious legal and reputational risks for banks involved. The money laundering process typically involves three stages: placement (introducing illegal profits into the financial system), layering (conducting complex transactions to obscure the origins), and integration (withdrawing or using the funds in a way that appears legally justified).

The other options pertain to regular financial practices and do not involve any illegal activity. Consolidating debts is a method for borrowers to manage their financial obligations more efficiently. Daily management of bank accounts refers to maintaining accounts for customers, ensuring payments, and processing transactions. Creating investment portfolios for clients involves managing and allocating assets based on client goals and risk tolerance, which is part of standard financial advisory services. Each of these activities operates within legal frameworks and does not involve the concealment of illicit funds, making them unrelated to the concept of money laundering.