Hot Money Law and Legal Definition

Hot Money is the financial capital that quickly moves from one financial asset to another in search of or with expectations of higher interest rates and return. Hot money can move from one bank to another or from one country to another. For banks, hot money usually refers to deposits that exceed FDIC insured limits that bounce around from bank to bank as interest rates change. For countries, hot money refers to financial capital that quickly leaves one country due to exchange rates, interest rate differentials, or economic turmoil, or the threat of war.

In the language of crime, hot money refers to stolen currency that can easily be traced back to the crime, such as marked bills or new currency with consecutive serial numbers. It is also known as bait money.