Top Stages of Money Laundering – An Inclusive Guide to Encounter Criminal Attacks

Top Stages of Money Laundering – An Inclusive Guide to Encounter Criminal Attacks

Written by meetdeltan, In Business, Published On
February 15, 2024

Money laundering has been impacting the business industry for a long time. In 1988, the money laundering concerns were addressed in the UN Vienna – stating that the conversion or relocation of property used for any offence can be derived from the illicit origin involving an individual to dodge the legal consequences of this cause. An estimation recorded regarding the money laundered globally in a single year is nearly 2 trillion dollars. However, this is just an approximation and not the actual number.

Most illicit operations use cash payments, the easiest and least risky way to conduct illegal transactions. However, with technological advancement, the imposters have adopted new strategies to manage funds through stages of money laundering. Nevertheless, the misuse of digitization created a sense of concern among businesses dealing with financial resources.

A Quick Insight into Money Laundering

To understand the money laundering process, it is essential to learn the definition of this term. The primary meaning of money laundering is the method of illegally concealing the source of money obtained and transferring it to a clear origin. The funds gained are aimed at being used for illicit purposes and fraudulent activities, including terrorist funding. The term originated from the United States (US), referring to the mafia who used to launder illegal funds for personal gains.

The businesses controlling the company’s assets were on high alert due to the increased rate of black money dealings. It was reported that an estimated 2 to 5% of the GDP (Gross Domestic Product) stems from illegal sources. Apart from the regulated economies, an underground economy refers to organized crime groups dealing with finances and other illicit operations compromising the country’s GDP.

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What are Primary Money Laundering Techniques?

Illegal funds can be laundered using multiple techniques. Imposters involved in such activities are always on the mission to determine new ways of laundering money.

These techniques include the following:

  • Money Mules
  • Shell companies
  • Smuggling
  • Black Salaries
  • False Invoices
  • Industrial Manipulation
  • Digital Deposit Methods
  • Multiple Bank Transfers

All these ways of conducting illicit transactions affect the banking sector regarding reputation and asset loss. The finance industry has been facing several suspicious transactions in money laundering. A brief research was conducted on this case, and the following results were concluded.

In previous years, Germany conducted research on unusual fund transfers in financial institutions, stating that approximately 25,000 money-dealing assaults were reported as subjected to Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF).

Explore Three Stages of Money Laundering

Money Laundering

Money laundering is the world’s primary concern, be it any banking sector or law enforcement agency. The risk score of the laundered illegal transactions has been targeting different regions, and this time, Nigeria has fallen victim to these illicit crimes. It was stated as among the top countries facing high alerts on terrorist funding and black money dealings. The calculated threat score was around 6.9 points, which requires an instant solution. However, there are three primary stages of money laundering followed by the scammers:

  • Placement

It is the initial stage of laundering illegal money. The basic concept of this term refers to accessing the means to manipulate illegally obtained money into the legitimate economy. It works by securing cash through illicit activities and finding placements in financial institutes to divide large amounts of money into smaller numbers to trick the systems. It makes the financial systems hard to track, leveraging the fraudsters to store it and use it illegally in the future.

  • Layering

This phase refers to the next step in money laundering, where the imposters develop confusion and make it hard to detect that the money obtained is illegal. However, it helps criminals move the transactions further from illicit sources, removing all possible means to get caught. It is also one of the complex stages of illegal methods of transaction.

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It is also termed a blending of funds criminals use to combine illegal funds with legitimate assets. To make the detection more complex, the scammer implements this approach.

  • Integration or Extraction

The last and most crucial stage of laundering money involves integration, in which the illegally obtained money is reintroduced into the legitimate economy, enabling the scammers to pass the transaction without fear of being detected. It places the laundered transactions back to the criminal, imitating it to be obtained through a legitimate source.

Preventing Money Laundering Through Robust AML Solutions

The strong impact of money laundering is not only destroying the digital market and exploiting the upcoming trends and growth of businesses. However, to overcome this fight against illegal transactions. The AML checks aid companies with efficient monitoring and screening methods. A brief overview of a few solutions combating money laundering is stated below:

  • Biometric AML

Dealing with the imposter in this modern time requires automated solutions, and biometric authentication is one of the most accurate and legitimate ways to verify identity. Biometric AML screening bridges the gap between security and easy implementation by replacing manual work and traditional methods with automated versions.

The cloud-based biometric process includes face recognition and multi-aspect face checks using 3D analytical pre-trained models. These models can detect facial movements and features closely while mitigating risk and reducing delays in the verification process.

  • Ongoing Monitoring

A track record of the identities to secure organization requires modification with time as the modern strategies include the ongoing monitoring of the individuals throughout. This strategy works with real-time case seniors with advanced technologies. It develops an inclusive insight into consumer behaviour by integrating information using risk assessment techniques. The consumer profile contains all sorts of data required for the verification.

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The automated monitoring tools minimize the risk associated with the entity by utilizing the evolved regulatory frameworks while maintaining the ongoing AML monitoring practices.

  • Risk Scoring

The calculation of risk scores refers to managing millions of consumer profiles that conveniently help businesses simplify global expansion with customized solutions. The efficient AML risk assessment on consumer profiles enables the solution to calculate the threat rate on the scale from low to high. This establishes a flexible risk-based strategy while developing a solid defence mechanism against financial crimes.

The convenient AML screening framework builds customer risk-scoring models embedded into the workflow and helps businesses achieve relevant alert prompts. It deals with external sources and high-level money laundering scams by offering a comprehensive risk-scoring approach through a consolidated database with national and international records.

Prevent Money Laundering with AML Watcher

They are considering all three stages of money laundering and the damages caused by using these illegal transactions in the financial and other emerging sectors. It is concluded that the incorporation of robust AML screening strategies is essential. AML Watcher provides a better understanding of the company’s financial condition while assisting them with robust risk assessment and user screening approaches. This helps the organization stay ahead of the imposters and protect enterprises against heavy reputational damage. Moreover, AML Watcher welcomes its consumers with substantial AML regulations to boost their businesses and enhance their relationships in the digital market. What are enterprises waiting for? Contact us and book a demo for further queries.

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