Purpose of laundering is to get the money legal so that it can be reinvested into the normal streams of the economy without arousing so much suspicion as to their illegitimate source.
According to the words of former FBI Special Agent Jeff Lanza, money laundering is interrelated to all crimes. ‘Financialisation’ drives other forms of criminal activity ‘It pays for organized crime, and makes the next stages of criminal business strategies possible.’
Money laundering steps usually occur in three primary forms to attempt to bring the unlawful forgeries into the realm of the ordinary.
There is conceptual agreement that there are three phases of this process, which is placement, layering, and integration.
Now, we will discuss in more detail what happens in each money laundering stage and how criminals schemes to get the dirty money in the legal channel.
What is money laundering?
Money laundering means cleaning.
There are normally 3 AML stages: which are, in turn, placing, layering, and integrating.
It allows one to get into the common economic environment with no intent, and sometimes even with no mere suspicion of any kind of criminality.
Placement involves the infusion of the ill-gotten cash into the said financial facilities either by depositing it or else buying money orders or traveler cheques among others.
This is then succeeded by the layering process where several transactions are made through wires, checks or transfers to separate the tainted money from its source.
Last of all, there is integration where the funds are reintroduced in the economy in the same manner as business income.
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Stage 1: Placement
The money earned through illegal means is introduced into the financial system for the very first time in this stage. This is the very first stage from the three stages involved in money laundering.
Criminals may deposit large cash sums to avoid raising any red flags when reporting. Placement legitimizes this ill-gotten wealth by transforming it to other less risky forms such as deposits, banking and other forms of monetary instruments.
How the Placement Stage Works?
Common methods of placement include converting large cash deposits into negotiable instruments, like money orders or wire transferring the funds between accounts.
Another common placement strategy involves breaking up illegally obtained money into small amounts in order to avoid raising red flags on AML monitoring systems within banks.
After being placed into some financial network, the funds can then begin to progress to the layering phase of laundering.
Stage 2: Layering
During these three stages of money laundering, the money has already been successfully placed within the financial system.
They can also move money from numerous accounts, make a number of small purchases and ATM withdrawals, or have some other type of convoluted transfer and transactions for the same purpose of obscuring the path of money.
The process of layering is intended to defeat the attempt of law enforcement authorities to trace the money path back to its original illegal source.
Stage 3: Integration
The money, from three steps of money laundering at this point, has been significantly diffused into the financial system following the placement and layering stages.
Integration causes the illegal funds to reintegrate into the economy through further transactions and purchases in such a way that they take on the appearance of normal business or personal gains. With integration, money laundering completes the process, and dirty money is now usable and clean.
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