Layering – The brief detail of the second stage of money laundering.
Meta Sec: Here we are going to know how layering in money laundering works, its methods and real life examples too.
Unveiling the Layering Stage in Money Laundering
Money laundering is the most talked about phenomenon. However, the question remains how is it defined as? The simple act whereby the criminals introduce their dirty money into the financial flows through three steps, which are known as Stages of Money Laundering.
But let’s be real for a second, the layering stage is where things get really tricky and difficult. This part basically involves a bunch of transactions to hide where the money came from.
Understanding the Money Laundering Process
Placement: Do you know how the first step in a sneaky money operation typically works? It’s called placement. This is the point where the dirty cash first gets slipped into the financial system and tries to blend in with the clean money eventually. So, This process could be done with the involvement of cash deposits, purchasing assets, or using smurfing techniques to break down large sums into smaller and make them less suspicious amounts.
Once the step has been completed, criminals reach the second stage in which multiple layers are created to hide the corrupt sources of their dirty money.
This is the stage where things get tricky with a bunch of complicated transactions to hide where the dirty money actually came from.
Integration: If we talk about the final stage of money laundering which is the integration stage. This is where the laundered money finally gets mixed back into the economy to make it seem legit and usually through things like investments, buying property, or starting businesses.
What is Layering in Money Laundering?
The origin of money is obscured as launderers employ multiple strategies to create a maze of financial activities. All of this takes place just to confuse and obscure the audit trail which makes it challenging for authorities to detect and investigate the illicit origins.
The Layering Process in Money Laundering
Layering, as the name suggests, is the act of adding more and more complex layers to the process of laundering money.
Moving Funds:
- With the intention to hide the sources of funds, money launderers choose a long trail of accounts and shell companies to spread them in different locations.
Purchasing and Selling of Assets:
- This step usually includes Buying and selling of Assets which have high value like real estate, luxury cars, and art.
Using Financial Instruments:
- The usage of Complex financial instruments such as derivatives, bonds, and stocks can be used to add layers in funds. These instruments often involve multiple transactions and can be challenging to track the origin.
Involving Offshore Accounts:
- The offshore banking accounts which are in control with the strict privacy laws are frequently used to hide money. The tracing of the origin of money can particularly get difficult by the secrecy of these accounts.
Methods of Layering in Money Laundering
Now-a-days launderers are continuously in search of new methods to layer funds. So, following are some common techniques which are given below:
- Wire Transfers:
- There are multiple wire transfers across various accounts and financial institutions which makes the process of tracking a path complex. Each transfer has an impact that adds a layer to blur the origin of the fund.
- Shell Companies:
- The shell companies which have no legitimate business operations allow the launderers to move money around without raising doubt. Such types of companies usually exist only on paper and serve as conduits for illicit funds.
3. Cryptocurrencies:
- Anonymous and complex nature of the cryptocurrency transactions make them ideal for layering as digital currencies can easily be transferred across the borders which ultimately adds multiple layers of obscurity.
Here we are going to discuss the examples of Layering in Money Laundering
Let’s have a look at a few real-world examples to illustrate the concept of layering in money laundering:
- Real Estate Transactions:
- Criminals usually buy several properties with illegal funds and then they quickly sell it which further proceeds from these sales appear legitimate and get layered through numerous property transactions.
- Complex Financial Instruments:
- A launderer tends to invest in stocks and then sell them rapidly by reinvesting the proceeds into other financial instruments. The rapid cycle of buying and selling create layers that blur the original source of the funds.
- Art and Antiques:
- High-value art and antiques usually get purchased with illegal money and then resold at auctions or to private buyers as well. The addition of each sale and purchase builds on a layer that makes tracing the funds more challenging and obscure.