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FRM Part II · FRM Exam Part II · Case Study: Financial Crime and Fraud

A bank detects that a customer deposits cash just under the reporting threshold across many branches, wires the funds to shell companies abroad, and later receives them back as apparent loan repayments from a seemingly unrelated firm. Which sequence correctly maps these steps to the stages of money laundering?

Sub-threshold cash deposits are placement through structuring, wires to shell companies are layering, and funds returning as apparent loan repayments are integration. This order moves illicit cash into the system, obscures its origin, then makes it appear legitimate.

  1. AStructuring/placement, layering via wires, integration via loan repaymentsCorrect
  2. BLayering via deposits, placement via wires, integration via loans
  3. CPlacement via wires, integration via deposits, layering via loans
  4. DIntegration via deposits, layering via loans, placement via wires

Explanation

Sub-threshold cash deposits introduce proceeds into the system (placement, using structuring). Moving funds through shell companies obscures origin (layering). Returning funds as seemingly legitimate loan repayments makes them appear lawful (integration). Other options misorder the stages.

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