Acca aaa s21 Notes

Note that the examples of the threats to which these safeguards may be applied cannot include 
any of the threats in Solution 1.
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Chapter 5
MONEY LAUNDERING
1. Introduction
Money laundering is a process whereby the proceeds of criminal activity are converted into assets 
appearing to have a legitimate origin.
Dirty money is made clean-looking. The money typically comes from extortion, drugs, prostitution, 
illegal gambling, illegal arms sales and people-trafficking. Criminal property may also arise from tax 
evasion.
2. The stages of money laundering
The process of money laundering can be described in the following three steps:
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Placement
: this is the process of introducing the money into a legitimate business activity so 
that its origins appear bona fide. Methods include:
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Blending funds: mixing the dirty money with legitimate cash such as boosting the cash 
takings of a business. Tax will have to be paid, but that’s a small price if the remainder of the 
money is safe-guarded.
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Gambling: winnings are artificially increased and this can be used to explain the source of the 
funds.
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Currency smuggling: move the cash to a lax jurisdiction where few questions will be asked.
You will notice that cash transactions facilitate placement because cash is relatively difficult to 
trace compared to bank or credit transactions
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Layering:
repeated transfer of money through different bank accounts and different countries 
in an attempt to conceal or camouflage its origins. That way, even if the placement process 
becomes known to the authorities it becomes difficult for them to trace the cash and recover it.
๏
Integration:
the movement of previously laundered money into the economy so that the 
money can be safely used. Examples include the purchase of assets such as expensive cars and 
art works and jewellery.