Handbook of Anti-Money Laundering.

CHAPTER 2THE PROCESS OF MONEY LAUNDERING

2.1 THE MONEY-LAUNDERING CYCLE

Money laundering is generally seen as a three-stage process, as shown in Figure 2.1.

Figure 2.1 The three-stage money-laundering process

The idea is that the initial proceeds enter the banking system at a perceived point of weakness (the placement phase) and then the funds are moved around such that the initial source of the funds is disguised (the layering phase). The funds are eventually reintegrated into the mainstream banking system as clean funds (the integration phase).

These three stages shall be considered separately.

2.1.1 The Placement Phase

The placement is the initial stage of the process. The illegitimate funds have been obtained in some way, perhaps as a result of extortion, theft or drug trafficking, or any other form of predicate crime. These funds will need to be placed initially into the banking system to commence the money-laundering process.

Placement is not just the movement of cash into a bank account, even though this is the process that is most frequently considered. The initial placement purely means moving the funds from their original cash source into some other form which will enable the money launderer to undertake further layering and therefore disguise these amounts.

For example, were a money launderer to purchase a physical asset, say a painting or another asset of value, ...