As noted in the 2003 ANPRM, the residential real estate sector may be vulnerable at all stages of the money laundering process. Money laundering is a process by which funds with an illicit origin are converted into funds with a plausibly legitimate origin. There are three general stages of money laundering. The "placement" stage is the stage at which funds from illegal activity or funds intended to support illegal activity are first introduced into the financial system. Money laundering "layering" involves the distancing of illegal funds from their criminal source through the creation of complex layers of financial transactions. "Integration" occurs when illegal funds are made to appear to have been derived from a legitimate source. Despite the relative illiquidity of most real estate assets, money launderers have used residential mortgage ansactions—fraudulently and legitimately structured - to disguise the proceeds of crime.
From page 7 of the Treasury Department's advance notice of proposed 31 CFR Part 103 rulemaking at http://fincen.gov/statutes_regs/frn/pdf/ANPRM.pdf.