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This question is the basic of Financial crime and money laundering risk, which everybody should know.
While money laundering is a single process, it does have three stages:
Placement, the initial entry of funds into the financial system, serves the purpose of relieving the holder of large amounts of actual cash and positioning these funds in the financial system for the next stage.
Layering, the next stage, describes a series of transactions designed to conceal the money´s origin. At this level, money is often sent from one country to another and then broken up into a variety of investments, which are moved frequently to evade detection.
Integration is the final stage. In this stage, the funds have been fully assimilated into the legal economy, where they can be used for any purpose.
Placement is the most vulnerable stage of the process, as the chance of discovery of the illicit origin of the money is greatest at the beginning.
The three phases are:
1. Placement
2. Layering
3. Integration
Three phases of money laundering are
Placement, layering, Integration.
Placement is the most difficult.
Three phases of money laundering are
- Placement
- layering
- Integration
The most vulnerable stage to detect is supposed the first stage, the placement.
Placement
Layering
Integration
Money laundering is often described as occurring in three stages:
Placement, layering, and integration-aka “hide, move, and invest.”
Placement: refers to the initial point of entry for funds derived from criminal activities into the financial system. For example, a drug dealer in another country depositing cash from his illegal trade into a local bank.
Layering: refers to the creation of complex networks of transactions that attempt to blur the link between the initial entry point and the end of the laundering cycle. This stage can consist of multiple securities trades, the purchase of financial products such as life insurance or annuities, cash transfers, currency exchanges, or purchases of legitimate business. Say the drug dealer cuts a check to take out a permanent life policy in the United States. He then cancels the policy and takes the refund from the insurance company to stock, and so on.
Integration: refers to the return of funds to the legitimate economy. After several transactions the drug dealer uses the laundered money to operate a restaurant.
These stages can occur simultaneously, separately, or overlap.
Placement, Layering and Integration.
Placment is most vulnerable to detect
Placement / Layering / Integration
Placement - entry of funds into the financial system
Layering - a number of transcations conducted to hide the origin of the illicit funds
Integration - the successful integration of illicit funds into the financial system.
The three phases are:
1. Placement
2. Layering
3. Integration
Placement is the most vulnerable stage of the 3 phases.
Even though money laundering is a single process, it can be broken down into three stages.
1.Placement stage: It represents the initial entry of illegitimate funds or proceeds of crime into the financial system. Generally, this stage serves two purposes: (a) it relieves the criminal of holding and guarding large amounts of bulky of cash; and (b) it places the money into the legitimate financial system. It is during the placement stage that money launderers are the most vulnerable to being caught.
2. Layering stage: This stage is the most complex and often entails the international movement of the funds. The primary purpose of this stage is to separate the illicit money from its source. This is done by the sophisticated layering of financial transactions that obscure the audit trail and sever the link with the original crime. During this stage, for example, the money launderers may begin by moving funds electronically from one country to another, then divide them into investments placed in advanced financial options or overseas markets; constantly moving them to elude detection; each time, exploiting loopholes or discrepancies in legislation and taking advantage of delays in judicial or police cooperation.
3.Integration stage: The final stage of the money laundering process is termed the integration stage. It is at the integration stage where the money is returned to the criminal from what seem to be legitimate sources. Having been placed initially as cash and layered through a number of financial transactions, the criminal proceeds are now fully integrated into the financial system and can be used for any purpose.
It is during the placement stage that money launderers are the most vulnerable to being caught.
