Money laundering refers to disguising illegally obtained money to make it appear legitimate. It involves three steps: placement, layering, and integration. Placement involves depositing dirty money into banks to enter the financial system. Layering involves moving funds through transactions to obscure the origin. Integration reintroduces laundered money as clean funds. Money laundering has significant negative economic effects like distorting markets and undermining financial integrity. Global initiatives like the Vienna Convention and EU Money Laundering Directive aim to prevent it. The Prevention of Money Laundering Act in India establishes obligations for banks and financial penalties for violations.