Money laundering theories

Money laundering theories explain how illicit money is processed to appear legitimate. Generally, there are three steps: placement (introducing illegal funds into the financial system), layering (concealing the origin through complex transactions), and integration (making the money seem legally earned). Different theories focus on how these steps occur, such as using offshore accounts, shell companies, or complex transactions to obscure the illegal origin. Understanding these theories helps law enforcement detect and combat money laundering by recognizing common methods and transaction patterns used to disguise illicit funds.