🔹 Definition
Placement is the first stage in the money laundering process, during which illicit funds are introduced into the financial system or economy, typically in a way that disguises their illegal origin. The goal of placement is to convert large amounts of criminal cash into less conspicuous forms, such as deposits, investments, or purchases of goods and services.
This stage is often the most vulnerable to detection and is therefore a primary focus in AML (Anti-Money Laundering) compliance frameworks.
🔹 Frequently Asked Questions (FAQs)
Q1: What are common methods used during the placement stage?
- Structuring (smurfing): Breaking large sums of cash into smaller deposits to avoid reporting thresholds
- Cash-intensive businesses: Co-mingling dirty cash with legitimate revenue
- Casino gambling: Buying chips with cash and cashing them out later
- Real estate purchases: Paying upfront using illicit funds
- Bank drop deposits: Using third-party accounts to distribute funds
- Currency exchanges or money remittance services
Q2: Why is placement considered high-risk?
- It involves the physical movement of illicit funds
- Cash is difficult to trace and easy to inject into vulnerable financial institutions or informal channels
- It creates an initial link between criminal activity and the financial system
- Once placed, funds can be layered and integrated, making recovery more difficult
Q3: What controls help detect and prevent placement?
- Transaction monitoring for unusual cash activity
- Cash transaction reporting (CTR) above jurisdictional thresholds
- Know Your Customer (KYC) and Enhanced Due Diligence (EDD) on high-cash clients
- Flagging and investigating frequent small deposits (structuring)
- Risk-based customer profiling for cash-heavy businesses (e.g., bars, car washes, pawnshops)
Q4: How does placement differ from layering and integration?
- Placement: Introduction of illicit funds into the system
- Layering: Concealing the origin through complex movements and transfers
- Integration: Reintroducing the funds into the legitimate economy, appearing clean
Together, these stages form the classic three-step money laundering model.
Q5: Are there digital forms of placement?
Yes. While traditionally associated with physical cash, modern placement methods also involve:
- Prepaid cards, crypto ATMs, or digital wallets
- Use of online gambling or gaming platforms
- Transfer into unregulated fintech platforms or virtual assets exchanges without strong KYC
