The process of money laundering involves the following three steps:

Placement:
This stage involves placing the illegal proceeds in the financial system like in a bank account etc. The money is often combined with the legitimate income of a cash-intensive business, which makes it indistinguishable from the legitimately earned money. At this point when large quantities of cash in small denominations have to be transported and infused into the financial system the money-laundering scheme is most vulnerable to detection.

Layering:
During this stage numerous transactions are carried out with the proceeds of the crime. The money is distributed through the financial system using transactions such as electronic wire transfers, shell corporations (front companies), false invoicing and fictitious import and export transactions. These transactions are normally carried out via legitimate financial institutions. The primary purpose here is not to make a profit but to create the impression that the illegal money has a legitimate source. This means that transactions are not conducted according to normal market principles and will often not make much economic sense.

Integration:
This stage completes the money-laundering objective, as the criminal will now have access to the ‘recycled’ proceeds of the original crime without fear of detection. The funds are placed in apparently legitimate businesses by investing in shell corporations, by buying stocks, real estate, art, etc. At this stage it is virtually impossible to connect the money to the profits made from the original crime.

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