Which of the following are the three stages of money laundering?

Correct option is A

The correct answer is (a) Placement, Layering, Integration.

Explanation

Money laundering is the process of making "dirty money" (illegal proceeds) appear "clean" (legitimately earned). This process is universally recognized to consist of three distinct stages:

• Placement: This is the initial stage where illicit funds are first introduced into the financial system. It is considered the most vulnerable stage for criminals because they must find a way to deposit large amounts of cash without triggering anti-money laundering (AML) alarms.
• Common methods: "Smurfing" or "Structuring" (breaking large sums into smaller deposits), purchasing traveler's checks, or gambling in casinos.
• Layering: Once the money is in the system, the goal is to obscure the audit trail. The launderer engages in a complex series of financial transactions to separate the funds from their original criminal source.
• Common methods: Wire transfers between multiple accounts across different countries, using "shell companies," or trading in stocks and derivatives.
• Integration: This is the final stage where the "washed" money is reintroduced into the legitimate economy. The funds now appear to come from legal sources, allowing the criminal to use them for luxury purchases or business investments without raising suspicion.
• Common methods: Investing in real estate, purchasing high-value assets (art, yachts), or creating fake business loans/salaries.

Information Booster:

The Prevention of Money Laundering Act (PMLA), 2002 was enacted to tackle this cycle specifically. Section 3 of the Act defines the offence of money laundering as being involved in any of these stages—whether it is the acquisition, possession, or the act of projecting the proceeds as untainted property.

Key PMLA Milestones:

• Predicate Offence: Before laundering can happen, a crime must be committed (e.g., drug trafficking, corruption). Under PMLA, these are called "Scheduled Offences."
• Burden of Proof: Under Section 24, once a person is accused of money laundering, the burden of proving that the proceeds are "untainted" lies on the accused, not the prosecution.
• Enforcement Agency: The Enforcement Directorate (ED) is the primary agency responsible for investigating these three stages in India.