Institute Insights: Revisiting the Three Stages of Money Laundering in a Changing World
Pete Dougherty, the Institute's Chair, explores whether the 3 stages of money laundering is an outdated concept or whether it is misunderstood.
Introduction
There’s been a lot of recent online discussion about the three stages of money laundering. What struck me most is the concern that, in the pursuit of complexity and modernity, financial crime professionals may be overlooking the foundational principles—mistaking them for outdated relics rather than enduring concepts.
Old concepts vs New
A number of academics and subject matter experts have dismissed the traditional three-stage model—placement, layering, and integration—as irrelevant or obsolete. I disagree. These stages were never intended as a rigid blueprint for how money laundering occurs, nor as a definitive guide for professionals in the field. Rather, they serve as a conceptual framework—an accessible entry point into what is, by its nature, a complex and constantly evolving crime.
These stages don’t always occur sequentially. In fact, they often overlap, occur simultaneously, or present in varying combinations. To suggest that the model doesn’t apply to emerging typologies like gambling or crypto is to misunderstand both the model and the methodologies themselves.
Gambling: A "New" methodology?
Let’s start with gambling. While often cited as a modern laundering technique, it's actually one of the oldest routes used by organised crime groups, including the mafia, to clean illicit funds. The mechanics are simple and clearly span placement, layering, and integration. In practice, this method isn’t novel—it’s a well-worn tactic.
What’s critical here is the precision required by the launderer. Greed or error can lead to dire consequences. I recall a murder investigation I worked on years ago where a launderer, having lost the criminal proceeds at a London casino, was found dead in woodland. The stakes in this world are not metaphorical.
Crypto: A Digital Evolution
Crypto does represent a newer channel—faster, more opaque, and undeniably harder to trace. But fundamentally, the money laundering process remains. The digital format changes the "how," not the "why" or "what." Movement across borders, transformation into other products, and eventual integration into the financial system all still occur.
The challenge lies in the pace, the cross-jurisdictional fluidity, and the often pseudonymous nature of crypto transactions. As a result, AML/CTF efforts must evolve accordingly. But again, this doesn’t negate the underlying stages—it simply reframes how and where they manifest.
Money Laundering: Not a victimless crime
There’s also a narrative emerging that laundering or facilitating the movement of criminal proceeds isn’t a real crime. This couldn’t be further from the truth. Launderers are enablers. They provide the means for criminals to clean their money and continue their operations—whether that’s trafficking drugs, people, weapons, or engaging in fraud and corruption.
Their role is critical and often places them higher in the criminal hierarchy. Detecting and prosecuting them is not simple—it requires financial crime specialists to piece together lifestyle indicators, property ownership, and unexplained wealth. The so-called “sniff test” becomes invaluable when traditional typologies fall short.
This is why money laundering, which became a standalone offence over 20 years ago and later evolved into a predicate offence, remains essential to legal frameworks worldwide. If we ignore those enabling crime, any enforcement efforts are superficial at best.
Conclusion
If we're so eager to discard tried and tested concepts, perhaps we need to rebrand ourselves as "Professional Nefarious Activity Disruptors." But the truth remains: criminal proceeds will always be placed, layered, and integrated. What changes are the channels—not the fundamentals.
As an industry, we must remain agile—understanding new typologies, embracing tools like AI to enhance detection, and refining our investigative techniques. But we shouldn’t confuse modernisation with reinvention. The question isn’t whether the three stages are still relevant—it’s how we work more effectively to identify, prevent, and prosecute money laundering in all its forms.
