InvestorQ : What describes they layering stage in the anty-money laundering process?
Dashrath Prakash Thorat made post

What describes they layering stage in the anty-money laundering process?

swati Bakhda answered.
2 years ago

Money laundering has become a major concern for governments the world over and India is no exception. Typically, money laundering cycle can be broken down into three distinct stages as under:

· Placement Stage

· Layering Stage

· Integration Stage

Before going to layering, let us understand the Placement Stage first. 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: (a) it relieves the criminal of holding and guarding large amounts of bulky of cash; and (b) it places the money into the legitimate financial system and so convert black money into white money. It is during the placement stage that money launderers are most vulnerable to getting caught since placing large amounts of cash into the financial system raises suspicions at various compliance checkpoints.

Next is The Layering Stage which comes after the placement stage and entails the actual structuring of the transaction. The layering stage is most complex and normally entails international movement of the funds. The primary purpose of this stage is to separate the illicit money from its source. This is done by the sophisticated layering of financial transactions that obscure the audit trail and disconnect the link with the original crime. During this stage, money launderers may begin by moving funds electronically from one country to another and then divide them into investments placed in advanced financial options or overseas markets. The countries that are not signatories to the PMLA conventions are normally selected for this purpose.

The last stage is the Integration Stage where the money gets laundered and goes back to the source of the funds and appears like legitimate funding. Once this is completed, it is very hard to distinguish laundered money from clean money. I hope this answers your query