The layering stage in money laundering is about trying to make illegal funds snuck into a financial system during the placement step look like they’re being used legitimately. However, creating this illusion can lead criminals to make some financial moves that are unusual or just downright don’t make sense.
Here are a few things to look for.
Recurring Transactions for Exact Amounts
When monitoring for suspicious activity, financial authorities should pay attention to the specific values of transactions. Transfers associated with layering are often for exact, “rounded off” amounts that end in multiple zeroes. Either that or the value of a sequence of money moves will end up being an exact amount – maybe one that AML operatives at a financial institution see oddly frequently. This may be fraudsters trying to move illegal money in amounts just small enough that they don’t have to be reported on.
Rapid Transfers Within an Account
Regulators should also focus on how quickly money is coming into and out of an account. If it’s frequently the case that funds are deposited into an account, only to be withdrawn a short while later, the account may be being used to layer illicit money.
An additional warning sign is if multiple accounts within the same financial institution are often transferring money back and forth between each other. Again, it’s likely the funds are illegal and the accounts only exist to facilitate layering in the money laundering process.
Frequent Use of Uncommon Deposit/Transfer Methods
Criminals will sometimes make frequent use of financial instruments—wire transfers, money orders, traveler’s checks, postal orders, and so on—in the structuring stage of money laundering. This lets them deposit or move illicit funds while adding an additional transaction to their history, making it harder to tell if they were sourced from illegal activities.
This is especially true of financial instruments that are difficult to trace or reverse, such as wire transfers. So if AML professionals notice an account primarily or exclusively using financial instruments to send and receive money, it’s a sign that it could be being used for layering.
A High Volume of International Transactions
Moving illegal money through multiple jurisdictions—especially different countries—is another common tactic in money laundering’s layering stage. Criminals may smuggle illicit funds into financial institutions in countries with inadequate AML systems. There, they may trade the ill-gotten money for foreign currencies, and/or invest it in financial products or shell corporations.
That’s why it’s important for AML professionals at financial institutions to be aware of which countries are on sanctions lists or other financial risk watchlists. If they notice a significant number of transactions moving funds to or from high-risk countries, it could be that the money is illicit and criminals are attempting to structure it to look legitimate.
In the end, the best defense against layering for AML teams is to ensure their financial institutions have Know Your Customer (KYC) programs that are up to standards. Employees should be trained to pick up on contextual cues, such as comments customers make or information they provide about certain transactions, that may point to layering.
Detect Layering by Getting a Big-Picture View of Transactions with Unit21’s AML Tools
Digital AML solutions, like Unit21’s Transaction Monitoring tool, go a step further in detecting methods of layering in money laundering. Taking additional contextual data into account can allow for visual link analysis, which can reveal activity patterns indicative of layering that would be difficult to spot otherwise.
Smurfing, in the context of money laundering, is the process of breaking up a large sum of money into smaller amounts, and then depositing each amount separately. The goal is to avoid financial institutions reporting these transactions to authorities as suspicious, as per AML/CFT/CPF regulations.
—is the second stage of money laundering, in which money is put through a series of financial transactions to obscure the true (and illicit) source of the funds.
The 3 Stages of Money Laundering 2024: Placement, Layering, & Integration. There are many different ways that money laundering can occur, ranging from highly complicated methods to the simplest arrangements. While there are many types of money laundering methods, there are three stages that take place in all cases.
Layering is the second of the three stages of money laundering, when successive layers of legitimacy are added to the ill-gotten funds, until their source is sufficiently obscured from authorities to be undetected as ever having been illegal.
Once the money has been put in place, the second stage is called layering or structuring. This involves breaking down large bulk funds into a series of smaller transactions. The idea is that these smaller transactions fall under the threshold of anti-money laundering regulations and won't set off any alarms.
Layering: Transfers the deposited money through various accounts in different countries. Integration: Invests in legitimate business ventures or stocks, presenting his wealth as legitimate earnings from investments. Placement: Mixes her illegal earnings with her cafe's legitimate cash sales.
Layering can include changing the nature of the assets, i.e. cash, gold, casino chips, real-estate, etc. Complex layering schemes involve sending the money around the globe using a series of transactions. The more countries the money enters and leaves, the harder it is to uncover the “dirty” source of the money.
Money laundering follows a three-step process: Placement, Layering, and then Integration. Layering is the process by which multiple transactions are carried out in order to obscure the source of the money. Offshore techniques are often implemented in order to further extract the illegitimate funds from the source.
Stage 1 – A patient has high levels of white blood cells and enlarged lymph nodes. Stage 2 – A patient has high levels of white blood cells and is anemic. He or she may also have enlarged lymph nodes.
In layering, one of the plant branches is covered with moist soil, and after some time, that branch develops roots and starts to grow as an individual plant. Commonly, jasmine and mint are artificially propagated by the process of layering.
Layering is one of the stages in money laundering where the launderer makes numerous transactions to take the illegal proceeds far from their original source. Launderers layer illicit money with several transactions to hide its source.
Methods or Examples of placement in money laundering:
Repayment of debt using illegal proceeds. Buying stored value cards with illegitimate money. Depositing small amounts into several bank accounts to evade reporting threshold.
The most popular method used in the placement stage is to divide large amounts of cash into less suspicious smaller sums, which can then be deposited into a single bank account or several bank accounts (which could involve the 'smurfing' technique).
Also called product integration. The weaving of a brand into the existing story lines of film, TV, streaming, or influencer programming. James Bond races an Aston Martin, Orange is the New Black characters gobble Dunkin' Donuts, or Influencers clean up with Dyson vacuums.
3. Integration. The final stage of money laundering is known as 'integration'. At this point, the laundered money has been absorbed into the legal financial system due to the layering process.
TBML uses similar techniques to traditional money laundering, namely launder, layer and integrate which are all designed to make it impossible to detect or investigate the original illicit origin or purpose.
Cash structuring is the act of breaking up what would otherwise be a single significant financial transaction into a series of smaller transactions to avoid scrutiny by regulators and law enforcement. Cash structuring is also known as “smurfing” in the industry.
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