Anti Money Laundering and Compliance

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Money laundering is the method of converting illegal money into legal tender. This happens when money is obtained through extortion or robbery or drug sales or through any other illegal means. Naturally, money laundering is mostly used by people in illegal business…

Introduction


Money laundering is executed in three steps normally. The first one is the placement which involves disposal of the funds obtained illegally through some other means. This is primarily handling cash. The second stage of money laundering is normally called the layering when the cash gets involved in multiple modes of transactions. This would make tracking back money or source a problem and cause confusion in the audit trails. The third stage is the one when the money laundered merges with the normal economy and integrates with the financial system as if it is sourced from normal business. This is normally called the Integration stage. Invariably, at one of the stages, money enters the banks and money laundering could be caught at this point in time.
Money laundering is done using various mechanisms which have their own names. Some are called the 'star burst', when the money is deposited in one account and is immediately distributed to a number of other accounts losing slowly the trace of the money2. The second method employed is called the boomerang. In this method, the deposit is done in one account and then passes on to another account soon after. From there it goes on a third and so on until it comes back to the original account where it started. Countering all these and an innumerable number of other creative methods that are adopted by launderers is certainly a challenge. ...
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