Have you ever wondered how and where criminals gain the cash flow that will be laundered? Someone said that the clock of justice always runs, but yes, demand does talk louder than the whining.
Money laundering is a wide and complex vices that endangers the world economy. Companies can ascertain weaknesses that the criminal association can utilize to move into the respectable economic territory.
This article will discuss 3 stages of money laundering. Let’s see this in detail
Money Laundering Process
Money laundering is the process by which criminals make their black money legal without any detection, and the process takes three steps.
- Placement
- Layering
- Integration
These stages form the money laundering life cycle and assist criminals in getting their streets into the legal system.
According to the survey made in 2023, money laundering is expected to be between 3 and 5 percentage points of the global GDP.
Bonus: Learn more about tools to identify placement in money laundering from our website.
Placement in Money Laundering
This is when the black money flows into the stream of the economic system.
They may be kept in banks, used to purchase other assets or smuggle money out of the country.
Investing in money laundering placement is difficult because money is used in most cases, and moving money around is often dangerous because it is conspicuous.
Layering in Money Laundering
The second process is known as money laundering layering, in which criminals ensure that the money cannot be traced.
This is done by transferring it from one account to the other, converting it from one currency to the other control, or putting in some business.
They raise the repetition of a money laundering process to mask the source of the money. Money laundering risk at the global level in 2023 was equal to 1.6 trillion US dollars per year.
Integration in Money Laundering
The last phase is integration in money laundering. During this period, those hidden revenues or black money came into the white money sweeping.
They are able to make good the appearance of money by putting their ill-gotten gains into businesses or buying expensive items. This is hard to monitor because the funds appear to be legitimate.
Major weaknesses of the Financial System
Criminals have tried to weaken regulations in an effort to conceal their operations. Thus, it is easier to utilize such money in environments where there are poor controls in transaction or reporting systems.
These are the risks that show how dangerous a threat the three stages of money laundering pose to the various financial regions.
All activities of sending cash into money laundering and integration are destructive for the system at any of its steps.
While the annual money laundering transactions potentially exceed $ 1.6 trillion daily, according to the FATF.
Consequences of Money Laundering
All sorts of Money laundering result to various threats affecting economies and businesses.
It undermines markets, removes people’s trust in financial companies, and may lead to penalties of considerable severity.
The increase in money laundering through the three stages complicates the recognition of unlawful activity.
For governments and banks to guard against, it is about time to understand the life cycle of money laundering.
At the global economic level, money laundering approximates 2 to 5 % of the global GDP, which means that society cannot underestimate its impact.
Legal Measures Against Laundering
Financial specialists are trying to prevent money laundering through various programs and methods.
Regulations help in raising such acts during placement on an organization’s standard.
These rules follow the flow of money and assist in combating the layering phase, where the criminals try to disguise the source of cash.
They also help identify integration in money laundering, which is money that appears legal and available for use.
Impact on the Global Economy
Money laundering is a threat to the world economy since it encourages criminal activities while distorting the notion of economic undertakings.
Such phases distort the balance of the financial markets. In money laundering, there is Illegal money which has a way of causing inflation.
These are the problems of the layering stage to trace the funds while integration makes the dirty money easily circulate in the economy.
It influences legal earning generation and hampers the recovery of the economy, thus negating the chances for everyone to become a millionaire.
