The name of black money is given to money that is not declared before the competent fiscal or monetary authorities of the country where the transaction has been made. Money laundering is based on the operation of converting said black money into money obtained legally, a procedure used by people who act criminally (drug traffickers, prostitution, etc.) or who have had the complicity of financial intermediaries.
In order to differentiate one class of black money from another, we must know that this type of money is born in two different ways:
- First of all, by illegal origin. This is the case when there are illegal or criminal activities on the part of citizens. Most of the money there is today in a economía it is due to this provenance. These include, as mentioned above, drug and arms trafficking, terrorism, prostitution, and goods stolen to be sold illegally.
- Second, we find informal activities. It is the second group, and the black money generated is thanks to not paying impuestos or generate tax fraud. Failure to declare certain commercial activities legally, since taxes greatly reduce the profits obtained, is a perfect example of this type of activity. Another example that can illustrate this type of activity very well is the payment of salaries without having contributed to Social Security, or having formalized their due contract.
The existence of black money increases the system of submerged economy, that is, all the money that an economy has but cannot control because it is owed in black money. However, the different countries in which this occurs have calculated an average of how much that amount would be.