In all crimes, whether intimidation or fraud, there is only one motive for financial gain. Funds raised by illegal means must be laundered so that they can be used freely on the system. Money laundering is a crime without borders or restrictions. Later we will discuss how to send money illegally from one state to another.
Money earned from illegal sources such as drug trafficking, arms trade, and corruption cannot be used without laundering. Whenever a person goes to a bank or other financial institution to deposit money or buy stock, they always ask for some source. Customers are responsible for providing a source of income. When a customer presents proof of income, the business will verify it.
If someone is providing a wrong or illegal source of income, a business can notify law enforcement. He could be arrested and face further charges. To avoid all these complications, illegal funds are laundered.
Money laundering, the process of concealing the source of illicit funds and concealing them by providing legitimate funds. Simply put, black money is converted to white through three steps of money laundering. Illegal sources are washed out of money and illegal sources are given to them.
To better understand the process, money laundering is divided into three stages.
Illegal funds are most vulnerable at this point. The funds will soon enter the system and are a huge amount. Most illicit funds are hard forms of iecash. Huge amounts of physical money can attract public attention. So, it is better not to keep your money in a solid form, but rather to spread it across the system in small chunks. Several methods are used to transfer funds from the system.
People can transfer money here in some currencies. Because they handle multiple currencies, they risk being used as a medium for money laundering. It helps with placement as well as conversion of money.
Painting & Arts Crafts
Expensive crafts and jewelry are purchased using illegal funds, which is a poorly regulated sector and does not require a source of income. Money launderers can easily buy these crafts. Now his illegal money was converted into another form and entered the system without leaving a trace.
break into smaller chunks
As previously discussed, cash is a huge amount. Therefore, the funds are divided into small portions. Then they get into business through the Smurfs. One or more bank accounts are used for this purpose. Funds are deposited into this account at different times. This act does not cause suspicion, since the money is very small.
Previously placed funds are circulated in the system upon structuring, also called stratification. The reason is that illegal funds are given here in several layers. Money goes through cycles of financial transactions within it. Assets are sold and purchased to disconnect from the source.
At this stage, the money has all legal origins that have nothing to do with illegal sources. The new source is now legal and it is very difficult to spot money laundering at this point. UBO gets their money after this step.
There is no hard and fast rule that money goes through three stages, and these stages can occur simultaneously or overlap. The motive is to wash off the criminal process. Banks, money changers and all other businesses should use anti-money laundering solutions to reduce money laundering risks. AML Compliance helps you stay compliant.