What does 'layering' refer to in the context of money laundering?

In the context of money laundering, 'layering' specifically involves creating complex layers of transactions to obscure the illegal source of funds. This is a crucial step in the money laundering process, where the objective is to make it challenging for authorities to trace the origins of illicit funds. Layering typically includes a series of transactions that may involve different financial instruments, account transfers, or even moving funds through various financial institutions, often across international borders. By doing so, the individuals involved aim to distance the money from its criminal origin and make it appear legitimate, thus facilitating further transactions without drawing suspicion.

The options referring to consolidating funds into criminal enterprises, utilizing wire transfers, or converting illegal funds into legitimate assets describe different aspects or strategies that might be related to money laundering but do not specifically capture the essence of layering. Layering is distinct in that it focuses on the obfuscation of the money trail, which is vital for evading detection by law enforcement agencies.