Three Stages of Money Laundering

Before you happen to put an end to money laundering activities, you must know about its various levels. There are three money laundering stages along with their corresponding anti-money laundering tactics. 

Tap into this segment to know about money laundering as well as aml reporting and how it happens.

Placement 

It is the initial step of money laundering which involves the movement of money into legitimate sources or assets through financial institutions, casinos, etc. This is the stage where criminals face the maximum difficulty because aml tracking sources will constantly be focusing on illegitimate sources of funding.  

Some of the tactics used by launderers during this stage include- 

  • Generation of false cash invoices 
  • Opening foreign bank accounts
  • Creating off-shore companies 
  • Transferring a decent amount of money at a time 
  • Putting money into the cash-centered business 

For money launderers placement is the toughest stage as they are transferring a large bill of money directly or indirectly to a financial system. 

Layering 

Layering or what is commonly called the “structuring stage” is the second level which involves breaking down large funds into smaller amounts. It is done to make its detection difficult and ease the laundering activity. 

Generally, it consists of the movement of money from international sources so law enforcement will face trouble tracking it. Money travels around the globe electronically and trades in overseas markets. However, aml compliance analysts these days have found various methods to hunt down such activities through rigorous practices, and many softwares help in doing the same. 

Layering tactics that are generally used by criminals include-

  • Trading through international markets
  • Trading multiple projects in foreign currencies or stocks 
  • Purchasing and selling luxury assets that cost hefty amounts
  • Spending on foreign money orders or bankers’ drafts 

Integration 

The final stage of money laundering is termed as the Integration stage. In this level, the funds are integrated back to the launderers financial accounts. Similar to earlier stages, this set of money also gets transferred in small amounts. 

For example, if the money is sourced through purchasing of a valuable asset such as property, or jewelry. The luxury asset is then again sold to create a trail of legitimate transactions. 

Such transactions use tactics like- 

  • Through fake employees on payroll
  • Through paying via loans to directors of shell companies 
  • Through paying out dividends to shareholders of criminal-controlled companies

You can combat these problems by seeking help through artificial intelligence and data-driven technology. It sweeps your transactions and monitors any unusual activity related to your finances. 

Keep in check the Aml compliance audits and data analytics to track patterns to note anomalies. Appoint and train all personnel of your business to ensure that your workforce is on the same page when it comes to fraud detection. 

The Bottom Line

It’s not easy to target a problem like money laundering. But, large-scale businesses and financial institutions need to be regularly updated and aware of such fraudulent activities. Because such activities demand extreme attention to not let slip circumstances out of hand.

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