ANTI MONEY LAUNDERING

Money laundering is a process whereby proceeds of illegal activities are converted into legitimate money through a series of financial transactions. In layman’s language, it is the process of converting black money into white money.

HOW IS MONEY LAUNDERED?

Money laundering is done through any financial transaction or a series of financial transaction that seeks to conceal the nature or source of proceeds derived from illegal activities. Usually, it involves three stages which are as follows: –

1) Placement: In this initial stage, the launderers try to physically dispose off the cash. This is done by reducing large amount into smaller chunks and depositing them in different accounts or other financial institutions.

2) Layering: In this stage, the proceeds are separated from the source through the use of layers of financial transactions. The layers are well designed to hamper the audit trail, disguise the origin of funds and provide anonymity. Examples of layering are: – premature payment of fixed deposits without regard to penalty, early surrender of annuity, purchase and sale of investment wise transfers disguising as payment of goods and services.

3) Integration: In the final stage, the laundered money is brought back into the economy so as to make it apparently legitimate fund. Examples are: – Investment in real estate, luxury assets, business venture etc.

Usually money laundering takes place in places other than where it has originated and in countries where anti money laundering act is not there or is not very strict