What are the 3 types of AML?

The three stages of Anti-Money Laundering (AML) are placement, layering, and integration. These stages describe the process by which illegally obtained funds are moved through various channels to obscure their origin and ultimately be used as legitimate money.

Stages of Money Laundering

1. Placement: This is the initial stage where illicit funds are first introduced into the legitimate financial system. This often involves breaking up large sums of money into smaller, less conspicuous amounts to avoid detection.

   • Example: Depositing small amounts of cash into various bank accounts.

2. Layering: This stage involves a series of complex transactions designed to obscure the audit trail and distance the money from its illegal source. These transactions can include wire transfers, purchasing monetary instruments (e.g., traveler's checks), or investing in shell companies.

   • Example: Transferring funds between multiple accounts in different countries, buying and selling stocks, or using shell companies to disguise ownership.

3. Integration: In this final stage, the laundered money re-enters the legitimate economy and appears to be from a legal source. The funds can then be used for various purposes, such as purchasing property, investing in businesses, or simply withdrawing the cash. This stage aims to make the funds available to the criminal without raising suspicion. It is also sometimes referred to as extraction.

   • Example: Using laundered money to buy a house, invest in a business, or purchase luxury goods.

Here's a table summarizing the stages: