What the three terms mean
Placement means introducing criminal funds or assets into the financial system. Layering means moving or disguising them to conceal their origin. Integration means making the value available for use with an appearance of legitimacy.
These terms describe a common model. They do not make criminal proceeds lawful. They also do not define every element of a money laundering offence.
Sources: AUSTRAC: Printed pages 10 to 11 and 28: laundering cycle and scam proceeds; AUSTRAC: Money laundering.
- Placement
Criminal funds enter the financial system.
- Layering
Activity conceals the origin of funds.
- Integration
Value becomes available with an appearance of legitimacy.
Three functions, not a required sequence
The model describes common functions. A business can see only part of the activity, and an offence does not require a completed cycle.
Separate evidence questions. An answer to one does not settle the others.
Why the sequence has limits
AUSTRAC’s 2024 risk assessment explains that scam proceeds can already be within the financial system. A business may see only part of a wider pattern. It should not require evidence of three separate stages before it examines a concern.
Australian money laundering offences can concern dealing with criminal property. A completed cycle is not a universal condition. Use the legal definition and the facts relevant to the service.
Sources: AUSTRAC: Printed pages 10 to 11 and 28: laundering cycle and scam proceeds; AUSTRAC: Money laundering.
Example: one part of a payment history
A fictional customer describes a payment as business income. The supplied records do not explain the payer’s connection to that business. The reviewer records this gap and follows the approved process.
The reviewer cannot see earlier or later transfers. They do not assign a stage without evidence. They also do not treat the missing history as proof that the payment is lawful.
Sources: AUSTRAC: Printed pages 10 to 11 and 28: laundering cycle and scam proceeds; AUSTRAC: Money laundering.
Use the model to ask better questions
Identify the payment, parties, stated purpose and supporting records. Explain which fact needs clarification. Record what remains unknown. Use the money laundering and ongoing CDD articles for the legal and operational questions that follow.
Sources: AUSTRAC: Printed pages 10 to 11 and 28: laundering cycle and scam proceeds; AUSTRAC: Money laundering.