Money laundering is the key operation of underground economy. Earlier this was not a big crime but from the day of attack on world trade centre this has become a serious problem. This paper covers the concept of money laundering, history and the process which shows that generally there are three stages involved in the process of money laundering placement, layering and integration. Some of the causes of money laundering may be bank secrecy laws, more dependence on financial services sector, corporate secrecy laws. Banks play a major role in curbing this menace. Some of the estimates shows that total amount of money laundered exceed $500 billion in the world each year. In India Prevention of money laundering Act 2002 has established in order to control this crime. This paper also covers the effects of money laundering on economic and political stability and also on banking system. Key words: money laundering, crime, banks, anti-money laundering