Discuss the stages of Money Laundering

Despite the variety of methods employed, the laundering is not a single act but a process accomplished in 3 basic stages which may comprise numerous transactions by the launderers that could alert a financial institution to criminal activity -

Placement - the physical disposal of the initial proceeds derived from illegal activity. It is occurred by:

Cash paid into bank (sometimes with staff complicity or mixed with proceeds of legitimate business).

Cash exported.

Cash used to buy high value goods, property or business assets.

Cash purchase of single premium life insurance or other investment.

Layering - separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity. It is occurred by:

Sale or switch to other forms of investment.

Money transferred to assets of legitimate financial institutions.

Telegraphic transfers (often using fictitious names or funds disguised as proceeds of legitimate business).

Cash deposit in outstation branches and even overseas banking system.

Integration - the provision of apparent legitimacy to wealth derived criminally. If the layering process has succeeded, integration schemes place the laundered proceeds back into the economy in such a way that they re-enter the financial system appearing as normal business funds. It is occurred by:

Redemption of contract or switched to other forms of investment.

False loan repayments or forged invoices used as cover for laundered money.

Complex web of transfers (both domestic and international) makes tracing original source of funds virtually impossible.