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Money Laundering is the attempt of concealing the true source of proceeds acquired by criminals from illegal activity to seem to have been derived from legal origin.
Stages of Money Laundeing are:
Placement: Deposit Proceeds into Financial Institution.
Layering: Hide the origin of illegal proceeds.
Integration: Create the impression that illegal procceds were derived from legal origin.
Anti-money laundering refers to a set of procedures, laws or regulations which is designed to stop generating income through illegal actions, though AML laws cover only a relatively limited number of transactions and criminal behaviors, their implications are extremely far-reaching.
3 stages in Money laundering : Placement, Layering & Integration
Money laundering is the generic term used to describe the process by which criminals disguise the original ownership and control of the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source.
Stages of Money laundering:
There are three stages of Money laundering are given below:
The process of placing, through deposits or other means, unlawful cash proceeds into traditional financial institutions. At this stage cash derived from criminal activity is infused into the financial system. The placement makes the funds more liquid since by depositing cash into a bank account can be transfer and manipulated easier. When criminals are in physical possession of cash that can directly link them to predicate criminal conduct, they are at their most vulnerable. Such criminals need to place the cash into the financial system, usually through the use of bank accounts, in order to commence the laundering process.
This is the first stage in the washing cycle. Money laundering is a “cash-intensive” business, generating vast amounts of cash from illegal activities (for example, street dealing of drugs where payment takes the form of cash in small denominations). The monies are placed into the financial system or retail economy or are smuggled out of the country. The aims of the launderer are to remove the cash from the location of acquisition so as to avoid detection from the authorities and to then transform it into other asset forms; for example: travellers cheques, postal orders, etc.
Layering is the process of separating the proceeds of criminal activity from their origin through the use of many different techniques to layer the funds. These include using multiple banks and accounts, having professionals act as intermediaries and transacting through corporations and trusts, layers of complex financial transactions, such as converting cash into traveler’s checks, money orders, wire transfers, letters of credit, stocks, bonds, or purchasing valuable assets, such as art or jewelry. All these transactions are designed to disguise the audit trail and provide anonymity.
Layering usually involves a complex system of transactions designed to hide the source and ownership of the funds. Once cash has been successfully placed into the financial system, launderers can engage in an infinite number of complex transactions and transfers designed to disguise the audit trail and thus the source of the property and provide anonymity. One of the primary objectives of the layering stage is to confuse any criminal investigation and place as much distance as possible between the source of the ill-gotten gains and their present status and appearance.
Typically, layers are created by moving monies in and out of the offshore bank accounts of bearer share shell companies through electronic funds’ transfer (EFT). Given that there are over 500,000 wire transfers – representing in excess of $1 trillion – electronically circling the globe daily, most of which is legitimate, there isn’t enough information disclosed on any single wire transfer to know how clean or dirty the money is, therefore providing an excellent way for launderers to move their dirty money. Other forms used by launderers are complex dealings with stock, commodity and futures brokers. Given the sheer volume of daily transactions, and the high degree of anonymity available, the chances of transactions being traced is insignificant.
It is the stage at which laundered funds are reintroduced into the legitimate economy, appearing to have originated from a legitimate source. Integration is the final stage of the process, whereby criminally derived property that has been placed and layered is returned (integrated) to the legitimate economic and financial system and is assimilated with all other assets in the system. Integration of the “cleaned” money into the economy is accomplished by the launderer making it appear to have been legally earned. By this stage, it is exceedingly difficult to distinguish legal and illegal wealth.
Not all money laundering transactions go through this three-stage process. The three basic stages may occur as separate and distinct phases or may occur simultaneously or, more commonly, they may overlap. Transactions designed to launder funds can for example be effected in one or two stages, depending on the money laundering technique being used. How the basic steps are used depends on the available laundering mechanisms and requirements of the criminal organisations.
Money Laundering is the process by which the criminally derived proceeds/funds are converted into legitimate money by using three stages.
AML is the process which a financial institution adopts in order to detect Money Laundering activities where their client might be cleaning their dirty money. ML is the process where the criminal will make dirty money look clean. This can be done by Over-Under Invoicing of goods, Over-Under Shipment of Goods, Maintaining to accounts in Tax haven Countries in order to evade local tax, smurfing, micro structuring, movement of funds in a fixed pattern (I.e. Same amount movement in a regular interval of day or two) using different network.
There are3 stages of money laundering:Placement: Placement of Funds
Layering: Movement of funds through different channels in different account held at different FIs.
Integration: After layering, all the money is integrated at one point and then flushed out for purchase of goods, esp. luxury items.
Money laundering is the generic term used to describe the process by which criminals disguise the original ownership and control of the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source.
The processes by which criminally derived property may be laundered are extensive. Though criminal money may be successfully laundered without the assistance of the financial sector, the reality is that hundreds of billions of dollars of criminally derived money is laundered through financial institutions, annually. The nature of the services and products offered by the financial services industry (namely managing, controlling and possessing money and property belonging to others) means that it is vulnerable to abuse by money launderers.
Traditionally money laundering has been described as a process which takes place in three distinct stages.
Placement, the stage at which criminally derived funds are introduced in the financial system.
Layering, the substantive stage of the process in which the property is ‘washed’ and its ownership and source is disguised.
Integration, the final stage at which the ‘laundered’ property is re-introduced into the legitimate economy.
This three staged definition of money laundering is highly simplistic. The reality is that the so called stages often overlap and in some cases, for example in cases of financial crimes, there is no requirement for the proceeds of crime to be ‘placed’.
Money Laundering is the process of taking ‘dirty’ funds and converting it into ‘clean’ funds.
‘Dirty funds’ are criminally-derived proceeds which are then converted into other assets so that they can be reintroduced into legitimate commerce in order to conceal their true origin or ownership – ‘clean funds’
There are three stages in money laundering:
Money Laundering is the process of transfer, transform, convert illegally originated money to disguise the illicit origin. Three Stages of money laundering. i.e. 1) Placement 2. Layering 3.Integration
Placement
Layering
Integration
money laundering is the disguising of illegally obtained money, so that it appears as legitimate
this occurs through the three stages of placement, layering and integration
Placement is where the cash is derived from an illegal activity, layering is hiding the source and ownership of funds and integration is the reintroduction of the funds into the economy appearing as legitimate money
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