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Money laundering, as you’re likely well aware by now, has everything to do with turning illegally obtained (aka “dirty) funds into “clean” money. Those ill-gotten monies are procured from a variety of criminal sources that include:
The sale of illegal drugs
Other sources like insider trading
In a nutshell, money laundering can have significant and detrimental effects on economies around the world.
That said, injecting large amounts of capital into the marketplace is not quite as simple as unloading giant bags of cash in an I’ll-take-one-of-everything kind of move, like during a giant shopping spree at the nearest mega-mall or luxury boutique. As you might imagine, suspicious activity like that is liable to raise more than an eyebrow.
So today, we’re focusing on the process of money laundering: that is, once the funds are obtained, how do they actually get into the financial system? Here’s what we’ll go over:
The stages of money laundering
How money laundering works
What can be done to prevent money laundering
The reasons your company needs anti-money laundering compliance training
Why Ethena rises to the top of the pile as an AML training resource
The stages of money laundering
To launder money successfully (aka, infuse dirty cash into a legit financial system), three stages have to occur:
- The placement of the funds into the economy
- A series of financial transactions known as “layering” to cover the trail
- And finally, integration of said funds back into the marketplace
So let’s dive in!
How does money laundering work?
The name of the game here is disguising those illegal financial gains. It can happen in many ways, so we’ll explore in depth how money laundering typically works below.
What are the 3 stages of money laundering?
As noted above, the process of money laundering takes place in stages. Here’s an overview of each:
Stage #1 of money laundering: placement
Placement is when illegally gained money is injected or placed into the financial system. This may happen with a series of regular, small incremental deposits at banks or through the purchase of money orders and checks. Once the money is placed into the banking system, those deposits can be spent at cash-intensive businesses like casinos, convenience stores, or car washes.
Stage #2 of money laundering: layering
Layering is like it sounds; a way to cover one’s tracks — by converting criminal proceeds into another form to hide their origin. It can often be done through complex layers of financial transactions stacked atop each other.
Some examples include:
Wiring money to other bank accounts
Using money as payment for goods and services
Cashing out purchased chips at a casino
Investing money into the stock market
These are all “legitimate” transactions, and the chances of those funds being identified as illegitimate shrink considerably.
Stage #3 of money laundering: integration
Integration is when you use those newly laundered funds in “regular” transactions so they can fully reenter the economy undetected. This can be done by making high-end purchases such as:
Or your average yacht
Large purchases may seem above board (pardon the pun), but they make distinguishing between legal and illegal money during the transaction monitoring process all the more difficult.
What protocols should be in place to prevent the stages of money laundering?
By now, one thing is abundantly clear: No legitimate business operation wants any such sordid financial activities taking place on their watch. So what’s a law-abiding business to do?
We’ve written previously on how to prevent money laundering, but there are of course other precautionary measures that can be taken, such as:
Appointing an AML officer within your company as a resource
Staying up-to-date on financial laws, frameworks, and regulatory procedures globally
Know Your Customer (KYC) practices
Implementing software that tracks and monitors transactions (which we’ve written about previously)
Effective (and configurable!) Code of Conduct training
But in addition to protocols like the ones above, one of the best resources is an internal one — your employees. Arming your workforce with up-to-date AML training helps ensure that everyone is aware of the pitfalls (and solutions), and they can actively help the company steer clear of money laundering traps.
Why you need AML compliance training at your bank or fintech company
It’s inarguable that AML training is an essential part of being in the business of finance, but to really drive that fact home, here are three additional reasons:
1. It’s required for companies in the financial services space
If your company manages large financial transactions, it’s legally mandated that your employees take AML compliance training — making it easier to ensure that everyone, from senior leadership to new hires, is well-equipped to address money laundering concerns.
And while this has always applied to banks and other financial institutions, industries like fintech are also subject to AML laws. Companies that handle large chunks of capital like real estate, gaming, and high-end assets, to name a few, are money-service businesses (MSBs) and qualify as financial institutions.
(Curious whether your company makes the cut? You can publicly access the full list of registered MSBs to see whether a given company is registered with FinCEN.)
2. High-risk transgressions equate to high liability
Anti-money laundering fines are substantial. With so many zeroes attached to such a fine figure, companies need all the external support (like effective training!) they can get.
Top that off with the awareness that governments have prioritized going after money laundering schemes, and it’s clear that watchful eyes are everywhere.
3. Set that standard high and meet industry expectations
Today, making compliance efforts is all the more essential and a standard of being a responsible business. In fact, many proactive businesses set the bar high, often expecting their partners and counterparties to meet the same AML standards they adhere to. And that includes instituting and maintaining a robust AML program.
So even if your company isn’t currently registered as an MSB, if it does business with corporations that are, the lack of an AML program could still hold you back. Plus, it’ll make both your workforce and your clients breathe easier.
What makes Ethena’s training work?
Don’t just take our word for it — between the positive reviews from our learners and tapping into the expertise of those in the field, Ethena has demonstrated a commitment to creating effective AML training.
Making actually effective is why we were founded. Because for all the hours our founders have had to sit through mandated harassment prevention training — you would think the typical workplace would be harassment free? (It’s unfortunately not, but we’re on a mission to fix that!)
But back to AML training.
Over a million learners like our content (they told us so)
We promise, we’re not just over here tooting our own horn. We’re privileged to be the training of choice for a ton of great companies, like Robinhood and Carta. And, we’re proud to say that over a million employees have shared that they find our courses compelling and effective — including our recently launched AML training!
It’s relatable, easy to understand, and compelling
At Ethena, we don’t just regurgitate reams of legal jargon in the hopes that our learners look up the definition of every other word. We present real-world scenarios in the world of money laundering, plus accessible solutions for combating these issues.
Then we arrive at these foundational tools by working with subject matter experts who sign off on the authenticity and accuracy of everything we present.
Your company’s policies get central placement
We recognize that in addition to the laws and regulations covered in Ethena’s AML compliance training, your company has its own recommended trainings, procedures, and guidelines that employees must adhere to.
With our newly created Training Uploader feature, you can now give your in-house training and policies primetime placement. Pop them into our Ethena platform, auto-assign your homegrown trainings, and monitor your employees’ completion rates with ease.
Ethena’s Training Uploader feature can house and distribute your training