Money Laundering
What money laundering is, the three stages of laundering, and how KYB helps prevent it.
2 min read
Money laundering is the process of making illegally obtained money appear legitimate by disguising its criminal origin.
The Three Stages
1. Placement
Introducing illicit cash into the financial system:
- Cash deposits below reporting thresholds (structuring)
- Currency exchanges
- Cash-intensive businesses (restaurants, car washes)
- Gambling (buying chips with cash, cashing out “winnings”)
2. Layering
Creating complex transaction trails to obscure the source:
- Multiple transfers between accounts
- Shell companies and nominee owners
- Cross-border transactions
- Trade-based laundering (over/under invoicing)
3. Integration
Returning cleaned funds to the launderer as legitimate income:
- Real estate purchases
- Luxury goods
- Business investments
- Loan repayments
Scale of the Problem
- Estimated 2-5% of global GDP laundered annually
- $800 billion to $2 trillion per year
- Enables drug trafficking, terrorism, corruption, fraud
How KYB Fights Money Laundering
KYB targets laundering at multiple points:
| KYB Activity | Anti-Laundering Effect |
|---|---|
| UBO verification | Exposes true parties behind shell structures |
| Sanctions screening | Blocks known bad actors |
| PEP screening | Identifies corruption risk |
| Ongoing monitoring | Detects suspicious patterns |
Without knowing who truly controls a business, financial institutions cannot effectively prevent money laundering.
Related: AML | Shell Company | SAR | CTR