Money laundering is an illegal practice that aims to conceal or disguise the true nature, origin, location, ownership, or control of money and/or assets obtained through illicit means. This criminal activity seeks to give a veneer of legitimacy to assets derived from illegal sources by involving them in lawful activities to hide their origin.
The process of money laundering involves three fundamental stages:
Placement: In this stage, illicit money or assets are introduced into the financial system through various methods, such as deposits into bank accounts, purchasing assets, or investing in legitimate businesses.
Layering: During this phase, illegal assets are moved and divided through multiple financial transactions to make their tracing difficult and to hide their illicit origin. This often involves transfers between accounts, buying and selling assets, and international movements.
Integration: In the final stage, the now "clean" assets are reintegrated into the financial and economic system, appearing to have a legal origin. Criminals can use them to acquire goods and services, make investments, or engage in any other economic activity without raising suspicions.
Money laundering poses a serious threat to the integrity of the financial and economic system, as it allows criminals and criminal organizations to operate without exposing their sources of illegal income. Additionally, it can facilitate the funding of illicit activities such as terrorism, drug trafficking, and organized crime.
To effectively combat money laundering, countries and financial institutions implement stringent compliance policies and controls, such as Know Your Customer (KYC) procedures and detection of suspicious transactions. These measures aim to prevent and detect illicit activities, ensuring transparency and legality in financial operations and safeguarding the integrity of the global financial system.