The Myth of How Al Capone Gave Us the Term ‘Money Laundering’

What does money laundering have to do with cleaning your dirty clothes? A popular legend says it’s less than you may think.
According to popular lore, when looking for places to funnel his unlawfully obtained money, American gangster Al Capone gravitated toward laundromats. Cash flowing into the businesses was hard for law enforcement to keep track of, meaning large amounts of money could slip through the system unnoticed.

As intriguing and popular as that theory is, it’s most likely a myth. It’s true that there are references to money laundering during the early and mid-20th century. But those largely refer to money laundering in the most literal sense—as in, washing dirty money. Anyone who’s ever pulled a crumpled bill out of their pocket knows how grimy cash can be.

In the early 1900s, the government realized that a lot of the money they were being sent to be destroyed wasn’t worn, it was just dirty. Giving it a quick wash in a specially designed machine allowed them to send it back out in circulation. In 1916, it was estimated that it cost $1.30 to print 100 notes but only $0.30 to clean 100 notes, so the process saved the government a lot of money.

Those money laundering machines later fell out of use, and the phrase gained its more nefarious association. Today, money laundering is defined as “any process that 'cleans' illegally obtained funds of their 'dirty' criminal origins, allowing them to be used within the legal economy.” That definition entered the public lexicon in the 1970s, and referred to funds used to bolster the Watergate scandal.

Money laundering was going on long before Watergate—and long before Capone’s crimes. To learn more about the history of money laundering and how exactly it works, check out the video below.

[h/t Boing Boing]

A version of this story originally ran in 2017; it has been updated for 2021.