Money laundering is the term for financial transactions done to hide the identity, source and destination of money. Money laundering is most often associated with organized crime, but it can also be associated with e.g. tax heaven based shell companies.

There are a lot of stories about offshore banking accounts being used for money laundering, but in reality most offshore banking accounts are created for legitimate financial reasons. Its just that money laundering is a lot better news than an offshore bank reporting business as usual.

The tendency to associate offshore banking with money laundering and dictator bank accounts is a major reason for many people believing offshore banking is illegal. Some offshore bank accounts will be used for illegal activities, but the majority of offshore banking is done for legitimate financial reasons.

Lately, the offshore banks have started checking their accounts for signs of money laundering, etc. Due to the offshore banks introducing such checks, the amount of money laundering done in offshore banks is falling.