ANTI- MONEY LAUNDERING

Running Head: ANTI- MONEY LAUNDERING
Anti- Money Laundering

ANTI- MONEY LAUNDERING 1
Contents
Answer a..........................................................................................................................................2
Answer b..........................................................................................................................................3
Answer c..........................................................................................................................................5
Answer d..........................................................................................................................................6
Bibliography....................................................................................................................................9

ANTI- MONEY LAUNDERING 2
Answer a
Money laundering can be defined as the process with the help of which the control and original
ownership of the proceeds from criminal conduct are disguised by the criminals by way of
making such proceeds seem to have resulted from an authentic source. The cycle of money
laundering can be broken down into three distinct stages which comprise of the placement,
layering and integration.
The Placement Stage- This stage is highlights the first entrance of the proceeds of crime or ‘dirty
cash’ into the financial system. Basically, two purposes are served by this stage: (i) the criminals
are relived from possessing and protecting big cash amounts, and (ii) the money is placed into
the legitimate financial system. The placement stage is very risky because at this stage the
susceptibility of the money launderers to get caught is very high. A number of ways can be
utilized for the purpose of placing the proceeds of crime and some of the common methods
include currency smuggling, gambling, loan repayment, currency exchanges, etc.1 The limitation
of this stage provides that the modern day crimes make the use of sources through which the
cash is not required to be placed into the financial system such as bribe payments by wire
transfer and proceeds of insider dealing.
The Layering Stage- This is the next stage which is often named as structuring. This stage is
regarded to be the most challenging stage and involves the worldwide movement of funds. The
main motive behind this stage is to detach the illegitimate money from its source. This task is
performed with the help of sophisticated layering of the financial transactions that can be
concealed from the audit trail. During this stage, the funds are moved by the money launderers
electronically from one country to other and then divided into investments placed in overseas
markets and advanced financial options2. Moreover, such funds are constantly moved for
escaping detection along with exploiting the loopholes of legislation3. However, the limitations
1 Dionysios S. Demetis. Technology and Anti-money Laundering: A Systems Theory and Risk-
based Approach (UK: Edward Elgar Publishing 2010), 12.
2 Colin King et. al., The Palgrave Handbook of Criminal and Terrorism Financing Law (Cham:
Springer, 2018) 168.
3 Doug Hopton. Money laundering: A concise guide for all business (Gower, 2016), 6.

ANTI- MONEY LAUNDERING 3
of this type of analysis provides for the failure in considering the dangers of passive relationships
where such kinds of transactional somersaults are not conducted by the criminal proceeds.
The Integration Stage- In this stage, the money returns back to the criminal from legitimate
sources. After placing and layering of the cash, it is fully included into the financial system and
therefore, can be utilized for meeting any purpose. The basic aim of this stage is to return the
money back money launderer in a way such that it appears to result from a legitimate source and
do not draw the attention of the authorities. However, this stage does not have any basis because
this stage is inseparable from the laundering activity which precedes it.
The basic problem with the model is that it frames money laundering too narrowly and creates a
mental picture that it encourages the possibility that brokerage or banking relationship in which
placement, layering or integration activity will be above suspicion, however it can even be toxic.
Answer b
Financial Action Task Force (FATF) is an inter- governmental body which works with the basic
motive to formulate and endorse guidelines at national and international levels, to fight with
money laundering and terrorist financing. It is therefore often regarded as the ‘policy making
body’ which performs the task of producing the needed political will for the purpose of bringing
about regulatory reforms and national legislative in specified areas. Mutual evaluations of its
members are conducted by FATF regarding their implementation of the FATF
Recommendations on an ongoing basis. This can also be regarded as peer reviews in which the
members of various countries are responsible for assessing another country. In- depth description
along with analysis of the system of the country is provided by the mutual evaluation report for
the purpose of preventing criminal abuse of the financial system along with further strengthening
its system with the help of focused recommendations to the country4.
Strictness is followed in the mutual evaluations and a country is regarded as deemed complaint
only in cases where it can prove this to other members. In simple words, there is an obligation on
4 “Mutual Evaluations.” FATF. Last modified. Last modified January 10, 2019. http://www.fatf-
gafi.org/publications/mutualevaluations/more/more-about-mutual-evaluations.html?
hf=10&b=0&s=desc(fatf_releasedate)