Three Stages of Money Laundering

Three Stages of Money Laundering

Three Stages of Money Laundering

Money laundering is among the top three major organised crime threats in Australia. The money laundering process involves deceptive financial transactions to hide the true source of illegally accumulated funds.

Our latest infographic unfolds the three stages of money laundering:

1. Placement

The first stage of money laundering is where illegal money is introduced into the financial system. This stage mainly has two purposes:

First, it allows criminals to dispose off their illegal funds
Second, the funds are entered into the formal financial system by exploiting reporting entities, like legitimate financial institutions or businesses.

2. Layering

Post the placement of funds, the illegal funds are separated from their source by hiding the trail of money. Launderers create a series of convoluted financial transactions, making it difficult to trace the origin. This technique includes moving funds electronically between countries or accounts, monetary conversions or reselling assets. Layering creates a web of transactions to distract the authorities from the criminal source.

3. Integration

In this final stage of money laundering, the funds are now considered ‘clean’. The funds are completely integrated into the financial system so criminals can use the funds to carry out other illegal activities.

Preventing the Three Stages of Money Laundering: Way Forward

Money laundering can be identified and combated at any of the three stages outlined above. Strong and effective Anti-Money Laundering (AML) measures play an important role in the early detection and prevention of this widespread crime. For example, with effective transaction monitoring systems in place, businesses can identify suspicious patterns when criminals attempt to disguise illicit funds through complex transactions. Therefore, implementing a comprehensive AML program is essential to preventing and mitigating the menace of money laundering.