We consider a risk-neutral investor who owns an initial capital K which was illegally generated in the past and which s/he can only place in two types of activities: legal vs. criminal. The criminal investor's problem is to decide the optimal value of share a of K that needs to be allocated to legal activities via money laundering (ML hereafter), with the rest being reinvested in illegal activities, i.e. the criminal organization invests aK in a legal activity and (1−a)K in an illegal activity, with a[0,1].We assume that ML has a cost c [0,1] for each unit of money being laundered. We define iL≥−1 the rate of return on the legal activity, and iC≥−1 the rate of return on criminal activity.Both legal and illegal investments involve specific risks for investors of being punished as offenders. We define pL[0,1] the probability of punishment for ML, and pC[0,1] probability of punishment for the source-crime.When sentenced, the criminal investor incurs in a sanction (S) that we assume to be increasing according to the severity of misbehavior, which is measured by the funds invested in the activity in question (in the case of ML, this means initial capital, gross of the cost of laundering funds). We assume that S is equal to the (gross) invested amount squared. Therefore, the sanction in the case of ML is SL=(aK) 2 , and the sanction for source-crimes is SC=[(1−a)K] 2 .We also assume that sanctions are enforced with a varying degree of celerity, depending on judicial delays, indicated by parameter s [0,1]. We assume that this celerity is the same for both ML and source-crimes.Summarizing, in the case of ML, the expected punishment (deterrence effect) is s(aK) 2 pL, while in the case of source-crime it is s[(1−a)K] 2 pC.At the end of the investment scheme, when the initial capital has been allocated between legal and illegal activities, and criminal offenses (ML and or source-crime) go undetected, the criminal investor obtains both legal capital derived from legal investment, and illegal capital derived from criminal investment. However, funds arising from the two activities are comparable only when considered in terms of the same use value.