Criminals will go to a great extent to ‘clean’ their money since they are aware that it is ‘dirty’ due to their illegal activities. After receiving the unlawful funds, their first priority would be to launder it, which implies the conversion of the money into investments and cash that are legal with the help of money laundering stages. They will be acting in ways that prevent law enforcement from seeing them.
Money laundering is the name given to the practice of hiding the money’s illicit source from the authorities and reinvesting it for legitimate causes. Placement, Layering, and Integration are the three processes involved in money laundering. Read more to know about the money laundering stages.
Top examples of different money laundering stages
Money laundering occurs across many industries and is widespread in multiple nations. Let us look at the different ways and techniques used by money launderers at each of the three stages of money laundering.
Placement
Here are a few examples of money laundering in the first stage of the money laundering stages:
- Blending of funds: Criminals can conceal their dirty money by mixing it with the day’s sales from a legal firm, making it more challenging for AML (Anti-Money Laundering) enforcement agencies and the FATF to follow them.
- Dummy invoices: To balance the cash that has been deposited, criminals make use of dummy invoices. In order to match the amount of money, they may occasionally overcharge, undercharge, or incorrectly characterize products and services that have been supplied to others.
- Currency smuggling: Criminals may also smuggle illicit currency into a nation where it may be used legally.
- Gambling: Purchasing casino gambling chips or putting a wager on a sporting event at one of the many potential venues both provide ways to launder money, however in both situations there will be some loss as a result of the risk.
- Loan repayment or credit card debt: With the help of this digital process criminals can take the assistance of lenders who might not be monitored by authorities and use their dirty money to pay back loans or credit card debt
Layering
Check out how the black money is laundered in the layering stage of the money laundering stages:
- Investment in properties or real estate: Purchasing real estate offers criminals access to a valuable asset, but it may also make them hard to find for law enforcement if the deed is sold without the right paperwork.
- Money transfer: By taking advantage of legal loopholes in different nations, criminals may transfer money electronically from one country to the other.
- Moving money in different accounts: Transferring money between several financial organizations, or between separate accounts within one institution.
- Investment in equities or stocks: Criminals could make long-term stock investments with the money.
- Investing in shell corporations: Criminals may put their illicit funds in corporations with a working façade.
Integration
Following are a few instances of integration stages among money laundering stages:
- Making investments in legitimate firms: Criminals can invest in legitimate firms or acquire them in order to launder their illegal money through legitimate monetary streams.
- Providing loans: The business may extend loans to shareholders or executives on the board; these loans are not subject to repayment.
- Purchasing luxury items: By acquiring items of extremely high worth, such as real estate, famous artworks, opulent cars, and jewellery, among other items, criminals can subsequently sell these items for genuine cash.
- Paying dividends: These payments may be provided to stockholders of businesses under the criminal’s control who is also responsible for the money laundering scheme.
- False workers: Criminals can set up a false office where they can list a number of employees who aren’t real and receive regular salary payments that, in reality, are going to crooks.
Illegal money is often overlooked for a variety of reasons. The main causes include a lack of AML compliance staff training, false-positive screening findings, penalties compliance, a lack of seriousness from upper management on AML compliance, and the usage of antiquated technology. To comply with AML regulations, financial institutions and other regulated companies must overcome a number of difficulties.
