How It Works
Traditional Money Laundering occurs in a three-step process. These three steps include placement, layering, and integration. Placement involves criminal derived funds to be introduced into the financial system. Layering disguises the ownership and source of the crime. Finally, integration allows the financial funds to be re-introduced into a legitimate economy.
During the placement stage, cash is moved from its original source. The source is generally easy to disguise and is often times misrepresented. This stage accomplishes the following two things: it relieves the criminal of holding and guarding large amounts of bulky cash and it places money into a legitimate financial system.
The layering stage is also commonly known as structuring and is the most complex stage. The purpose of the layering stage is to separate money from the original source. This is typically accomplished by constant movement of the funds. By layering financial transactions, audit trails are covered up and the link with the original crime is broken.
In the integration stage, money is returned to the criminal from what seems to be valid source. After placement and layering, proceeds are fully integrated into financial systems and can be used for any purpose. The major objection of the integration stage is to reunite the money with the criminal, and make it appear valid without drawing attention to the crime.
Where It Occurs
The following are all places where money laundering occurs. Keep in mind; these are not the only places, just the main ones.
- Other financial institutes (ex: insurance or mutual funds)
- Money exchange firms
- Real estate concerns
- Jewelry and antique dealers
As mentioned previously, money laundering is not easy to detect due to the placement, layering, and integration process. Even though it is hard to detect, there still are warning signs to look for and keep in mind.
- Consecutive transactions with total higher than the threshold limit
- Unjustifiable account activity (size and frequency of transactions
- Frequent deposits followed by frequent withdrawals
- Requests for wire transfers or bank checks in exchange for currency
- Large amount of bankers’ or travelers’ checks deposited in an account without a justifiable reason
- Cashing checks earned rom gambling