What is Money Laundering?
Money laundering is the process of disguising the proceeds of criminal activity so they appear to come from a legitimate source. It is a criminal offence in its own right, and the obligations it creates fall not only on banks but on any company that could be used, knowingly or not, as a conduit.
The three stages of laundering
Placement introduces illicit funds into the financial system, historically through cash-intensive businesses, structured deposits, or the purchase of assets. It is the stage where the money is most exposed and where most detection happens.
Layering then moves the funds through complex chains of transfers, shell companies, and cross-border transactions designed to break the audit trail. Integration returns the money to the legitimate economy as apparently normal business income, often through invoicing for services that were never delivered.
AML controls in a corporate context
Non-financial companies encounter laundering mainly through third parties. Know Your Customer and supplier due diligence establish who the counterparty really is, including its beneficial owners. Transaction monitoring looks for the patterns that characterise layering: circular flows, payments to jurisdictions with no commercial rationale, and invoicing disconnected from any deliverable.
The reporting obligation is what most firms underestimate. Suspicion triggers a duty to report to the national financial intelligence unit, and the assessment must be documented whether or not a report is filed. Absence of documented reasoning is itself a compliance failure.
Money Laundering and Supervizor
Supervizor's compliance solution tests the full transaction population for the flow patterns that characterise layering, rather than relying on threshold alerts. Teams use it to:
- Detect circular and atypical payment flows across entities, including round-tripping between related counterparties
- Identify high-risk counterparties through jurisdiction, ownership overlap and payment behaviour
- Evidence the monitoring performed, with a documented trail of what was tested and escalated