What are the three stages of money laundering?

The three stages of money laundering, which are Placement, Layering, and Integration, represent the process through which illegally obtained funds are made to appear legitimate.

In the Placement stage, the illicit funds are introduced into the financial system. This often involves breaking large sums of cash into smaller amounts and depositing them in banks or using them in financial transactions to avoid detection by authorities.

The Layering stage involves creating complex layers of financial transactions to disguise the origin of the funds. This might include transferring money between different accounts, banks, or even countries to obscure the trail of the funds and make it difficult for investigators to trace back to the original illegal activity.

Finally, the Integration stage occurs when the laundered money is reintroduced into the economy, making it appear as legitimate income. By this stage, the funds can be used without raising suspicion, as they seem to be part of normal business operations or personal finances.

Recognizing these stages is crucial for understanding how financial institutions and regulatory bodies work to detect and prevent money laundering activities. Each stage presents different challenges and opportunities for both criminals and law enforcement agencies.