Money laundering is a serious type of criminal fraud whereby illegal money is acquired and

turned into legal tender. Three distinct money laundering stages are then followed for the
‘dirty’ illegal money to be reintegrated into the legal, financial system for the criminal’s
benefit.
Due to the nature of the crime, the true extent of money laundering can be difficult to
recognise, but the National Crime Agency (NCA) reports over £100 billion of laundered
money affects the UK’s economy each year

Placement
The first stage of money laundering is known as ‘placement’, whereby ‘dirty’ money is
placed into the legal, financial systems. After getting hold of illegally acquired funds through
theft, bribery and corruption, financial criminals move the cash from its source. This is where
the criminal money is ‘washed’ and disguised by being placed into a legitimate financial
system, such as in offshore accounts.

Ways of placement

1. Blending of funds:
2. Invoice fraud:
3. Through ‘smurfing’
4. Offshore Accounts

Layering
The second stage in the money laundering process is referred to as ‘layering’. This is a
complex web of transactions to move money into the financial system, usually via offshore
techniques.

Once the funds have been placed into the financial system, the criminals make it difficult for
authorities to detect laundering activity. They do this by obscuring the audit trail through the
strategic layering of financial transactions and fraudulent bookkeeping.

Layering is a significantly intricate element of the money laundering process. Its purpose is to
create multiple financial transactions to conceal the original source and ownership of the
illegal funds.

Integration
The third of the stages of money laundering is ‘integration’. The ‘dirty’ money is now
absorbed into the economy, for instance via real estate. Once the ‘dirty’ money has been
placed and layered, the funds will be integrated back into the legitimate financial system as
‘legal’ tender. Integration is done very carefully from legitimate sources to create a plausible
explanation for where the money has come from.

This money is then reunited with the criminal with what appears to be a legitimate source. At
this stage, it is very difficult to distinguish between legal and illegal wealth. The launderer
can use the money without getting caught. It is extremely challenging to catch the criminal if
there is no documentation to use as evidence from the previous stages.

1. Automatic Exchange of Information (AEOI): This is a global standard that

requires countries to exchange financial account information of non-resident
taxpayers with their home countries. The Cayman Islands have adopted this
standard and are committed to implementing it.
2. Base Erosion and Profit Shifting (BEPS): This is an initiative by the Organisation
for Economic Co-operation and Development (OECD) to prevent multinational
companies from artificially shifting profits to low-tax jurisdictions. The Cayman
Islands have committed to implementing the BEPS framework.
3. Anti-Money Laundering (AML) regulations: The Cayman Islands have
implemented robust AML regulations, which require financial institutions to
identify and verify the identity of their customers and report suspicious
transactions to the relevant authorities.
4. Increased transparency: The Cayman Islands have made efforts to increase
transparency, such as joining the Global Forum on Transparency and Exchange
of Information for Tax Purposes and signing the Multilateral Convention on
Mutual Administrative Assistance in Tax Matters.
Pressure from international bodies: The Cayman Islands have faced pressure from
international bodies such as the European Union and the United States