What does the term "layering" specifically refer to in money laundering?

Layering is the process in money laundering that involves executing a series of complex transactions to obscure the source of illicit funds after they have been placed into the financial system. This stage is crucial as it aims to create confusion and make it more difficult for authorities to trace the origins of the money. Through layering, money launderers may perform various transactions that can include exchanging currencies, wiring money between different accounts, or investing in various financial instruments, all in an effort to distance the ill-gotten gains from their criminal origins.

In essence, layering serves to disguise the money's source by creating a complicated trail of transactions, thereby making it challenging for law enforcement agencies to follow the money and prove its illicit origin. This critical step differentiates layering from the initial placement of illegal funds into the financial system and the final integration of those funds into the economy as legitimate money.