Money Laundering A ThreeStage Process The money laundering

Money Laundering: A Three-Stage Process The money laundering cycle can be broken down into three distinct stages. The stages of money laundering include the: q. Placement Stage q. Layering Stage q. Integration Stage

ØPlacement ØThe first stage of money laundering is when the individual participating in criminal activity places cash proceeds into the financial system. ØThis is done so that they can get rid of the cash that is derived from criminal sources. Ø It can be unsafe for people to hold onto a large amount of cash at one time, so they may try to dump the cash somewhere that provides greater security. ØThis stage corresponds to the greatest degree of vulnerability for the criminal. Financial officials are on the lookout for suspicious transactions that are cashbased.

The Placement Stage The placement stage represents the initial entry of the "dirty" cash or proceeds of crime into the financial system. Generally, this stage serves two purposes: Øit relieves the criminal of holding and guarding large amounts of bulky of cash; and Øit places the money into the legitimate financial system. It is during the placement stage that money launderers are the most vulnerable to being caught. This is due to the fact that placing large amounts of money (cash) into the legitimate financial system may raise suspicions of officials.

The placement of the proceeds of crime can be done in a number of ways. For example, Øcash could be packed into a suitcase and smuggled to a country, Øor the launderer could use smurfs to defeat reporting threshold laws and avoid suspicion. Some other common methods include: Loan Repayment of loans or credit cards with illegal proceeds Gambling Purchase of gambling chips or placing bets on sporting events Currency Smuggling The physical movement of illegal currency or monetary instruments over the border Currency Exchanges Purchasing foreign money with illegal funds through foreign currency exchanges Blending Funds Using a legitimate cash focused business to co-mingle dirty funds with the day's legitimate sales receipts

The Layering Stage ØAfter placement comes the layering stage (sometimes referred to as structuring). The layering stage is the most complex and often entails the international movement of the funds. ØThe primary purpose of this stage is to separate the illicit money from its source. ØThis 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, Øthe money launderers may begin by moving funds electronically from one country to another, Øthen divide them into investments placed in advanced financial options or overseas markets; Øconstantly moving them to elude detection; Øeach time, exploiting loopholes or discrepancies in legislation and Øtaking advantage of delays in judicial or police cooperation.

Integration ØIt is the stage at which laundered funds are reintroduced into the legitimate economy, appearing to have originated from a legitimate source. ØIntegration is the final stage of the process, whereby criminally derived property that has been placed and layered is returned (integrated) to the legitimate economic and financial system and is assimilated with all other assets in the system. ØIntegration of the “cleaned” money into the economy is accomplished by the launderer making it appear to have been legally earned. ØBy this stage, it is exceedingly difficult to distinguish legal and illegal wealth.

Not all money laundering transactions go through this three-stage process. Ø The three basic stages may occur as separate and distinct phases or may occur simultaneously or, more commonly, they may overlap. Ø Transactions designed to launder funds can for example be effected in one or two stages, depending on the money laundering technique being used. Ø How the basic steps are used depends on the available laundering mechanisms and requirements of the criminal organisations.

Business that are ideal for laundering cash ØBanks; Security houses; Financial intermediaries; Accountants; Solicitors; Surveyors and estate agents; International money transmitters; Company formation agents and management services companies; Casinos and bookmakers; Art, bullion and antique dealers; Car dealers; ØRestaurants; Hotels; Bars; Nightclubs; Dry cleaners; Video rental companies; Vending machines operators; Fairgrounds and attractions; Parking lots; Retail outlets; Others, dealing in high value commodities and luxury goods.