I’ve been hearing from friends in Guernsey that a recent industry presentation there suggested that the familiar three-stage model of money laundering – placement, layering and integration – is out of date. Granted, it dates from the mid-1980s, but then so does my car, and that’s still in top running order. Vintage status alone is no reason to discard something (otherwise plenty of us would be out on our ears). The only issue is whether it still works.
As I understand it (and please do correct me if you know better), the PLI model was developed by American academics in the run-up to the criminalisation of money laundering (which was achieved through the Money Laundering Control Act of 1986). In order to clarify just what was meant by “money laundering”, the process was broken down into the three stages: placement, layering and integration (or what I have always thought of as in, round and out). Since then, the terms have been in continuous use, although anyone who studies money laundering techniques for more than five minutes will quickly realise that the three stages are not discrete, but rather blend and mesh, and indeed that not all money laundering schemes involve all three stages (placement, for instance, does not figure if the value is already in the system, as with most fraud and embezzlement). Like all models of complex activities, it is a grand over-simplification. But as a basic explanation – the criminal gets his dirty money into the financial system, then moves it around to hide and disguise it, before bringing it out, under the guise of a cover story, to use it – it has served us well.
The alternative that has been suggested, I am told, is enable, distance and disguise. I’m quite taken with these terms – “enable” is particularly of the moment, as we hear more and more talk from the authorities of “professional enablers”. I also like the stress on distancing (of origin and ownership). But what this trio lacks is any linear motion: you can enable, distance and disguise at any stage of the money laundering process. But perhaps that doesn’t matter; do we need to suggest a progression, or is suggesting a progression actually misleading? My concern is that the whole purpose of a model is to simplify for those who need only a general overview understanding; those who delve deeper will soon abandon the effort to label any action as placement or layering or integration anyway. And for those who need a simple model, is enable, distance and disguise any better than placement, layering and integration? What do you think?