How Does Money Laundering Work?

Money Laundering can be defined as committing or attempting any act to conceal or disguise money’s true origin and make it appear as if it is a legitimate source.

Stages of Money Laundering

1. Placement

Introduction of illegally sourced funds into the financial system

2. Layering

Concealing the true source of funds by performing complex transactions so that it cannot be traced

3. Integration

Re-integrating the laundered money into the legal system, so that it appears as legal assets

Acts Linked to Money Laundering

Transferring money, converting it, or carrying out any operation using it, -Knowing that it is a result of criminal activity or an illegal source

Acquiring, possessing, or using funds that the person knows are proceeds of crime or from an illegal source

Concealing or disguising the true nature, source, mobility, ownership, place, disposition, or manner of disposition, Or rights with respect to funds that the person knows are proceeds of crime

Participation in by means of an agreement or aiding, abetting, or providing counselling, advice, facilitation or attempt to commit any acts deemed as money laundering

FATF and its role in monitoring Money Laundering

The Financial Action Task Force (on Money Laundering) is an intergovernmental organisation founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. In 2001, its mandate was expanded to include terrorism financing.

The objectives of FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. FATF is a “policy-making body” that works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. FATF monitors progress in implementing its recommendations through “peer reviews” of member countries.