Placement

Placement, in anti-money laundering usage, is the first stage of money laundering: the point at which the proceeds of crime are first moved into the legitimate financial system. In most cases the proceeds start as cash from drug sales, theft, fraud or other offences, and placement converts that cash into bank balances, payment instruments, assets or stored value that can later be moved electronically.

Placement is the first of the three classic money laundering stages, followed by layering, which hides the trail, and integration, which returns the funds to the criminal as apparently clean wealth. Because placement is when illicit money first touches a regulated business, it is usually the stage at which criminals are most exposed, and much of the design of anti-money laundering controls, from cash reporting to customer identification, is aimed at it.

Large quantities of cash are bulky, conspicuous and hard to use for big purchases. A criminal group earning cash every day needs a way to turn it into money that can be wired, invested or spent without attracting attention. At the moment of placement the link between the money and its source is still direct: the person depositing the cash is often close to the crime, the amounts may not match any known income, and the money has not yet been mixed with legitimate funds.

For this reason many legal systems require financial institutions to identify customers, record large cash transactions and report suspicions at the point money enters. In the United States, for example, banks file a currency transaction report for cash transactions of more than $10,000 in a business day, a rule that criminals try to avoid by breaking deposits into smaller amounts.

Placement techniques vary with the local economy and the controls in force, but several recur in case studies and typology reports:

• Structured deposits. Cash is split into amounts below reporting thresholds and paid into many accounts or branches, a practice known as structuring or smurfing.
• Cash-intensive businesses. Restaurants, car washes, retail shops and similar businesses mix criminal cash with genuine takings and bank the total as sales.
• Money mules. Recruited individuals deposit cash or receive funds into their own accounts and pass them on, often as part of a money mule network.
• Purchase of monetary instruments and stored value. Cash is used to buy money orders, prepaid cards, gift cards, casino chips or cryptocurrency through cash-accepting brokers or machines.
• Smuggling cash abroad. Cash is carried across borders by a cash courier and placed in a country with weaker controls.

Placement is not limited to cash. Where the crime itself produces electronic funds, such as online fraud or ransomware, the first step of receiving the money into an account or wallet the criminal controls plays the same role, and the techniques shift towards mule accounts, payment apps and crypto exchanges.

Banks and other regulated firms detect placement mainly through customer due diligence and transaction monitoring. Due diligence establishes who the customer is, what the business does and what activity is expected, so that unusual cash volumes stand out. Monitoring systems then look for patterns such as repeated deposits just below a threshold, cash deposits at many branches on the same day, cash turnover far above the level expected for a business of that size, or deposits followed quickly by outgoing transfers.

When staff or systems identify such activity, the firm investigates and, if suspicion remains, files a suspicious activity report with the national financial intelligence unit. Shops, casinos, dealers in high-value goods and other designated businesses carry similar duties in many countries, because criminals move to sectors where cash is accepted with fewer questions.

The FATF recommendations do not prescribe a single placement rule, but several of them target it directly: customer identification, record keeping, reporting of suspicious transactions, controls on cash couriers through declaration or disclosure systems, and the extension of duties to casinos and dealers in precious metals and stones. National laws then add cash limits, reporting thresholds and sector-specific rules.

The placement, layering and integration model is a teaching framework rather than a description of every case. Some laundering schemes skip placement entirely, for example when funds are already in the banking system as a result of corruption, tax evasion or fraud on a company. Others carry out placement and layering in a single step, as in trade-based money laundering. Investigators therefore use the stages as a guide to where controls should sit, not as a checklist that every case must fit.

• Financial Action Task Force