Layering
Definition
The second stage, designed to sever the audit trail between the illicit source and the funds. Layering typically involves a rapid series of transfers across multiple accounts, entities, and jurisdictions, wire transfers to correspondent banks, currency conversions, and round-tripping through offshore entities.
- Stage of
- Money laundering (second of three stages)
- Preceded by
- Placement
- Followed by
- Integration
- Common techniques
- Multiple transfers, currency conversion, offshore round-tripping
- Purpose
- Sever audit trail from illicit source
Common questions
What makes layering harder to investigate than placement?+
Placement involves a single identifiable point where illicit cash enters the financial system, but layering deliberately fragments funds across many accounts, entities, and jurisdictions to obscure that link. Investigators must reconstruct a chain of transactions that may cross multiple banks and legal systems, each with different disclosure rules.
How do investigators try to trace funds through the layering stage?+
They typically follow the money through bank records, wire transfer messages, and correspondent banking relationships, looking for patterns such as rapid pass-through transactions, round-number transfers, or structuring designed to avoid reporting thresholds. Cross-border cooperation and mutual legal assistance requests are often needed once funds move offshore.
Related terms
- Integration
- The third stage, in which laundered funds re-enter the legitimate economy as apparently clean wealth. Common integration mechanisms include real estate purchases,...
- Placement
- The first stage of money laundering, in which illicit cash is introduced into the financial system. Methods include cash deposits, currency exchange,...
- Trade-Based Money Laundering (TBML)
- A typology that uses international trade transactions to transfer value across borders. Mechanisms include over-invoicing or under-invoicing goods, falsifying quantities or descriptions,...
- Beneficial Owner
- The natural person who ultimately owns or controls a legal entity or arrangement, as distinct from the nominee or registered owner. Anti-money-laundering...
- Shell Company
- A legal entity with no genuine business operations, created to receive fraudulent payments. In vendor fraud, the fraudster controls the shell and...
- Smurfing (Structuring)
- Breaking a large cash sum into multiple smaller transactions, each below the mandatory reporting threshold, to avoid triggering Currency Transaction Reports or...
- Structuring (Smurfing)
- A placement-stage technique in which large cash amounts are broken into multiple smaller deposits or transactions, each deliberately kept below the threshold...
Explained in these topics
- Money Laundering: Placement, Layering, and IntegrationThe second stage, in which placed funds are moved through a series of transactions, entities, and jurisdictions to obscure the paper trail connecting them to t...
- Money Laundering Typologies and Audit Indicators