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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Money laundering

During the audit of Delmar Trading, an audit senior learns that Delmar's finance director has transferred funds through several shell companies in different jurisdictions and then bought a hotel using a loan from the last shell company, which is later repaid from hotel income. Which description of the stages is most accurate?

Passing funds through several shell companies is layering because it obscures the trail. Buying the hotel with a loan from the final shell and repaying it from hotel income is integration, as the proceeds re-emerge as apparently legitimate wealth. Placement, the initial entry of cash, is not described.

  1. ATransfers through shell companies are layering; the loan-funded hotel purchase and repayment from income is integrationCorrect
  2. BTransfers through shell companies are placement; the hotel purchase is layering
  3. CTransfers through shell companies are integration; the hotel purchase is placement
  4. DThe whole sequence is layering because every step involves moving funds

Explanation

Moving funds through multiple shell entities and jurisdictions obscures the audit trail, which is layering. Using a seemingly legitimate loan to buy an asset that generates apparently clean income returns the money to the launderer, which is integration. Placement, the initial entry of cash, is not described.

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