There is no doubt that digital currencies provide benefits for an individual, a company and an institution by facilitating better access to financial products and services.
Money laundering costs the global economy between $800 billion and $2 trillion annually, according to a United Nations report. This amounts to 2%–5% of the global gross domestic product. Today, more than 90% of money laundering still goes undetected. Developments in technology, however, have resulted in newer and faster tools. Criminals use these advancements to continue laundering money. At the same time, government authorities and fintech companies leverage technology to identify transaction attributes and help to expose fraud.
- Placement as a starting point: a movement of cash from its source. Money is placed into circulation within the existing money system by going through intermediaries, such as financial institutions, casinos, shops and currency exchanges. Examples of these activities include currency smuggling out of a country, bank complicity, currency exchanges, purchase of assets and so forth.
- Layering. In the second stage, the objective is to make it challenging to uncover the activity of money laundering. To do so, criminals have to layer their spending and make the trail of illegal money difficult to identify. This usually happens by converting cash into monetary instruments or buying assets with illicit funds to resell them.
- Integration. This is the final stage of money laundering where laundered money goes back into the economy through the banking system and is, therefore, considered to be “clean.” Methods include but are not limited to property dealing, front companies, foreign banks and false invoices.
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