Have you ever wondered how bad guys hide the money they make from holding someone up or selling illegal drugs?
A former FBI agent states, “Placement is the hardest part to find because it uses cash, and it is what criminals like to use.” This article will discuss what the Placement stage of money laundering is and how that works.
We’ll describe the common means by which launderers place money in places, the kinds of stores they like to use, and why it is so difficult for law enforcement to identify suspicious deposits.
It will help businesses avoid inadvertently enabling a placement scheme, in addition to any sanctions for knowingly allowing it to occur in the first step.
Sources of illegal funds
Bad guys earn their dirty money from several bad things, like selling drugs, stealing, or scamming people online.
In the placement stage of money laundering, this illegal money must be entered into the regular financial system. Some common sources include drug deals, robbery, identity theft, and phishing scams.
According to the United Nations Office on Drugs and Crime, around $800 billion to $2 trillion are laundered around the world annually.
Regardless of where it originated, the dirty cash is put into AML laws. More money must be spent on it than on regular money.
Bonus: Check our tools and resources to help strengthen controls and compliance for your organization over placement in aml.
Common placement methods
During the placement stage, criminals have several methods of trying to get dirty money into the legitimate money stream. The whole goal is to transform dirty money into clean paper or electronic money tracks between the money laundering placement stages.
- Direct cash deposits: Dirty cash is directly transferred into bank accounts. And that is illegal because it is likely to raise suspicions of money placement under the aml rules.
- Structuring deposits: These types of criminals break large sums of money into smaller deposits over time so that they do not go beyond the under-reporting limits. This is called “structuring.”.
- Others invest in high-value goods that easily find ready markets, such as gold or prepaid cards, instead of putting the money directly into the bank. This washes the ill-gotten funds off their illegal origins.
- The Internet: Thieves have a placement made online via digital currencies, including Bitcoin or remittance services.
Places for placement deposits
Launderers look for venues in which to carry out the placement stage of money laundering by making illegal cash deposits without notice.
There are some prosaic venues and small storefronts, such as corner grocery shops, because they tend to conduct so much cash business daily.
Others try to make use of money transfer businesses such as Western Union to transfer funds from one placement stage to the next.
A report from 2023 showed over $6 billion was passed through these types of businesses. The companies remain open to such wrong uses.
Disguising money trail importance
During placement, the dirty money must appear clean and come from a legal source. If law enforcement can trace the money laundering stages back, big penalties could occur.
In 2023 alone, the U.S. Department of Justice seized more than $1.6 billion in criminal proceeds connected to money laundering schemes.
This is why money launderers use different deposit amounts and accounts to break the money laundering placement money trail.
Moving funds between many locations and people makes it harder to detect which transactions are actually from illegal sources.
Covering tracks is very important because if the money can be traced, then whole money laundering networks are busted by police for this reason.
Detective work difficulties
In the first placement step of money laundering, it’s hard to catch the bad guys because law enforcement agencies have to track down cash deposits.
The money cannot be traced back. The detectives need to connect these deposit transactions to later steps.
Small deposits are made by criminal networks that split their dirty funds into many sums of less than $10,000.
They do this to avoid being traced and also to avoid being reported to the banks. This kind of fragmentation makes it complicated to trace transactions.
Cases often cut across different businesses and countries. The huge detective work that will be required in tracing the placement phase complicates uncovering and stopping these crimes. The FATF revealed that about 80%illegal funds cannot be detected easily at this stage.
Technology helps track placement.
New finance tech tools have improved the ability to detect money laundering placement. Systems can analyze larger transaction datasets using email templates, enabling institutions to streamline communication and reporting processes.
Systems can identify changed spending, unusual deposit behaviors, and other “red flags” indicating dirty money.
Complex networks concealed in anti-money laundering data can be recognized by AI. There are estimates that financial institutions process up to 500 million transactions daily.
This way, they become able to detect anomalies better. These advances in technology give governments more choices to remain ahead in the fight against dirty cash.
Preventive measures for businesses
- Obey the KYC process. Verify IDs and check for suspicious activity when putting in money.
- Monitor transaction policy. Maintain red flags, which include multiple small placements that point towards the money laundering scheme.
- Train employees about signs of placement in aml. Report any concerns right away.
- Coordinate with AML officials. Investigate placement inquiries promptly. Demonstrates a high-quality commitment to preventing dirty funds.
