Stages of Money Laundering

Essentially, there are three primary (though often overlapping) stages in the money laundering “spin cycle”:

• The placement stage
• The layering stage
• The integration stage

Money Laundering: The Placement Stage
During the placement stage, the hard currency generated by the sale of drugs illegal firearms, prostitution or human trafficking, etc. needs to be disposed of, and is deposited in an institution or business. Expensive property or assets may also be bought.

Money Laundering: The Layering Stage

During the layering stage, money launderers endeavour to separate illegally obtained assets or funds from their original source. This is achieve by creating layer upon layer of transactions, by moving the illicit funds between accounts, between businesses, and by buying and selling assets on a local and international basis until the original source of the money is virtually untraceable.
The more transactional layers are created, the more difficult it becomes for an auditor to trace the original source of illicit funds, and thus anonymity is achieved.

Money Laundering: The Integration Stage

Upon successful completion of the financial layering process, illicit funds are reintroduced into the financial system, as payment for services rendered, for example. By this stage, illegally obtained funds closely resemble legally generated wealth.

Depending on the money laundering mechanisms available to the launder, these three steps may overlap. Whether the money laundering process starts with a deposit or a purchase, the methods will invariable entail layers of shape-shifting transaction aimed at distancing the funds or assets from their source origins. The further this transactional distance becomes, the “cleaner” the laundered money appears.