Money laundering is the process of converting illegally obtained money into funds that appear legitimate. It involves disguising the origin of money generated through criminal activities such as corruption, fraud, smuggling, drug trafficking, or tax evasion.
The money laundering process generally takes place in three key stages:
1. Placement
This is the initial stage where illegal cash is introduced into the financial system. Criminals may deposit small amounts to avoid detection, convert cash into other assets, or use legitimate businesses to mix illegal earnings with legal funds.
2. Layering
In this stage, multiple complex transactions are carried out to obscure the money’s origin. This may include transferring funds across banks or countries, using shell companies, or routing money through several accounts to break the audit trail.
3. Integration
The final stage involves reintroducing the laundered money into the legitimate economy. At this point, the funds appear clean and can be used for investments, business activities, or personal expenditures without raising suspicion.
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