The Stages of Money Laundering

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The Stages of Money Laundering
25/09/2019

Money laundering is the concealment or disguise of the nature, source, location, disposition, movement, rights with respect to ownership of property, knowing that such property is derived from an offense or offences or from an act of participation in such an offence or offences.

Simply put, it is the process of making large amounts of money generated through criminal activities appear to have come from a legitimate source.

Money laundering has three main stages, and these are:

Placement

The initial stage of the money laundering process involves moving money from its source and putting it into circulation.  The criminal proceeds are deposited into the financial system, usually through a financial institution by depositing cash into a bank account.

Large amounts of cash are broken into smaller, less conspicuous amounts and deposited over time in different offices of a single financial institution or in multiple financial institutions to make it difficult for authorities to track. Furthermore, placement may be accomplished by the cash purchase of financial securities.

Layering

The second stage of money laundering occurs after the ill-gotten funds have gained entrance into the financial system, at which stage, the funds or securities are converted or moved to other institutions, further separating them from their criminal source.

The launderer may also disguise the transfer as payment for goods or services or transfer the funds to a shell company.  Money launderers may also purchase goods and sell them later either locally or abroad to legitimise the money.  Money launderers usually target countries that fail to enforce AML regulations.

Integration

The third stage of the money laundering process involves the placement of the laundered money back into the economy and financial system in such a way that it appears to be clean and legitimate and is available for use by criminals to buy expensive cars and property or invest in different stocks, unit trusts and money market.

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