Tuesday, January 25 2022

The International Compliance Association (ICA) is a professional membership and awarding body. ICA is the leading global provider of professional, certificated qualifications in anti-money laundering; governance, risk, and compliance; and financial crime prevention. ICA members are recognized globally for their commitment to best compliance practice and an enhanced professional reputation. To find out more, visit the ICA website.

Covid-19 forced criminals to find novel ways of getting their illicit funds into the financial system. With lockdowns all over the world and the closure of physical banking facilities, they have had to explore new methods to keep the criminal underworld turning. Moving into online banking was just the first step, but entering the crypto asset space has really seen criminals gain momentum.

Below we look at a handful of criminal methods involved in money laundering and compare the more “traditional” approach to what we are beginning to see today. We’re not saying the new ways are replacing the old ones, which are still taking place; we’re simply shining light on some of the emerging challenges in preventing money laundering.

Criminal methods

Smurfing: Criminals split large piles of cash between individuals to deposit into different bank accounts around the country in an attempt to avoid detection.

More recently, this is being done by splitting cash between 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Deposit and withdrawal: Money that is deposited into an account but then withdrawn almost immediately is a classic sign of criminal activity, especially if it is repeated on numerous occasions.

With advances in technology, this action can be carried out by a customer suddenly receiving a large amount of crypto assets directly from a decentralized exchange-associated account and then attempting to cash out immediately.

Multiple deposits: Criminals are aware depositing a large amount of cash raises suspicions among bank branch staff. To avoid this detection, they will often break their money up into smaller amounts and deposit it over a short period of time.

Today, we see high-value funds sent from multiple crypto asset addresses via ATMs to a single recipient wallet address, again over a short period.

Targeting the elderly and vulnerable: Mail order and telephone scams have been a constant stream of revenue for criminals. By applying pressure in person or over the phone, they can convince victims into handing over large amounts of savings.

The elderly and vulnerable are still targeted by criminals, but now in even more complicated ways. People who do not understand cryptocurrencies and appear confused when questioned about their activity are prime targets. Criminals will deliberately overwhelm them with complex details, convincing them to invest large amounts of money before disappearing with it all.

Gambling: Casinos have long been used by criminals to launder money. Simply exchanging cash for chips and reversing the process is the purest way of cleaning money. Much has been done by casinos to better police 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 for cleaning illicit funds. Chips are purchased using the dirty money with new funds received when they cash out their winnings. This process is the same one traditionally conducted in brick-and-mortar casinos, only now using cryptocurrencies in an attempt to evade suspicion.

Prepaid cards: Loading up a prepaid card using cash from illegal activities is a proven way for criminals to move money and avoid the financial system.

Criminals today move 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 working in compliance, finance, or any other industry, it is important we keep a look out for these new techniques being utilized by criminals. If we go on looking for the same methods being conducted in the same ways, we are going to miss a huge amount of criminal activity. By looking for the basic premise of money laundering, rather than the method used, we will be better positioned to spot subtle (and more obvious) attempts to launder illicit funds.

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


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