What Does Layering Mean in Money Laundering?
Scammers and fraudsters need to launder their illegally acquired funds into the financial system to truly profit from their criminal activity. For them, the initial crime is just the beginning and the act of converting the ill-gotten funds into a legitimate source is the most complicated process. We call this process Money Laundering and the criminals launder the funds into the economic system through different stages layering is the most complex of the three stages of money laundering.
In this post, we describe how layering in money laundering works, and how an effective anti-money laundering (AML) framework can help organisations identify these transactions sooner. AML consultants in Dubai can help strengthen your AML framework. Read on to learn more about layering in money laundering:
What Are the Three Stages of Money Laundering?
Layering is the second stage of money laundering preceded by placement and succeeded by Integration. In the first stage (placement), the money gained from illegal sources is introduced into the economic system. In the second stage (layering), the illicit funds are moved around to disguise their origin. In the final stage (integration), the criminal retrieves the illegitimate funds, which by now are covered in layers of legitimacy that the source has become untraceable.
What Is Layering in Money Laundering?
Layering is the second stage of money laundering where the criminals add successive layers of legitimacy to the initially placed funds. In the layering stage, the origins of the funds are concealed by moving them around in a series of bank transfers or financial transactions. The funds are moved, dispersed, and disguised to minimise suspicion or prevent detection from law enforcement.
Typically, the funds will be broken down into smaller transactions and transferred overseas to keep the money moving globally and prevent the authorities from tracking the finances easily. Criminals achieve this through various methods such as electronic transfers between countries, using shell companies, moving funds between several banks and moving funds between multiple accounts within an institution. Avail of AML consulting services in Dubai to develop a framework against money laundering.
What Are the Red Flags Pointing to Layering in Money Laundering?
Businesses need to train their employees to detect layering early on while onboarding new customers. However, criminals use sophisticated typologies to hide the origins of their funds, which will make it tough for organisations to detect acts of money laundering. The following indicators of possible layering in money laundering. Some of them are:
- High transactions volumes that involve precise, rounded-off amounts
- Funds deposited and withdrawn from accounts at high speeds
- High volumes of funds are transferred between multiple accounts within a single bank
- High frequency of wire transfers to and from accounts
- Funds being transferred to and from high-risk countries, or between high-risk accounts
How Can Businesses Detect Layering in Money Laundering?
If layering goes undetected, it will be difficult for organisations to track the source of the funds. Criminals always come up with new typologies to disguise the origin of their ill-gotten funds. Businesses need to stick to the core elements of the AML framework in the UAE to counter any act of layering. The following are the core AML elements:
Know Your Customer
This is the initial stage in AML where an organisation confirms the identity of a new customer and establishes its risk level. You can learn more about the KYC process by consulting with AML advisers in Dubai, UAE.
Transaction monitoring involves monitoring a customer’s financial activities. This is the stage where layering activities are most likely to be identified.
Filing Suspicious Activity Reports & Suspicious Transaction Reports
Filing Suspicious Activity Reports (SARs), or Suspicious Transaction Reports (STRs), is a legislative requirement for financial institutions (FI) and Designated Non-Financial Businesses and Professions (DNFBPs) such as real estate agents, dealers of precious metals and stones, auditors, and trust & corporate services providers. STRs and SARs assist law enforcement in detecting criminal actors and preventing the flow of illicit funds through the UAE financial system.
Hire the Best AML Consultants in Dubai, UAE
Detecting complex acts like layering 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.