Explain the reasoning in brief on the following statements: Money Laundering is a process for conversion of money obtained illegally to appear to have originated from legitimate sources.

Laundering means acquiring, owning, possessing or transferring any proceeds (of money) of crime or knowingly entering into any transaction related to proceeds of the crime either directly or indirectly or concealing or aiding in the concealment of the proceeds or gains of crime, within or outside India. It is a process for conversion of money obtained illegally to appear to have originated from legitimate sources. Invariably, there are three stages through which money laundering takes place. The three stages of money laundering are as follows: The first step is called the placement , when the cash is deposited in the domestic banks or is used to buy goods such as precious metals, work of art, etc. The second step is called the layering . Once the funds are entered into the financial system (banks), the funds are converted by transfers to different destinations. This stage is called as layering. At different locations, bank accounts are opened and the funds are transferred as quickly as possible (at times breaking into series of small transactions to escape from the limits set up by banks for cash transactions). The last stage is called the integration . In this stage, the launderer attempts to justify that the money obtained through illegal activities is legitimate. Through different methods attempts are made at this stage, like using front offices of the companies, using the tax haven and offshore units, using these funds as security for loans raised, etc.