Is there any other purpose of money laundering besides hiding the source of illegally obtained money and evading taxes?
This question has some potential to be discussed because, so far, money laundering is linked to funds obtained through Fraud, Corruption, human trafficking, embezzlement, and so on.
Is money laundering a single-step process that allows criminals to move their money jurisdiction to another?
The money laundering process involves three different stages, where AML placement is most crucial.
As this is the initial stage that launders use to infuse money into the legal financial system, if the compliance team is already aware of the techniques and with the implementation of effective combating strategies, financial institutions, and banks can significantly reduce the chances of money laundering at the first stage of money laundering.
So, why do people with illegal money in their pockets choose the placement process in money laundering?
At this stage, criminals use different techniques such as smurfing, structuring, and opening multiple accounts to avoid the detection process. Surprisingly, they often get successful in their mission.
This piece of writing will try to cover everything about placement in money laundering, techniques launderers use, and combating techniques for the compliance team.
Understanding the Placement stage in Money laundering
Placement is actually the first step from where the real thrillers of laundering illicit funds start. So, the process isn’t simple for either the criminals or for the organizations, who are making sure not to let them infuse the money into the financial system.
It is often discussed that money laundering must be stopped at this stage, but The process isn’t as simple as it seems to be because, due to various hidden, conventional, and unconventional techniques used at this stage, the placement stage becomes very difficult to detect.
But if caught at this money laundering stages, the whole drama of money laundering is exposed.
So, to understand it thoroughly, let us understand the different techniques used by criminals at the placement stage in money laundering.
Techniques Used by Launderers During the Placement Stage
Looking back into the ways criminals have opted to launder their money at this stage of money laundering isn’t less thriller than any heist Hollywood movie.
Structuring (Smurfing): one of the most common techniques used by almost every criminal. Break down the large amount into smaller portions and then deposit them by opening different accounts in various banks to avoid threshold detection.
Bulk Cash Smuggling: This is an old tactic that involves hiring hundreds of people across both sides of the border, giving them physical cash, or hiding the cash in the vehicle and exported goods. Some extremist smugglers even hide the cash in their bodies to avoid detection and transfer money easily.
Currency Exchange: when you have the currency in multiple foreign currencies, it will become quite difficult for the compliance team to check the origin of the funds.
Therefore, criminals Convert large amounts of illicit cash into different currencies to obscure the money’s origin. This can also involve using currency exchange businesses or international transfers.
Use of Casinos and Gambling: knowing that the gambling and casino market is going to increase by almost 4 billion dollars by 2027, launderers will definitely use this vulnerable market to launder money. They may convert dirty money into chips at a casino, then gamble for a short time, and then cash out the chips to make sure that they are legitimate gambling winnings.
Shell Companies and Front Businesses: Launderers use these entities to create the appearance of legitimate income, mixing illicit funds with those generated by the business.
Combating Techniques for the Compliance Team
Seeing the various techniques used at the placement stage, Detecting and combating money laundering at the placement stage becomes even more challenging. However, using the following techniques could stop the process.
1. Implementation of Comprehensive Enhanced Due Diligence (EDD)
knowing who your customers are and verifying that they are who they claim to be. And to make the process even better, financial institutions need to implement high-risk screening against the PEPs and people on the sanctioned lists.
This will help the organization to ensure that any suspicious activity is flagged and investigated. This involves conducting thorough checks on high-risk customers and transactions, ensuring that any suspicious activity is flagged and investigated.
2. Comprehensive Transaction Monitoring System
to make sure no transaction goes unchecked, businesses need to implement a monitoring solution that monitors every transaction in real time and generates flags even before criminal activity occurs.
3. Know Your Customer (KYC) Policies
before onboarding new clients, companies make sure that they are not included in any sanction or criminal activity list. For this, verifying the customer’s identity while he tries to open an account or make the first transaction is necessary.
To avoid penalties and reputational damage, businesses, particularly those in the financial industry, need to implement a robust AML compliance program. AML monitoring and screening software is the best solution, helping you screen against multiple sanctioned lists, PEPs, adverse media, and so on.
So, don’t wait for the worst, act now and make your compliance effort more stringent.