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How is money laundered?

In the initial stage of money laundering, the launder introduces his illegal profits in to the financial system .This might be done by breaking large amounts of cash in to less conspicuous smaller sums that are then deposited directly in to a bank account, or by purchasing a series of monetary instruments (cheques, money orders etc) that are then collected and deposited into accounts at another location.

After the funds have entered the financial system, the second or layering stage takes place. In this phase the launderer engages in a series of conversions or movement of the funds to distance them from their source. The funds might be channeled through the purchase and sales and investment instruments or the launderer might simply wire the funds through a series of accounts at various banks across the globe. This use of widely scattered accounts for laundering is especially prevalent in those jurisdictions that do not co-operate in anti money laundering investigations. In some instances the launderer might disguise the transfers as payments for goods or services thus giving them a legitimate appearance.

Having successfully processed his criminal profits through the first two phases of the money laundering process, the launderer processes then moves them to the third stage-integration- in which the funds re-enter the legitimate economy .The launderer might choose to invest the funds in to real estate , luxury assets, or business ventures.