Stages of Money Laundering: Key Insights on Placement
Complying with the UAE’s Anti-Money Laundering (AML) laws is critical for financial institutions Designated Non-Finance Businesses & Professions (DNFBP) and Virtual Assets Service Providers (VASPs) to fight off the risk of money laundering. Money Laundering is the process of making large amounts of dirty money appear to have come from a legitimate source. The process of money laundering involves three stages: Placement, Layering and Integration.
Among the three stages, Placement is highly critical as criminals inject ill-gotten money into the system at this stage. If businesses are unaware of the three stages of money laundering, they may unwittingly become part of the money launderer’s ploy. AML consultants in Dubai can equip you with sufficient AML knowledge so that you can detect suspicious transactions early on.
Here is everything you should know about placement in money laundering:
Placement is the first stage of Money Laundering
Placement is the first stage of the money laundering process, where illegal funds are surreptitiously introduced into the financial system. Criminals do this to make the funds appear legitimate
Placement involves the physical transfer of cash
Placement usually involves the physical transfer of cash from the source of the illegal funds to a financial institution or other location where the funds can be deposited.
Criminals use various Placement methods
Placement methods can vary widely and may include depositing cash into a bank account, using money orders, buying assets such as real estate, or investing in businesses. Some of the most commonly seen methods are as follows:
- Smuggling of illegitimate cash or liquid monetary instruments.
- Mixing illegal proceeds with legitimate proceeds, such as ill-gotten funds infused into the cash-intensive grocery business.
- Repaying debts through illegitimate proceeds.
- Buying stored value cards with illegitimate money.
- Depositing small amounts into several bank accounts to evade reporting threshold. It is also called smurfing, one of the most common money laundering techniques.
- Buying foreign currency with illegitimate funds.
- Cash purchase of a security or insurance.
- Invoice fraud – over-invoicing or under-invoicing
Involves breaking up large sums of cash
Criminals often break up large sums of cash into smaller amounts to avoid suspicion. Financial institutions and DNFBPs (auditors, real estate agents, dealers of precious metals and stones, trust and corporate service providers) need to put in place strong KYC procedures to detect this. AML consulting services in Dubai can help you with this.
Placement requires the cooperation of financial institutions
Financial institutions are often unwittingly involved in the placement stage of money laundering. Criminals may use bank accounts or other financial products to place their illegal funds.
Placement is often the most difficult stage to detect
Because placement involves the physical transfer of cash, it can be difficult to detect. Criminals may use a variety of methods to conceal the source of the funds, such as using shell companies or fake identities.
Placement is a criminal offence
Placement is illegal, and those involved in the placement of illegal funds can be charged with money laundering.
Anti-money laundering regulations aim to prevent the placement
Governments around the world have implemented anti-money laundering regulations to prevent the placement of illegal funds. Financial institutions are required to monitor their customers’ transactions for signs of suspicious activity. The UAE also has strong AML laws to prevent the menace of money laundering.
Strategies to Intercept Placement in Money Laundering
Since the criminals make the financial institutions a part of the process, Placement is hard to detect. However, Placement can be detected if you build a strong AML Department within the organisation. Your AML team needs to have Customer Due Diligence (CDD) and KYC protocols in place to screen customers early on. If you dig up any suspicious names or accounts at this stage, they must be reported to the supervisory AML authorities in the UAE.
If the account shows no owner or is under a third party, the CDD/KYC team should continue with the investigation. If this process also yields no result, the CDD team must continue one step further. From here, the AML team should try to find all ties from the account to check for relationships with accounts on a watch list. AML advisers in Dubai can provide robust assistance in this regard.
Hire the Best AML Advisers in Dubai, UAE
Detecting Placement in money laundering can be a tightrope walk for businesses. However, hiring the best AML consultants in Dubai Jitendra Chartered Accountants (JCA) can be your best defence against money launderers and financiers of terrorism. JCA provides robust AML consulting services in Dubai that will enable you to ensure AML-CFT compliance without any hassle. We provide services such as implementing AML Policy and Procedures, assessment of tools and controls design, review of current AML Policy, planning of AML-CFT framework, AML audit and reporting, AML training for the staff, Assistance with goAML registration and AML penalty appeal services.