AML Rightsource Training Practice Test

Which statement describes layering in money laundering?

Introduction of illicit funds to the financial system. Integration of funds back into the economy. Movement of funds, converting the funds into another form. Create a complex audit trail. Reporting of suspicious activities.

Correct Answer:

Movement of funds, converting the funds into another form. Create a complex audit trail.

Explanation:

Layering involves moving funds and transforming their form to sever the connection to their illicit origin, often through a sequence of transactions across accounts, jurisdictions, and financial instruments. The goal is to create a complex audit trail that obscures the money’s origin, making it hard for investigators to trace back to the crime. This is why describing layering as the movement of funds and conversion into another form, with a complex audit trail, best fits the concept. In contrast, placement is about introducing illicit funds into the financial system, and integration is about reintroducing funds into legitimate activity; reporting suspicious activities is a compliance action, not a laundering step.

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