Exposing Money Laundering

COUNTRY NAME: International

Exposing Money Laundering : The Three Stages Unveiled

Money laundering is deleterious to the financial network, promotes crime syndicates, and facilitates vices like drug trafficking, terrorism and political malfeasance, hence it is a threat not only to the economy but the entire society. In order to grasp the full scale of the issue, it is first necessary to learn about its chronological process which occurs in three stages namely placement, layering and integration. These stages are critical in making the transfer of mobs’ money into legal operating assets. This article focuses on these stages and details the different means through which criminals launder money.

The Three Stages of Money Laundering

1. Placement: The Integration of Criminal Funds

The first stage of money laundering is called placement, which is when funds that have been gained illegally are deposited into a financial system. This stage is important because it signified the point which ‘dirty money’ is created and entered into the financial system. The main aim of this stage is to get as far as possible from its original location by ‘getting out of the spotlight,’ which in this case means getting out of reach of law enforcement agencies.

Methods Used in the Placement Stage:

In order to place the ill-gotten funds into circulation without drawing any attention, criminals resort to making use of a number of strategies or techniques. For Example;

Smurfing: recovering from large denomination cash outside the watch of financial institutions or authorities, customers make multiple deposits that are more lesser than prescribed limits.

Purchasing of high value Articles: Criminals can also use the ill gotten gains to acquire luxury commodities, real estate properties or cars. Such properties can be sold or deployed in future to create legitimate looking returns.

Utilizing for legal nominal purposes: On occasions, criminals try to inject illegitimate funds into the industry by patent legal approaches such as purchasing goods or paying for services.

The main goal for these actions is the positioning of the funds not to be visible at the initial stages of the beginning of the operation.

2. Layering: Making the transition more complicated after the funding in the financial system.

This one is done after illicit funds are placed into the financial system, they come into the layering stage. This stage’s purpose is to further move the funds away from their primary centre – crime, or rather, the location. In a dismantling operation, the overall aim of layering is to obliterate the potential appeal leaf, which, as the money is now, been somewhat elusive, retracing to its initial deposit is near to impossible to the one investigating in this case.

Methods Used in the Layering Stage:

During this one, it is easier for this laundering group to make several changes across the regions limit, moving the laundered money from one region to another, and vice versa.

Money Transfers in Varying Banks: It is general observation that criminals use illegal transactions in changing countries based on their regulations. For instance, there are numerous countries with fewer despotic regulation and criminals have no compunction creating a ruckus which eventually ends out illegal. All affairs touch upon one another, as they use numerous banks across different countries to foster disbelief and increase the distance between the funds and the center where they came from.

Shell companies and false documents: Shell companies – creation of these sort of companies became prevalent to assist paper-based transactions while manipulating the true owner of the assets. False documentation was common usage too whereby, invoices and contracts that were tampered, in addition to business transactions documentation moving bubbles of money across different locations.

Third Parties and Intermediaries: In an effort to remain hidden, criminals can add numerous layers of complexity to the movement of funds by employing trusted third parties or intermediaries, thereby further distancing themselves from the laundering of money.

Moreover, this layering cocktail has fraudsters making a tangled web-room of transaction patterns that makes investigators' work even more complicated in that it would be practically impossible to trace the origin of funds

3. Integration: Bringing back in the ‘wash’ Money back into the system

The last phase of money laundering is called integration where the illegal money is now completely incorporated in the legitimate economy. In such a case, the ‘dirt money’ is actually termed as ‘clean’, which doesn’t rouse any suspicion for either person doing business or an individual who is doing some work. Through this integration, criminals can relish the outputs of their crimes without the fear of being caught and punished for them.

Methods Used in the Integration Stage:

Created at this point, the laundered money is always used in the ways which are no different from the legitimate use of money. There are many forms from which the integration can be attained:

Investing in Legal Businesses: Using the ‘dirty’ money, criminals will buy assets, invest in or make operational improvements or conduct business transactions in the legitimate companies that they have laundered money. This provides an additional layer of legitimacy to the funds.

Investing in real estate or financial markets: Some criminals would opt to purchase properties as such real estate assets, stocks or bonds would conceal the illicit nature of the earned funds. Together with that, some of them would integrate illicit funds by investing in the property market.

Expenditure on Craze Pet: There is no limit on expenditures when one extracts money earned by crime, this means that such criminals would easily buy luxuries such as yachts and vacations especially when detected illegal activity will not be an issue.

In this last phase, there are no restrictions on the flood of laundered cash; instead, criminals can utilize it in the same manner as any regular wage.

Shared Methods in All Phases of Money Laundering

In five out of seven cases, the crimes say that they innovation the money laundering features such as global registration, proxy ownership, and anonymous joint ventures fake endorsement across all the three aspects of money laundering which are placement, layering and integration. Some of these include:

Fake Firms: These are mere shells with no employees or real assets but have legal and tax strings attached to them. The real purpose of these 'firms' is to hide money transactions. They are often used during both placement and layering.

Foreign Banks: Many money addicts use foreign banks to erase Deposits where and them private policies cover them. Such methods on hiding owner of funds is greatly issued.

Smurfing: In the banking system and regulatory bodies, such amounts are considered more suspicious than fewer. Hence, the crime of smurfing involves converting larger amounts into lower ones.

Trade-Based Laundering: Trade-based laundering makes it possible for criminals to carry out what is otherwise referred to as “trade” without inspecting how their transactions reflect the value of goods or services.

Cryptocurrencies: Digital currencies are now being favored in money laundering because they are easily transferred through the use of cryptocurrencies like bitcoin which are difficult to trace.

Conclusion:

The process of layering is generally referred to as the process whereby only the importance of the individual is portrayed, and he is separated from the crime. Understanding this notion is critical for financial institutions, regulators and law enforcement agencies which all hope to deal with the money laundering problem.

The practice of money laundering goes beyond limits, since the criminals combine legal with illegal means of transferring money, and in the complex process, they make sure to hide the source of money. Looking at the trend and its potential harm, governments, banks and financial organizations should be aiming at improving the means of fighting money laundering and increasing international cooperation all the while improving monitoring systems.

Updating the information available about the phases and methods of money laundering is a responsibility of each of us in developing a safer and more open financial system.