Three Stages in the Money Laundering Cycle::

Three Stages in the Money Laundering Cycle::

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Money laundering often involves a complex series of transactions
that are usually difficult to separate. However, we generally
consider three phases of money laundering:
􀂄 Step One: Placement — The physical disposal of cash or
other assets derived from criminal activity.
During this initial phase, the money launderer introduces
the illegal proceeds into the financial system. Often, this is
accomplished by placing the funds into circulation through
financial institutions, casinos, shops and other businesses,
both domestic and international. This phase can involve
transactions such as:
􀂉 Breaking up large amounts of cash into smaller sums and
depositing them directly into a bank account.
􀂉 Transporting cash across borders to deposit in foreign
financial institutions, or to buy high-value goods — such as
artwork, antiques, and precious metals and stones — that
can then be resold for payment by check or bank transfer.

􀂄 Step Two: Layering — The separation of illicit proceeds from
their source by layers of financial transactions intended to
conceal the origin of the proceeds.
This second stage involves converting the proceeds of the
crime into another form and creating complex layers of
financial transactions to disguise the audit trail, source and
ownership of funds.
This phase can involve transactions such as:
􀂉 Sending wire transfers of funds from one account to
another, sometimes to or from other institutions or
jurisdictions.
􀂉 Converting deposited cash into monetary instruments (e.g.
traveler’s checks).
􀂉 Reselling high-value goods and prepaid access/stored
value products.
􀂉 Investing in real estate and legitimate businesses.
􀂉 Placing money in investments such as stocks, bonds or life
insurance

􀂉 Using shell companies or other structures whose primary
intended business purpose is to obscure the ownership of
assets.

􀂄 Step Three: Integration — Supplying apparent legitimacy to
illicit wealth through the re-entry of the funds into the
economy in what appears to be normal business or personal
transactions.
This stage entails using laundered proceeds in seemingly
normal transactions to create the perception of legitimacy. The
launderer, for instance, might choose to invest the funds in real
estate, financial ventures or luxury assets. By the integration
stage, it is exceedingly difficult to distinguish between legal and
illegal wealth. This stage provides a launderer the opportunity
to increase his wealth with the proceeds of crime. Integration
is generally difficult to spot unless there are great disparities
between a person’s or company’s legitimate employment,
business or investment ventures and a person’s wealth or a
company’s income or assets.