London (Parliament Politics Magazine) – Money laundering has become a common method for criminals to fund their illegal activities. Whether it is weapons, narcotics, human trafficking, or smuggling, they need a lot of money. As criminals have to carry out insider trading, bribery, and fraud schemes, they look for ways to launder money. Some prominent companies go for embezzlement to carry out their illicit activities. Many times professional money launderers carry out laundering services on behalf of other businesses. Unfortunately, it is almost impossible to assess the amount of money laundering in the world.
What Are The Three Stages Of Money Laundering?
Criminals make use of three stages of money laundering to keep their success intact. They have to release a big amount to the financial system. Some of them take illegal money from one country to the other with planned strategies. All criminals and money launderers may not use the same method to launder money. Sometimes they combine all three stages or pay attention to one at a time. Here are three different states of money laundering:
1. Placement
The initial stage of money laundering relies on placement. This is how ‘dirty money’ is released into the financial system. Criminals think of ways to break up a large sum of money into smaller deposits. The money is laundered into various bank accounts. It helps them collect and deposit checks in various locations around the world.
Some other placement methods include adding cash from one business to the other. False invoices and smurfing play a major role here. Even if the money is available in a large amount it is reflected as a very small amount. It has to remain below the AML reporting threshold while transferring to the bank account. While taking money from one country to the other, a criminal will take a small amount of cash. In this way, the customs will declare them safe.
2. Layering
The process of layering begins once the money has entered the financial system. In this process, the launderer will move money to a distant place. These funds can be transferred using a fake purchase or sale investment. A holding company can move the money directly into their account no matter what part of the globe. This helps them let go of the AML investigations as the money is spread in many different accounts. In many situations, criminals transfer money by disguising it as a loan or payment for products. You need to look out for the following layering tricks:
1. Chain-hopping
Chain hopping is all about converting one cryptocurrency into other. It also involves moving from one blockchain to the other.
2. Mixing or Tumbling
Mixing or Tumbling involves various transactions into several exchanges. It becomes harder for the authorities to trace the money or the accounts.
3. Cycling
Cycling is all about making a deposit of fiat currency and moving it from one bank to the other. It also includes selling or buying cryptocurrency to hide the dirty money in various ways. This helps the launders deposit money from one bank to the other.
3. Integration
Integration involves the third and final stage of money laundering. This is where the criminal will try to integrate the funds into the legitimate economy. They use the money to buy goods and services that make it look legit. In this way, they can save themselves from a law enforcement team or tax authorities. Most criminals like to invest their money in real estate, assets, and businesses. Some common tactics of integration are as follows:
1. Fake employees
By showing fake employees the criminal gets a chance to take out money from their bank account. As the payment is made in cash it helps them launder a big amount.
2. Loans
They pretend to pay loans to the director or shareholder. However, it is never repaid.
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3. Dividends
It shows the fake dividends that are paid to the shareholders of a company. Such companies are usually controlled by the criminals themselves.