Money Laundering (ML)

Definition of money laundering

Money laundering is a process designed to hide the illicit source of financial gains. Illicit revenue stems from predicate crimes, such as fraud, scam, human trafficking, ransomware, hacks, bribes etc.

Criminal actors engaging in money laundering seek to conceal the funds’ origin, enabling them to use the laundered assets for personal satisfaction or to perpetuate their illegal activities.

What is money laundering, and what are the stages of the whole process?

Criminals use a variety of techniques and industries to achieve their goals. They often use money laundering transactions concluded in the real estate market, involving the trade of luxury goods, casinos, works of art, or cryptocurrencies.

Laundering funds usually consists of three stages: direct or indirect placement of illicit gains into the financial system; layering the funds through a series of transactions to hide their origin, usually splitting the original full amount into smaller ones under reporting thresholds to evade suspicion; and integration which refers to the funds being returned to the criminals in a way that appears to have been obtained from a legal source.

Money laundering means that illicit funds are introduced into the financial system at an initial stage. Criminals can do this in various ways, but most commonly, they use deposits, investments, or the purchase of valuable assets.

In the next stage, they perform complex financial transactions to conceal the actual source of the illicit funds. This may involve bank transfers, currency exchanges, or numerous cash operations that make it difficult to establish the true origin of the funds.

Finally, the laundered funds are reintroduced into the economy, which looks like they came from a legitimate source. This can include investments (including in the cryptocurrency market), takeovers, or other financial activities that provide the appearance of legitimacy.

As money laundering is not a victimless crime, both law enforcement and legislation fight against this process in almost every country worldwide.

The importance of anti-money laundering platforms

Given the sophisticated methods money launderers use, the importance of sophisticated AML platforms, which are geared towards detecting and preventing such illegal activities, becomes all the more critical. For example, anti money laundering platform from Coinfirm uses state-of-the-art technology and analytics to monitor transactions, identify suspicious patterns, and ensure compliance with stringent AML regulations.

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