Black money is first brought into the financial system at the stage of placement which is a phase of the money laundering process where the main objective is to separate it from its respective origin. Scammers who are involved in performing the money laundering try their level best to evade the possibility and point of getting discovered by some law enforcement as the money is linked to the illegal sources.
What are the techniques Employed During the Placement Phase?
Money launderers are more prone to employ a variety of strategies and the most popular techniques among them are explained as follow:
Structuring (Smurfing): Smurfing is also called structuring which can be defined as a technique that is utilized to avoid getting hit by the reporting criteria through dividing the big sums of money into smaller amounts respectively. This whole practice has the ability to make the outlook of the transaction less noticeable in its nature. Let us take an example of a money launderer who might deposit several tiny amounts into various bank accounts over the span of different time.
Cash Intensive Businesses: Scammers might mix the money that is gained through illegal means with the legal revenues simply through establishments of the ventures like restaurants, casinos, or retail outlets that frequently handle significant sums of cash on a regular basis. Practice of such a sort makes it more difficult for the law enforcements to distinguish between the clean and dirty money at the same time.
Currency Exchange: Trail of unlawful cash might be masked through converting them into other foreign currencies or by employing currency exchange services in the respective country as well. Arrangements of such a nature are frequently carried out in the countries who have weak anti money laundering laws in order to escape from the tight legal proceedings.
Bank Deposits: Another popular strategy is making cash deposits into the banks and particularly in the areas where there are laxer anti money laundering regulations as compared to other jurisdictions. Oftentimes, funds might be moved to the different accounts or further utilized for the additional activities of money laundering once they manage to enter into the banking system.
Cash couriers: Another method of transferring the illegal payments is simply through physically moving the cash across international boundaries as such an approach is still widely used around the world by the scammers. There is no doubt that it is one the most dangerous of all due to border controls and customs inspections but scammers still manage to perform it well at the same time.
What are the difficulties in Identifying Placement getting done?
It is quite difficult to identify and stop the placement for a number of reasons and few of them are explained as follow:
High Transaction Volume: Millions of transactions do take place which are worth trillions in total that get further processed through the financial institutions and relevant law enforcements. It is more similar to trying to find a needle in a haystack than to find suspicious conduct when there is such a big volume to cater at the same time.
Money Launderers’ Sophistication: Scammers are always up whenever some change occurs which leads them to change their strategies as well in order to get around anti money laundering regulations. They are more inclined to look for the legal gaps whenever some technological advancement takes place and utilize the unwary middlemen with the intention to tuck away their operations through various strategies.
Globalization: Transactions that are made cross border have been made quite easier through the interconnection of the world economy which has become another avenue for the money launderers to transfer funds between different countries as well.
Anti-Money Laundering Measures to Counter Placement
Financial institutions and regulatory agencies have already increased the variety of anti money laundering strategies with the purpose to counter the placement stage and few of them are explained as follow:
Cash Transaction Reporting: It has the chance to become a really difficult situation for the money launderers to deposit big sums of money covertly since there are many countries which ask for the reporting of cash transactions over a decided threshold respectively.
Training and Awareness: Institutions or organizations that are related to the field of finance can maintain the constant vigilance simply through teaching their staff members about the red flags and updated money laundering tactics as well.
Suspicious Activity Reports (SARs): Reports of such a sort are quite essential for spotting and looking for the operation that might get linked to the activities like financial crime or money laundering operations.