The objective of most criminal acts is to generate a profit. Money laundering is the term used for disguising the proceeds of crime (‘dirty money’) with the aim to transform the proceeds to appear legitimate (‘clean money’) without arousing suspicion.
Activities of organized crime, including for example drug trafficking, can generate huge amounts of criminal proceeds. Criminals disguise the sources, change the form, or, move the proceeds to a place where they are less likely to attract attention.
The process of money laundering typically has three stages:
The Placement Stage: The launderer introduces the proceeds of crime into the financial system.
The Layering Stage: The launderer engages in a series of movements or conversions of the funds to disguise them from the original source.
The Integration Stage: With stages 1 and 2 being successful the cycle is complete, therefore the launderer might choose to invest/withdraw the now laundered funds, thus returning the funds to the financial system as legitimate funds.
Criminals are continuously looking for new routes, products, and services for laundering their funds including new and emerging financial technology (FINTech). Money laundering is a threat to any financial system, and it is therefore vital to have comprehensive anti-money laundering regimes in place to deprive the criminal of ill-gotten gains.