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Dirty money moves in three steps
Placement
Placement converts illegally obtained money into assets that seem legitimate, often by depositing it into a bank account registered to an anonymous corporation or a professional middleman. This is where criminals are often most vulnerable to detection, since they introduce massive wealth into the financial system seemingly out of nowhere.
Layering
Layering uses multiple transactions to put more distance between the funds and their origin. That can mean transfers between multiple accounts, or buying tradable property like expensive cars, artwork, and real estate. Casinos, where large sums of money change hands every second, are also popular venues. A launderer may have their gambling balance made available at a casino chain's locations in other countries, or work with employees to rig games.
Integration
Integration lets the clean money re-enter the mainstream economy and benefit the original criminal. They might invest it in a legal business and claim payment by producing fake invoices, or start a bogus charity and place themselves on the board of directors with an exorbitant salary.
Why is placement the riskiest stage for criminals?
This is the moment when cash first meets a bank, and banks are required to watch for it. In the United States, the Bank Secrecy Act of 1970 requires banks to report cash transactions above $10,000. Launderers respond by splitting deposits into smaller amounts, a practice called structuring or smurfing. Structuring is itself a federal crime in the United States, whatever the source of the money.
Why are casinos useful for layering?
Casinos handle huge volumes of cash and turn it into chips, credit, and winnings. A casino cheque or a record of winnings gives money an apparently legitimate explanation. Chips can be bought with cash and cashed out with little play, which swaps one form of value for another. The Financial Action Task Force recommends that casinos follow the same anti-money-laundering rules as banks.
How do fake invoices clean money?
A fake invoice bills for goods or services that were never delivered, so a payment looks like a normal business transaction. The money lands in an account as revenue with a paper trail behind it. A related method inflates or shrinks the stated price of real shipments so that value moves across borders unnoticed. The Financial Action Task Force calls this approach trade-based money laundering and names over- and under-invoicing as a core technique.
How do investigators trace layered transfers?
Investigators follow the money by gathering account records and matching transfers between accounts, dates, and amounts. Banks send suspicious activity reports to national agencies that collect and cross-check them. In the United States, that agency is the Financial Crimes Enforcement Network, known as FinCEN. Financial intelligence units in more than 160 countries belong to the Egmont Group, which shares such information across borders.