An economy’s stability is deeply influenced by its financial structure. Therefore, it is essential to identify the source of all the funds that are being introduced into the financial system. Despite their significant importance, financial institutions are exposed to money laundering threats due to the introduction of illegal funds into the official system. 

According to a report, approximately 2283 cases of money laundering activities were associated with illicit financial transactions. The imposters usually place illicit funds into the financial system by disguising their sources. Placement in money laundering is the initial phase through which they blend the illegal funds with legitimate sources.  

This blog aims to provide guidelines on how placement in money laundering affects financial stability and how to avoid these attempts through anti-money laundering regulations.               

Understanding Placement in Money Laundering – An Overview of the Initial Stage  

It is the initial stage through which the criminals disguise the source of funds. This stage is concerned with the introduction of illegal funds into the financial system without raising suspicions of them being illicitly acquired. 

The core components of it entail the masking of funds to hide their origin. Additionally, money launderers divide the funds into smaller groups and spread them across different bank accounts. Another critical way of placing illegal funds into the financial structure is by moving them across foreign accounts.    

A Quick Glimpse of the 3 Stages of Money Laundering

The money laundering process is usually undertaken through three stages, where the complexity of transactional analysis rises with each step. These three stages are briefly discussed below:

• Placement in Money Laundering: As discussed earlier, money laundering placement involves the introduction of illegal funds into the financial system without representing its sources. 
• Layering in Money Laundering: In the second stage, the imposters spread the funds across financial sector by making several transactions. This complicates the tracking of financial funds. 
• Integration in Money Laundering: Lastly, the illegal funds are blended with legitimate funds. Additionally, the imposters purchase property assets with these funds, converting the black money into legitimate sources.     

Examples of Placement Money Laundering  

Placement in money laundering is often conducted through the division of financial deposits into different accounts. In addition, money launderers purchase and resell stable assets around the less regulated sectors. It encompasses the smuggling of illegally acquired funds into foreign bank accounts. 

These funds are replaced with local currency. Furthermore, the imposters take out loans from legitimate sources and repay them with illegal funds to authorize their funds at the same time. Placement money laundering also facilitates trade-based laundering in which the imposters manipulate the price and quality of transactions involved in trading practices.     

Techniques Used to Identify Illegal Activities in the Money Laundering Placement Stage 

Financial institutions must look out for the following warning signs in order to detect illicit transactional activities. These signs are examined below:

• Imposters might make illogical financial decisions to ignore being suspected of illegal activities. 
• Additionally, they may represent inconsistent information, such as forged documents and synthetic identity details, during the onboarding operations. 
• Usually, money launderers are often involved in complex transactional activities. This is a huge red flag, which the examiner must consider during the transaction monitoring process. 

AML Placement Stage – Detecting the Money Laundering Attempts  

AML regulations play a crucial role in the detection and prevention of the illegally attained funds. The detection of it is facilitated with extensive customer due diligence and AML modules. 

• A streamlined AML screening process provides defense against the money laundering practices. The compliance with these regulations ensures an effective identification of illegal entities involved in money laundering. 
• The use of technologically advanced screening modules stimulates the identification and tracking of transactions taken out of the financial system. These automated modules effectively identify all the anomalies and discrepancies that the financial sector may face.  

Industries Vulnerable to Money Laundering Placement 

Placement in money laundering often affects various industrial operations. For example, the real estate sector is deeply affected due to the money laundering practices. The reason is that the imposters purchase property with illegal funds. 

Additionally, the retail sector facilitates money laundering practices by inflating product sales and underreporting the expenses faced during the investment procedures. Furthermore, the construction and development sector can be used to funnel illegal funds through inflated contracts. 

Concluding Remarks 

Placement in money laundering is the first stage through which the imposters undertake illicit transactional activities. In this stage, the imposters try to conceal the source of illicitly acquired funds in order to avoid regulatory penalties and fines. 

Additionally, various industries are exposed to illegal activities during the placement stage of money laundering. Therefore, organizations must conduct extensive AML checks to track illegal funds. Moreover, these checks must be integrated with the latest technologies, which streamlines the identification of illicit fund transactions.