Managing Financial Crime Risk: Old Crimes, New Methods | Item

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The International Compliance Association (ICA) is a professional membership and awards body. ICA is the world’s leading provider of certified anti-money laundering professional qualifications; governance, risk and compliance; and the prevention of financial crime. ICA members are recognized around the world for their commitment to best compliance practices and a better professional reputation. To find out more, visit the ICA website.

Covid-19 has forced criminals to find new ways to get their illicit funds into the financial system. With closures around the world and the closure of physical banking facilities, they have had to explore new methods to keep the criminal world spinning. Switching to online banking was only the first step, but entering the crypto asset space has really seen criminals take off.

Below, we take a look at a handful of criminal methods involved in money laundering and compare the more “traditional” approach to what we are starting to see today. We are not saying that the new methods replace the old ones, which still exist; we are simply highlighting some of the emerging challenges in preventing money laundering.

Criminal methods

Smurf: Criminals distribute large piles of money among individuals to deposit in various bank accounts across the country to avoid detection.

More recently, this is done by distributing the cash among individuals and then making multiple fiat deposits at crypto asset ATMs up to the standard deposit limit or at frequent intervals.

Deposit and withdrawal: Money deposited into an account and then withdrawn almost immediately is a classic sign of criminal activity, especially if it is repeated over and over again.

With advancements in technology, this action can be performed by a client suddenly receiving a large amount of crypto assets directly from an account associated with the decentralized exchange and then attempting to cash out immediately.

Multiple deposits: Criminals know that depositing large amounts of cash raises suspicion among staff at bank branches. To avoid this detection, they often divide their money into smaller amounts and deposit it over a short period of time.

Today we are seeing high value funds sent from multiple crypto asset addresses through ATMs to a single recipient wallet address, again over a short period of time.

Target the elderly and vulnerable: Mail order and phone scams have been a constant stream of income for criminals. By lobbying in person or over the phone, they can convince victims to hand over large sums of money.

The elderly and the vulnerable are still the target of criminals, but now in even more complicated ways. People who Dnot understanding crypto-currencies and appear confused when asked about their activity as prime targets. Criminals will deliberately overwhelm them with intricate details, convincing them to invest large sums of money before disappearing with it all.

Gambling: Casinos have long been used by criminals to launder money. Simply exchanging money for tokens and reversing the process is the purest way to clean up the money. Much has been done by casinos to better control this practice.

Criminals have now turned to online casinos, both those that accept physical money as well as cryptocurrencies. This practice has proven to be very effective in cleaning up illicit funds. Tokens are purchased using dirty money with new funds received when they cash out their winnings. This process is the same as that traditionally carried out in physical casinos, now only using cryptocurrencies in an attempt to evade suspicion.

Prepaid cards: Loading a prepaid card using money from illegal activity is a proven way for criminals to transfer money and avoid the financial system.

Today, criminals transfer funds directly from an illicit source, such as ransomware funds or dark web drug proceeds, to a crypto asset prepaid card provider to use for rapid conversion into fiat or to purchase physical goods and services.

What can you do?

Whether you work in compliance, finance, or any other industry, it’s important that we stay abreast of these new techniques being used by criminals. If we keep looking for the same methods applied in the same way, we are going to miss out on a huge amount of criminal activity. By researching the basic principle of money laundering, rather than the method used, we will be in a better position to spot subtle (and more obvious) attempts at illicit money laundering.

The International Compliance Association is a sister company of Compliance Week. Both organizations are under the umbrella of Wilmington plc.

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