Stages of Money Laundering this digital world, conducting crime has become easier than ever. However, it is not easy to use the spoils of criminal act
Stages of Money Laundering this digital world, conducting crime has become easier than ever. However, it is not easy to use the spoils of criminal activity as the financial flow is always monitored. If the criminals start to lavishly spend their illicit funds, law enforcement authorities are bound to notice it. Money laundering is the process of hiding the original source of the money and integrates it into the legal financial system so it is not traced back to the crime from which the money was obtained from. Every criminal has to find a clever way to manipulate the system and to do that they use stages of money laundering. In this blog, we will discuss in detail the stages of money laundering and how it has further corrupted various industries.
Stages of Money laundering
There are three stages through which criminals launder money. Here are some discussed in detail:
This is the first step of money laundering in which the criminal places windows their illicit fund’s in the legal system. This is done through unlawful financial flow into conventional financial institutions. The placement is done in liquid form and into the non-regulated system so not much attention is brought to it.
Here how money laundering can occur in the placement stage.
Cash gained from the illicit activity is added into the legitimate system. This is well suited for a business with no variable costs like car parks or cash wash or casinos.
This is done by putting false invoices and making it seem like a payment settlement just to surpass the money.
Putting the money into small amounts and then depositing it into the banks to make it look like they are below the reporting threshold.
Through this, the real owners of the companies are hidden to keep the identity verification of the criminal hidden.
Overseas Bank Accounts
Taking the small amount of money abroad and then depositing them out of the jurisdiction. After a while sending the money back to the origin of the country to make it look legit.
This is the second step through which the criminals hide money so deep into the financial system that it is no longer attached to the source of the funds. The main object of the layering stage is to overthrow any criminal investigation by confusing the law enforcement authorities, Criminals invest their funds into the financial system to make the profits look legit.
The final stage of money laundering in which the money is again introduced into the legal financial system and they appear to have been gained through legit income. By this stage, it becomes impossible to figure out the origin of the money and criminals can now use these funds for whatever they want without bringing any legal attention to themselves.
Anti-Money Laundering Regulations
In order to capture the criminals during the stages of money laundering, the law enforcement regulatory bodies have regulations. These regulations require all industries that are vulnerable to the stages of money laundering to verify all their clients before making deal with them. They are also to monitor any financial flow and report to the authorities if any unusual activity is seen. This act ensures transparency as well as a risk-based approach. For transparency, the companies are required to identify their beneficial owners while for risk management the business verifies the background of their client finds out about the risks attached to them. The businesses that fail to follow these rules end up facing penalties like high value fines or even revocation of their license.
Anti-Money Laundering Technology
The anti-money laundering process is not easily achieved and this is why there are technological solutions that help to ensure compliance with these measures. The software-based AI-powered solution can verify the identity of the individual and automatically screens them against the sanctions list, watchlists, PEPs, adverse media or any other list that is provided by the regulatory body. If the business or even the individual appears on the list it means they have been blacklisted before being involved in the illicit activity and there is a significant risk attached to them. The technological AML solution ensures the financial system to fight the stages of money laundering.