What is the purpose of the "layering" stage in money laundering?

The layering stage in money laundering is a critical phase aimed at obscuring the original source of illicit funds. This is achieved by executing a series of complex financial transactions designed to make tracing the money's origins extremely difficult. These transactions may involve transferring funds through multiple accounts, converting currencies, or engaging in various financial products, thereby breaking the connection between the criminal activity and the funds.

By concealing the source of the funds, the launderer can create a more favorable position for the eventual integration of those funds into the legitimate economy without raising red flags. The objective here is not to identify or report the source of the funds, nor to integrate them back into the economy yet; instead, it's primarily about making the funds appear legitimate by hiding the trail that leads back to illegal activities. This concealment is necessary to ensure that law enforcement agencies or financial institutions cannot readily identify the true nature of the funds, ultimately aiding the criminal in legitimizing their proceeds.