Describe the three steps of the money laundering cycle

Question

What will be an ideal response?

Answer 1

The basic process of laundering money begins with placement of the funds into the legitimate U.S. market. Common methods of placement include creating shell corporations or fake cash-intensive businesses and smurfing, more technically known as structuring, whereby large amounts of cash are broken into increments less than
$10,000, to avoid federal reporting requirements, and deposited into various bank accounts.

The second step in the laundering process is layering, through which the money is cleaned by moving it around through a series of elaborate transactions, often involving offshore bank accounts and international business companies (IBCs). These multiple, complex transactions aim to obscure the connection between the money and the criminal group and to continue until the organization feels confident the money is adequately clean.

The third and final step in the money laundering cycle is integration, where criminals repatriate their money through seemingly legitimate business transactions. For example, the launderer creates a bogus export company in a free trade zone and a bogus import company owned through an IBC in a different country. A trading relationship is established where the exporter sends nonexistent goods or goods invoiced at greatly inflated prices to the importer, who pays the exporter in cleaned money, thus completing the laundry cycle.