Which is an example of funds originating inside the securities sector that require laundering?

Which is an example of funds originating inside the securities sector that require laundering?

• A. Embezzlement
• B. Legitimate profits from market making
• C. Routine trading with full disclosure
• D. Cash deposits from salary

Answer: (A)

Funds that originate from criminal activity within the securities sector must be laundered because their origin is illicit. Embezzlement fits this idea: it involves someone in a securities firm stealing or misappropriating funds, so the proceeds are criminal. The goal of laundering here would be to make those funds appear legitimate and usable in normal financial activity. In contrast, legitimate profits from market making come from lawful trading activities, routine trading with full disclosure is standard legal activity, and cash deposits from salary are regular income. These do not represent illicit proceeds, so they don’t require laundering.

Funds that originate from criminal activity within the securities sector must be laundered because their origin is illicit. Embezzlement fits this idea: it involves someone in a securities firm stealing or misappropriating funds, so the proceeds are criminal. The goal of laundering here would be to make those funds appear legitimate and usable in normal financial activity.

In contrast, legitimate profits from market making come from lawful trading activities, routine trading with full disclosure is standard legal activity, and cash deposits from salary are regular income. These do not represent illicit proceeds, so they don’t require laundering.