Northern Virginia Criminal Justice Academy (NVCJA) Practice Exam

What defines Type 2 Money Laundering?

1. Transferring money to charities

2. Converting cash that is known to be from felony criminal activity for compensation

3. Investing money into legal businesses

4. Hiding cash in offshore accounts

The correct answer is: Converting cash that is known to be from felony criminal activity for compensation

Type 2 Money Laundering specifically refers to the act of taking proceeds that are known to originate from felony criminal activity and converting them into forms that appear legitimate, often for compensation. This can include actions such as exchanging cash from criminal enterprises into assets or currencies that can be legally introduced into the financial system. This definition highlights the critical element that the individual or organization is aware that the money originates from illegal activities and seeks to conceal that association. By converting that cash, they aim to 'clean' the money to use it freely without drawing attention to its illicit source. Other options do not directly align with the core concept of Type 2 Money Laundering. For instance, transferring money to charities can be legitimate activity depending on the source of funds, and investing in legal businesses alone does not necessarily indicate that the money is being laundered, especially if the source is clean. Hiding cash in offshore accounts can be part of money laundering strategies, but without the intent and knowledge of being derived from explicit criminal activity, it doesn’t fit the definition of Type 2 Money Laundering as closely as the conversion of cash with known illicit origins in exchange for compensation does.