What is meant by 'layering' in Money Laundering?

Layering in the context of money laundering refers specifically to the creation of a series of complex transactions that are designed to obscure or obfuscate the origins of illegal funds. This process typically involves moving money through various financial instruments or accounts to make it difficult for authorities to trace the original source of the funds. By complicating the trail, those engaging in money laundering aim to distance the illicit money from its criminal origins, thereby integrating it into the legitimate financial system.

The other concepts, while related to money laundering tactics, do not specifically encapsulate the definition of layering. For instance, regulating financial transactions to ensure legitimacy focuses on oversight and compliance to prevent money laundering rather than the act of layering itself. Additionally, using shell companies to hide illicit activity is a separate tactic often employed in the initial stages of laundering but does not specifically describe the layering process. Lastly, exchanging cash for goods to avoid detection represents a method of value conversion or immediate concealment rather than the intricate series of transactions involved in layering.