The objective of money laundering is to disguise the original source of funds which have been obtained from illegal activity. Once the criminal proceeds are obtained, the first stage of the laundering process is commonly known as placement.  Placement refers to the initial step by the launderer to use the funds in the financial sector. 

Because the placement stage has closer proximity to the illegal activity, it presents a higher risk of the launderer being detected.  If the dirty funds are not detected in the placement stage, the task of identifying money laundering becomes significantly more difficult.

During the placement stage and layering process (described below) a launderer will seek products or services that assist to -

• Conceal the source of funds; or

• Readily convert cash to a monetary instrument; or

• Readily move value from one jurisdiction to another.

Once the funds have been ‘placed’, the launderer will then undertake layering transactions. Layering will generally involve a complexity of transactions but may include a single transaction. Examples include the buying and selling of real estate or the buying and selling of securities through an unregistered or registered trading platform such as NZX or ASX. The objective of the layering stage is to return the dirty funds back to the launderer in a manner that appears to be legitimate income.

Once the launderer believes they have satisfactorily 'cleansed' the funds and distanced themself from the original illegitimate activity, they will then integrate the funds for their full use and access.

Money laundering therefore has three typical stages - (1) PLACEMENT, (2) LAYERING, (3) INTEGRATION. The level of sophistication applied to each stage will depend on the sophistication of the launderer.