The Three Stages of Money Laundering: How Placement, Layering, and Integration Work in 2026

The Three Stages of Money Laundering: How Placement, Layering, and Integration Work in 2026

The three stages of money laundering revealed: placement, layering, and integration. Understand how each stage works and how businesses detect and prevent it.

The global scale of money laundering is vast. According to the United Nations Office on Drugs and Crime (UNODC), between 2 and 5% of global GDP is laundered each year, which amounts to between $754 billion and $2 trillion.

In most jurisdictions, ML is a serious crime punishable by imprisonment and/or significant fines. For example, in the USA, the penalty for involvement in money laundering can reach $500,000 or twice the value of the property involved in the offense, whichever is greater, and maximum imprisonment of up to 20 years, or both.

Failing to prevent money laundering can also be very serious, especially for businesses with regulatory Anti-Money Laundering (AML) obligations, such as financial institutions. Barclays Bank was fined £42 million (~USD57 million) in 2025 for AML failings, while TD Bank was hit with a historic penalty of $3 billion in 2024. This shows the scale of the risk businesses take if they do not get on top of their Anti-Money Laundering obligations.

Understanding the processes involved in money laundering is really important. Traditionally, this has been broken down into three key stages - placement, layering, and integration; however, it’s not always quite so simple.

Let’s explore what ML is, how the stages have evolved, common money laundering schemes, and how it can be prevented.

What is money laundering?

Money laundering is the process of concealing the origin of money obtained from illicit activities, like drug trafficking, bribery, or fraud. The purpose of money laundering is to introduce illicit funds into the financial system under the guise of ‘clean’ money, so that criminals can use it without attracting undesirable attention from authorities.

Money laundering can occur even when a company’s employees are unaware that the activity is taking place or do not understand what money laundering is. Although the financial services industry has traditionally been considered the most susceptible to money laundering and was once the primary target for criminals, criminal networks now use a wide range of industries to launder illicit funds.

It’s now a myth that only financial companies are vulnerable to money laundering, as criminals exploit various industries—from sports to art—to launder illicit funds. Businesses that fail to comply with tightening Anti-Money Laundering regulations can face hefty penalties and reputational harm.

Money laundering, terrorism financing, and proliferation financing

The fight against money laundering, terrorism financing, and proliferation financing is closely connected because all three involve the movement and misuse of funds within financial systems.

AML (Anti-Money Laundering) focuses on preventing criminals from disguising the origins of illicit funds.

CTF (Countering the Financing of Terrorism) targets financial flows used to support terrorist activities.

CPF (Countering Proliferation Financing) addresses the funding of activities related to the proliferation of weapons of mass destruction.

Because these risks often overlap in financial transactions, regulatory frameworks typically address them together under the broader AML/CTF/CPF compliance regime.

The growth of money laundering

Money laundering activity has increased significantly in recent years. According to a Eurojust report, cases have risen sharply since 2016 and are expected to continue growing, posing increasing risks to businesses and financial systems.

This trend is reflected in the growing number of Suspicious Activity Reports (SARs) filed by financial institutions. Data from the US Financial Crimes Enforcement Network (FinCEN) shows a steady rise in reporting:

Overall, SAR filings have increased year-on-year, indicating heightened reporting activity and a growing focus on detecting suspicious financial behavior.

A similar pattern can be observed in Europe. For example, reports submitted to the Luxembourg Financial Intelligence Unit (FIU) rose significantly:

Before examining how financial institutions combat these risks, it is important to understand how money laundering works and the stages it typically involves.

The 3 stages of money laundering

Traditionally, the money laundering process has been explained using the ‘three stages of money laundering’ model. These stages are:

  1. Placement
  2. Layering
  3. Integration/extraction

💡However, modern financial crime rarely follows such a clear sequence of money laundering stages. Today, money laundering is increasingly viewed as a multi-layered, multi-stage process where steps overlap, repeat, or occur simultaneously across different systems and jurisdictions.

That said, looking at the traditional three stages of money laundering does provide a good grounding in some of the key processes used by criminals.

Stage 1: Placement

In money laundering, the placement of illegal funds into the financial system may occur either directly or indirectly. Direct placement typically involves cash, while indirect placement may occur through intermediaries, businesses, casinos, or other channels.

The most popular method used in the placement stage is to divide large amounts of cash into less suspicious smaller sums (structuring), which can then be deposited into a single bank account or several bank accounts (which could involve the ‘smurfing’ money laundering technique).

Other methods of placement in money laundering include:

Stage 2: Layering

“Layering” is the process of separating illicit money from its source and creating “layers” of transactions to confuse an audit. The purpose of layering in money laundering is to hide the origins of illegally obtained assets. This stage is considered to be the most complex, as it involves multiple transactions, often including international money transfers.

The most “popular” examples of layering in money laundering include:

Placement vs layering: Key differences

Placement, layering, and integration are all separate parts of the money laundering lifecycle, but when it comes to placement vs layering, there is often some confusion about how they are different.

While placement injects illicit funds into the financial system, layering hides the source of these funds through a series of transactions and financial tricks.

Stage 3: Integration

After placement and layering, integration is the next step. Criminals integrate—or, in other words, “return”—illicit money to themselves in a way that appears “clean.” If the money laundering integration stage is successful, the funds are now part of the legitimate financial system and can be used freely.

The main objective of integration in money laundering is to launder the money without attracting law enforcement attention. This can be done, for instance, by purchasing property, art, jewelry, or luxury automobiles.

Common money laundering schemes (2026)

Criminals use all available financial instruments—from NFTs to real estate—to make their illicit funds look legitimate through various money laundering schemes.

Money mules

Money mules are individuals recruited by criminals to move or transfer illicit funds on their behalf. Because money mules often have legitimate bank accounts and a clean financial history, their transactions may initially appear less suspicious, making it easier for criminals to move stolen or illegal money through the financial system.

In a typical money muling scheme, the mule receives funds into their bank account—often from fraud, phishing, or other criminal activity—and is instructed to transfer the money onward, withdraw it in cash, or convert it into cryptocurrency before sending it to other accounts controlled by the criminals. By routing funds through multiple money mules, criminals attempt to obscure the origin of the money and make it more difficult for authorities to trace the laundering chain.

Money laundering through gambling, gaming, and betting

Gambling, gaming, and betting (both online and offline) are often used to launder illicit cash. Money laundering in casinos is, perhaps, the best known, but money laundering in gambling can take many forms.

Examples of money laundering here include:

A typical gambling laundering scheme may look like this:

  1. Placement: Illicit funds are deposited into a gambling platform or casino, sometimes in cash or through prepaid cards, payment services, or cryptocurrency.
  2. Layering: The criminal places multiple bets or purchases casino chips and participates in low-risk or coordinated betting activity to circulate the funds while minimizing losses.
  3. Integration: The remaining balance is withdrawn as gambling winnings, which can be presented as a legitimate and potentially taxable source of funds (SoF).

Money laundering through sports

Money laundering in sports is a serious issue. There are many ways to make—and therefore launder—money through sports: from sports betting to sponsorships to action figures. The higher the profit from these activities, the higher the risk of money laundering.

The most vulnerable sports include football (soccer), cricket, rugby, horse racing, motor racing, ice hockey, volleyball, and basketball.

Given, the sport generates over $30 billion a year, money laundering in football is a particular cause for concern.

Money laundering through real estate

Real estate is a high-risk sector for money laundering. One estimate suggests that as much as £10 billion ($13.3 billion) is laundered each year through the UK property market alone.

Examples of real estate money laundering techniques include:

A typical real estate laundering scheme may look like this:

  1. Placement: Using cash or complex financing structures (e.g., trusts, shell companies, or back-loans) to purchase property.
  2. Layering: Transferring ownership through multiple entities or repeatedly buying and selling the property (“property flipping”) to obscure the origin of the funds.
  3. Integration: Selling the property and receiving the proceeds as seemingly legitimate income from a real estate transaction.

Money laundering through cryptocurrency and digital assets

Billions of dollars are thought to have been laundered through cryptocurrency in recent years, making crypto money laundering a major concern for regulators and crypto businesses. Other digital assets, such as NFTs, have also been used by money launderers.

Digital asset and cryptocurrency money laundering can take forms such as:

A typical cryptocurrency laundering scheme may look like this:

  1. Placement: Illicit funds (for example, from scams, ransomware, or fraud) are converted into cryptocurrency through exchanges, peer-to-peer platforms, or crypto ATMs.
  2. Layering: The funds are moved through multiple wallets, chain-hopped between cryptocurrencies, sent through mixers, or routed through DeFi protocols to obscure the transaction trail.
  3. Integration: The laundered assets are converted back into fiat currency through exchanges, OTC brokers, or crypto-friendly businesses, appearing as legitimate investment or trading profits.

The impact of money laundering on business

Here are only a few of the negative consequences of money laundering for businesses:

Moreover, the impact of money laundering can be far-reaching, with damaging socio-economic effects worldwide, including:

For these reasons, businesses and regulators must actively combat money laundering to protect financial systems, maintain market integrity, and prevent the broader economic and social harm caused by illicit financial activity.

Regulatory fines for money laundering: Case studies

If businesses don’t monitor transactions, they risk money laundering, fraud, and other crimes occurring on their platforms. That’s why governments have been tightening their AML regulations.

Barclays Bank fined £42 million for inadequate money laundering risk management

In 2025, Barclays Bank was fined £42 million (~USD56 million) across two of its subsidiaries.

TD Bank hit with a historic $3 billion money laundering penalty

Canada’s TD Bank was fined $3 billion in 2024 for failing to prevent criminals from transferring hundreds of millions of dollars in illegal funds through its systems. The bank pleaded guilty to conspiracy to commit money laundering and failing to take action when staff flagged highly suspicious activity.

Danske Bank fined €1.82 million for negligent monitoring and maintenance of AML processes

In 2022, Danske Bank was fined €1.82 million (~USD1.82 million) by the Central Bank of Ireland.

How to detect and prevent money laundering

To keep businesses safe and aid money laundering detection, a thorough Anti-Money Laundering (AML) compliance program must be in place. It should define how the company detects, assesses, and reports financial crime, including the following measures:

Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD)

Before a customer is allowed to use a service, they must go through a Customer Due Diligence (CDD) check. This involves obtaining the customer’s information to verify their identity and evaluate whether they are involved in any crime.

Ongoing Due Diligence (ODD)

This is an extra layer of risk management that involves ongoing due diligence checks on customers and transaction monitoring.

Transaction monitoring and AML audits

Transaction monitoring in AML is used to detect suspicious activity within customer transactions.

How smurfing detection works

‘Smurfing’ or structuring works by moving a pot of illegal funds through many small transactions that are below the legal reporting thresholds in a jurisdiction.

FAQ

Modern money laundering tends to be a multi-layered process with multiple stages that can overlap, repeat, or occur simultaneously. However, the traditional three stages of money laundering are placement, layering, and integration/extraction.

Money laundering is the process of disguising illegally obtained money so it appears to come from legitimate sources.

Placement, layering, and integration are key elements of money laundering.

Knowing how to prevent money laundering is essential for businesses, particularly those in the financial sector and other heavily regulated sectors.

The penalties for money laundering vary between jurisdictions but are generally very serious, including imprisonment, fines, and confiscation of assets.