Understanding the Three Phases of Money Laundering

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What Are the Three Phases of Money Laundering and How Do They Impact Financial Systems?

It has been noticed that the rate of global illegal finance transactional activities has increased to a very shocking extent where it has led to market disparities as well. Activities of such a nature give multiple opportunities to the money launderers to hide the source of money that was obtained from an illegal source in the first place. Overall risk index for the country of Paraguay has scored 5.07 points in the year of 2023 solely. Process of money laundering can be described as a continuous cycle that has been distinguished into three further phases.

Businesses or companies tend to have significant numbers of obstacles during these money laundering phases that can further cause disruptions and ultimately lead to financial instability as a result. Today in this blog we will be evaluating the essential phases of money laundering as well as the methods employed which are explained below:          

A Comprehensive Overview of the Three Phases of Money Laundering

One of the most damaging and exploitative nature of financial crimes that clearly preys on the entire economic stability of a country can be considered as money laundering or terrorist financing as well. Three distinct stages which are precisely supposed to carry out such sort of operations are typically known as placement, layering, and integration respectively. Essential elements regarding of each step and the level of risk that each phase presents to the financial institutions specifically have been explained as follow:

Phase of Money Laundering Placement

Scammers tend to take a start in the initial phase from their illegal transactional activities being taken as the placement. Scammers or money launderers simply attempt to incorporate their illegal money into the legal financial system through breaking up the big sums of money into smaller ones and then that procedure is further known as fund smurfing accordingly. Following are taken as several essential elements of the money laundering stage of placement that are:

  • Dividing the large sums of money into smaller parts for the purpose to get around the legal requirements at the same time.
  • Creation of the financial invoices in a fake manner with the intention to tuck away the illegal financial activities on the account of UBO.  

Phase of Money Laundering Layering

Second stage of money laundering can be labelled as the layering stage where the cash is transferred between different bank accounts both locally and abroad simultaneously. Scammers are more likely to frequently move the money to tax havens while paying a little attention to the anti money laundering regulations which enables them to transform money outlook to something that is accepted by the overall law.  

Phase of Money Laundering Integration  

Incorporation of illegal funds into the established financial system is directly linked to the last phase of money laundering where vast fields get picked up like real estate and art industry. If we talk about real estate, it simply includes the sales and purchases as well as the business investment opportunities which are often how all of this gets accomplished. Third party services are provided by the money mules who then play with the patterns to make it look like authentic stuff going on. Legal holders of the financial accounts who are most likely to assist in activities like money laundering through their legal routes can be described as money mules respectively.      

Evaluation of the Key Techniques Employed Throughout the Money Laundering Phases

Overall 3 stages of the money laundering have been carried out through the distinct channels because of their financial nature precisely. To make it more clear for understanding, one of the most popular techniques of money laundering is when the cash is being smuggled whether in person or online for the sake of evading the repercussions of non-compliance.

Highlighted Offenses for Money Laundering Under the Proceeds of Criminal Act (POCA) 2002

There are rich numbers of regulatory rules out there that have been developed by Sections 327, 328, and 329 of the Proceeds of the Criminal Act for the purpose of detecting and resolving money laundering cases which are explained as follows:

  • Section 327 tends to place a strong emphasis on looking into any activity that could hide the source of illegal funding and all the actions that are directly intended to extract financial resources from the domestic jurisdiction as well.
  • Evaluation in thorough manner is required to get rid of all the illegal behaviors in which a third party assists in money laundering operations is briefly explained in the Section 328.
  • Topic related to the identification of all such assets which are further purchased from the companies engaged in dishonest financial practices has been covered under the Section 329.      

How can AML Watcher be of your help?

Protect your business with AML Watcher! Stay informed about the latest money laundering trends, regulations, and preventive strategies. Gain expert insights, tools, and resources to safeguard your financial systems and ensure biometric aml with global standards. Take proactive steps today to reduce risks and maintain the integrity of your business operations.

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