Page 138 - CAPE Financial Services Syllabus Macmillan_Neat

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FINANCIAL SERVICES STUDIES
UNIT 1 - PAPER 02

KEY AND MARK SCHEME

6. (a) Explanation of the stages of money laundering.

Stages of money laundering:

- Placement,
- Layering, and
- Integration.

1 mark for each correct stage

Definition and Description of each stage

Placement refers to the movement of cash from its source.
Sometimes sources can be disguised or easily represented.
Normally such is followed by placing the laundered amount
into circulation via local, regional or international
financial institutions, or other business enterprises.

Layering is the process of disguising the laundered funds,
making it more difficult to detect and uncover a laundering
activity. Hence, the stage is meant to deter law enforcement
officials and the prevention of a clear paper trail.

Integration is the movement of previously laundered money into
the economy via through the banking system and thus such
monies appear to be normal business earnings i.e. the once
laundered funds is now concealed. This stage differs from
layering in that, for in the integration process detection
and identification of laundered funds is provided through
informants.

1 marks for each for the description of each stage

(b) Discussion of the stages that are applicable to the above
scenario.

Only Stages 1 and 3 are applicable.

Stage 1 is applicable as Peter Honest did not do his due
diligence in inquiring as to the where and how Winston Church
obtained the 50 million from that he invested in a market
portfolio.

Stage 3 is applicable as after Peter Honest invests the 50
million in a market portfolio and the returns is invested in
Stone Investments then it becomes legitimate.

1 mark each for naming the stages
3 marks each for the discussion.