The money laundering process involves three stages criminals may use to conceal the source of illicit funds and make funds appear legitimate.
Stage 1 – Placement
During the placement stage, illegally obtained funds are introduced into the legitimate financial system.
- making ‘structured’ deposits of multiple small amounts of cash into a bank account, so the activity can go untraced.
- converting money into legitimate assets such as real estate or financial securities
- buying casino chips and later cashing them in, and treating the proceeds as winnings
- transporting money to a country with non-existent or weak anti-money laundering controls.
Stage 2 – Layering
During the layering stage, illegally obtained money is moved, dispersed, or disguised to conceal their true origin and to make it appear legitimate.
- depositing the money in a foreign country which accepts deposits from non-residents.
- establishing fake companies in offshore financial havens, often referred to as ‘shell corporations’, that can hold accounts and conduct transactions that are distanced from the criminal.
- using a mass of transactions by transferring money electronically between multiple banks and accounts, which makes it difficult to trace the path of the illegal funds
- using other individuals and businesses to engage in transactions on their behalf.
Stage 3 – Integration
During the integration stage, these now distance funds that have been laundered are made available to criminals in a way that makes the funds or assets look like they have been legitimately acquired. The funds may be used for investment in legitimate or illegitimate businesses, for the personal expenses of the criminals, or to purchase high-value assets, and luxury goods.
- buying and selling real estate associated with shell corporations.
- establishing front businesses that deal in cash services, to enable illegal cash to be deposited, such as bars, car washes, laundromats, and restaurants.
- invoicing for consulting or director fees to a shell corporation
- paying credit card debt with an offshore bank account.
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