The commonly cited three stages of money laundering are: placement, layering, and integration. However, some sources identify an additional, initial stage: planning. Therefore, while the core process is often described in three phases, a more comprehensive view includes a preparatory stage.
Let's examine each stage in detail:
1. Planning
- Description: This initial, pre-emptive stage involves strategizing how the illicit funds will be introduced into the legitimate financial system without detection. It entails assessing vulnerabilities in financial institutions, identifying potential loopholes in regulations, and establishing methods to obscure the origin and ownership of the funds.
- Activities:
- Choosing methods for placing the money (e.g., structuring deposits).
- Setting up shell companies or accounts in jurisdictions with weak financial oversight.
- Identifying individuals to act as "straw men" or nominees.
2. Placement
- Description: Placement is the initial stage where illegally obtained money is first introduced into the legitimate financial system. This is often the riskiest stage for money launderers because it involves directly handling large sums of cash.
- Activities:
- Depositing cash into bank accounts.
- Purchasing monetary instruments like money orders or traveler's checks.
- Smuggling cash across borders.
- Using cash-intensive businesses (e.g., restaurants, casinos) to mix illicit funds with legitimate earnings. This is sometimes referred to as "mingling."
3. Layering
- Description: Layering involves separating the illicit proceeds from their source by creating complex layers of financial transactions to obscure the audit trail and disguise the origin of the funds. The goal is to make it difficult to trace the money back to the criminal activity.
- Activities:
- Transferring funds between multiple accounts in different countries.
- Converting cash into other assets, such as real estate, stocks, or precious metals.
- Creating shell companies and conducting transactions between them.
- Using electronic fund transfers and wire transfers.
4. Integration
- Description: Integration is the final stage where the laundered money is reintroduced into the legitimate economy in a way that appears to be from a legitimate source. The funds are now cleaned and can be used without raising suspicion.
- Activities:
- Investing in real estate, businesses, or other assets.
- Purchasing luxury goods.
- Using the funds to finance further criminal activities.
- Obtaining loans or mortgages using the laundered money as collateral.
| Stage | Description | Objective | Example |
|---|---|---|---|
| Planning | Initial strategizing on how to introduce illicit funds into the financial system without detection. | Develop methods to obscure the origin and ownership of the funds, exploiting financial system weaknesses | Setting up a shell company in a tax haven country before depositing funds |
| Placement | Injecting illicit funds into the legitimate financial system. | Get the "dirty" money into the system without immediate detection. | Depositing small amounts of cash into various bank accounts ("structuring"). |
| Layering | Separating the funds from their illegal source through complex transactions. | Obscure the audit trail and make it difficult to trace the funds back to their origin. | Transferring money between multiple accounts in different jurisdictions, converting cash to assets like stocks or real estate, and utilizing shell companies. |
| Integration | Reintroducing the laundered money into the legitimate economy as seemingly legitimate funds. | Give the "clean" money the appearance of legitimacy. | Investing in a legitimate business, purchasing real estate, or using the funds to finance further legitimate ventures. |
In conclusion, the four stages of money laundering are: planning, placement, layering, and integration, each designed to obscure the origin of illicit funds and make them appear legitimate. While some view planning as preparatory rather than a distinct phase, its consideration offers a more complete picture of the money laundering process.
