Although the money laundering process is complex, it could essentially be classified into 3 stages, which are placement, layering and integration.
Criminals hold a huge amount of cash (Dirty Money) from illegal activities, such as drug trafficking, smuggling, corruption, kidnapping, fraud, etc.
Before they can use the dirty money, they must convert it into clean money, which is the objective of money laundering.
Basically, there are 3 stages of money laundering - Placement, Layering and Integration.
Stage 1: Placement
To The objective of placement is to deposit dirty money into a legitimate financial system.
To avoid suspicion, dirty money will be broken down into small portions and converted into foreign currency before they are deposited into banks. This technique is called "Smurf".
There are various ways to make the deposit, such as gambling, loan or credit card repayment, making deposit in counties with lax banking regulation, etc.
Stage 2: Layering
The objective of layering is to confuse law enforcement officers by making the source of money non-traceable and non-auditable.
Money will be transferred from accounts to accounts all over the world, especially via countries of tax haven. In addition, shell companies, offshore accounts, financial products, valuable assets, etcetera, will be used to increase the complexity of the process and distance the criminals from the money.
Wire transfer is the most preferable means to move money between accounts because there are millions of wire transfers every day, it is almost impossible to identify the illegal transfers.
Stage 3: Integration
The objective of integration is to reunite the money and return it to criminals.
Finally, the money seems to originate from legitimate sources (Clean Money) and is saved in several accounts in the legitimate financial system.
The money now could be used by criminals for various purposes, such as purchasing properties, luxury products or funding other criminal offences.
Thank you for reading the article. For the details of the 3 Stages of Money Laundering, please contact us.
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