Our Gold CRM for Compliance Consultants

Gold Network Partner CRM

Our CRM is one of the most advanced systems for tracking customers and leads and converting business from them. It will take a small consultancy to a corporate level of marketing overnight.

The images show the level of interaction the system facilitates. From capturing leads direct from your website – directly input to your system and then allocated to one of your team – to automatically logging calls from the VOIP call centre we provide. So you know who called, what for and when -direct in your account without you having to answer the call. This alone provides you with a 24/7 phone service and frees you from the office to do what you’re best at.

Take a look through the images for the functions we provide. Don’t be daunted by it. Our system comes modular and you take and leave as much or as little as you need. The point is, it is all there for you to become a stellar marketing and sales force.

Benefit from an Enterprise level of Marketing Support and Expertise.

Joining us will take your business to the next level. This level of expertise is for business owners who want to dominate. Who want to succeed. If you’re happy with your client list and don’t want to secure access to the offshore market and build a significant successful enterprise then Gold partnership isn’t for you.

If you want to go to the next level – come and join us.

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Curious Link Between Trump, Hydroxychloroquine and British Illicit Trade & Smuggling.

Illicit trade and money laundering

I have decided to post this after some light reading in the early hours of this morning. The story, if you stick with it, demonstrates the historic nature of illicit trade and smuggling by nation states searching for power on the world stage. It links to Mr Trump and his use of Hydroxychloroquine (I’m shortening this to HCQ for the rest of this article) and the history of the development of the drug which paints an insight into the world search for a vaccine for COVID19. It also details historic links of nation states, in this case the UK, to illicit trade to gain a world advantage.

We have all seen the headlines. Trump is pulling the US out of the WHO. Controversial and debate-able, but for once I have some accord with him. Some of the world organisations really are just talking shops that consume huge finance with little in terms of effectiveness coming out. They are a sink on society that need a real good kick up the backside to make them more effective and efficient. I put FATF into this group too, all recommendation and no action.

The story begins in the Peruvian foothills where the Andes and Amazon meet and a tree called the Cinchona Officinalis grows. Back in the 1700’s a search was on to cure Malaria. The first nation to find it would gain a significant advantage in the colonisation of the third world countries that had mineral wealth to exploit. The UK was in this race with India central to the development of the nation’s wealth. Malaria was such an issue in the British colonies because the troops were getting ravaged by the humble mosquito. It was critical to keep the army fighting fit and the civil servants imposing politics on the indigenous population.

For centuries malaria has plagued people across the world. It ravaged the Roman Empire; it killed between 150 to 300 million people in the 20th Century; and according to President Trump’s friends at the the WHO, nearly half of the world’s population still lives in areas where the disease is transmitted.

Then came quinine.

According to legend, quinine was discovered as a malaria cure in 1631 when the Countess of Cinchona, a Spanish noblewoman married to the viceroy of Peru, fell ill with a high fever and severe chills, classic malaria symptoms. Desperate to heal her, the viceroy gave his wife a concoction prepared by Jesuit priests made with the bark of an Andean tree. The countess recovered and the tree that cured her was named “cinchona” in her honour.

Historians today know this legend, as romantic as it seems, isn’t wholly true. Quinine wasn’t discovered by Jesuit Priests but by the indigenous Andes tribe called the Quechua who had been using it for medicinal purposes prior.

The Brits, ever eager to exploit, decided on trying to cultivate their own crop of the trees to avoid paying the South Americans for the bark. Samples were analysed at Kew Gardens, the latest in a long line of British centres of smuggling (!!) – really Kew Gardens? They even built a special greenhouse, specifically for the Cinchona tree.

The Jesuit Priests established the trade routes back to Europe and the new discovery became the talk of the town across Europe. Oliver Cromwell, in Protestant England, was having none of it, believing a Catholic plot, he refused the drug and subsequently died of malarial complications because of his hatred of the Catholics. It was dubbed ‘papal poison’.

In France, quinine was used to cure the intermittent fevers of King Louis XIV. In Rome, the powder was tested by the Pope’s private physician and distributed for free by the Jesuit priests to the public.

By 1677, cinchona bark was listed by the Royal College of Physicians in its London Pharmacopoeia as an official medicine used by English physicians to treat patients.

Economics

The economic story starts to develop when the bark of the tree was transported back to Europe to be examined, analysed and exploited. In the 1900’s the French, Spanish, Dutch and British were all exporting it and much of the wealth of the trade can be seen in historic buildings, built at the time, in Peru. It’s value soared, malaria was one of the greatest threats faced by European troops deployed in overseas colonies. Peru, Ecuador, Colombia and Bolivia monopolised the trade. Bolivia’s tax take during this period, from quinine alone, was 15%. According to Dr Rohan Deb Roy, author of Malarial Subjects, obtaining adequate supplies of quinine became a strategic advantage in the race for global domination, and cinchona bark turned into one of the world’s hottest commodities. Any possible comparisons to today’s search for a COVID19 vaccine?

The bark was used by the Dutch in Indonesia; by the French in Algeria; and most famously, by the British in India, Jamaica and across South-East Asia and West Africa. Quinine is frequently cited by historians as one of the major “tools of imperialism” that powered the British Empire.

The British, ever resourceful, recognised the value of the tree’s seeds. Why pay when you can grow your own?

The South American republics imposed strict export restrictions on seeds and plants, while gaining significant profits from exporting the bark. European powers, particularly France, Great-Britain and the Netherlands, needed the bark and wanted to break the South-American monopoly.

Expeditions

A number of expeditions were sent to procure seeds and plants, often by smuggling them out illegally so they could be replanted in colonial plantations.
Expeditions by explorers Richard Spruce, Clements Markham and Robert Cross all managed to procure seeds and trees. It was Charles Ledger, however, who managed to procure seeds from the Peruvian/Bolivian border for a bark that contained up to 10% quinine (a significant improvement over other species). Ledger sold his cultivar to the Dutch who eventually succeed in cultivating the tree most effectively in terms of quinine volume.

By the mid-1850s, the British had successfully established “fever tree” plantations in southern India, where malaria was rampant. Soon, British authorities started distributing locally harvested quinine to soldiers and civil servants. It’s long been rumoured that they allegedly mixed gin with their quinine to make it more palatable, inventing the gin and tonic drink. Small amounts of quinine are still found in tonic water to this day.

The British use of the bark supported the ever forward advance of the Victorian colonies, especially in India. It was, however, abandoned in the 1880’s, leaving the world market to the Dutch with their more potent cultivar.

Exploitation

Human exploits, go beyond plant life to each other. The story informs us about the lengths nations will go to exploit others. We sometimes sit, in the western world, and mock at others on the world stage and their particular form of democracy (or not). Yet we have developed as we have by exploiting other nations and people’s through history. Smuggling by the Brits was nothing new with expeditions regularly involved in it across the silk road and into Afghanistan and beyond.

I recall a colleague in Afghanistan recounting a story about a TV programme he saw there. His Afghan friend explained. It was a satirical puppet show that had an American as a clown and a Brit as the devil. He explained the Americans are clowns for funding Afghanistan but the British are the devil; they can’t be trusted.

It’s always good to see yourself through another’s eyes.

What the story suggests is the lengths taken to gain competitive advantage on the global stage. This is evident today in the search for a vaccine as nations will and do give a cloak of cooperation but are all racing to be the first. It is true of any mineral and trade, including finance.

We have written previously on the Brits importing drugs to China to destabilize their economy in the 1800’s and while all countries compete, the Brits are particularly good at illicit offshore finance in today’s modern economy.

It’s like a corporate creating a single holding company with lots of business entities registered separately to dis-aggregate risk. Why else the Cayman Islands, BVI, Jersey, and others?

How can the world regulators and policy-setters hold the UK to account for what goes on in the Cayman Islands? It’s true to say they aren’t held accountable because it is a self governing jurisdiction that likes to think of itself as a country – even though it isn’t. More able to run their affairs with less regulation making it easier to commit white collar crime – all the while keeping the UK clean from its stain.

So we go from a seed, to a drug to a trust fund, it is all related down the ages. It’s all illicit trade, smuggling, tax evasion and money laundering.

Quinine has largely been superseded by modern laboratory manufactured HCQ. And Mr Trump knows the benefits of that one, right?

Please do share this content if you found it interesting.

DECISIONS IN THE HEAT OF BATTLE

If there is something emergency services are good at it is making life or death decisions in the heat of battle. The below model is used by the British police. At least some of it is. We have expanded on it’s utility to cause cognisance of the factors that play into points 1 to 5.

CYW Decision making model

What is important is the ease with which people can grasp this. It’s about providing staff with a model that everyone knows to make decisions throughout the firm, at all levels.

At the command level the strategy/mission/Objective is set and this is communicated to the whole organisation. That’s the centre green circle.

From that, at any level, and at any urgency, the model is followed from 1 through 5. This is where the police model finishes. We have added the additional requirements to help people assess and consider information.

  1. Where did the information come from and how reliable is it?
  2. Do we know it to be true without reservation or just suspect it is true?
  3. What further information do we need to make a decision?
  4. We consider information using the PESTEL model
    • What political impact does this have?
    • How does it effect the environment?
    • What sociological impact does it have?
    • Any technical requirements/needs?
    • How does it impact the economy (or our revenue)?
    • What legal aspects do we need to consider?
  5. Out of the information we have or require, what is essential and what implied information do we need or have that supports this? Is it contingent on success?
  6. From the previous, build a plan. Have two contingencies based on the information we do not know or do not know to be 100% true. If those things have misled us, the two contingencies will be ready to then go through this cycle again, using the updated information.
  7. Put the plan into action and maintain a review cycle, constantly spinning the circle and re-assessing as you go.

Any question you have then feel free to direct them to us via our contact page.

HOW YOUR SOCIAL MEDIA ACCOUNTS LEAVE YOU OPEN TO CRIMINALS.

HOW YOUR SOCIAL MEDIA ACCOUNTS LEAVE YOU OPEN TO CRIMINALS.

In this post we will examine real cases where social media has been exploited by criminals. A couple of types of exploitation are social engineering and criminal intelligence gathering. We will explore both and also establish links to money laundering and white collar crime.

It is estimated criminals earn over $3 billion annually from exploiting social media. From extortion of people through the threat of uncovering personal sexual behaviour to using the platforms to research potential victims, criminals are active searching your profiles.

In the immediate aftermath of the Boston bombing 125 charities emerged claiming to raise funds for victims – criminals seeking to quickly capitalise on a tragic event. This is the power and danger of Social media. The speed with which it can be utilised for harm.

We are too quick to tweet, post, pin and share practically everything with practically anyone. The habit for sharing so much and not always knowing who the recipient is can get us into trouble. The more information you post, the larger the dossier of information available to set the stage for a compromise- such as password cracking, identity theft, and more. One of the most common methods criminals use to gain access is spear phishing, and the fact that we often share too much information makes it fairly easy for an attacker to gather enough material on you to conduct a successful spear phishing scam. You may think it’s your “friend” sending you that cute picture, but it may be a criminal looking to get you to click on it so he can infect your machine and steal your data. This is particularly relevant with mobile communications like ‘Whatsapp’. The volume of images and videos shared has exploded throughout the Coronavirus pandemic. The problem is the downloading of a video that has been shared millions of times could infect your device even though it has come to you innocently from a friend. It is that easy to be infected. Symantec report 43% of attacks via social media relate to malware and ransomware. Be careful what you download!

Add to this the very personal nature of what you post and the human instinct to create memorable passwords. Maybe a favoured sports star? Or a pet/child’s name. Or let’s think about birthdays. They are all used extensively by people on social media and easily identified by criminals looking to hack your accounts. Add to this ‘the post moaning about the bank’, effectively giving the criminal what bank you are with and it isn’t hard to see a pattern developing.

Russian FBI arrest.

Social media is used extensively by criminals. The recent arrest of ‘PlinOfficial’ a Russian rapper shows how social media is used in money laundering. Real name Maksim Boiko, a 29 year old Russian with no describable education or talent is pictured repeatedly with wads of cash in Instagram posts. Some might say this is a related cultural thing as he tries to imitate US rappers. But the story goes much deeper than that. Boiko is an interesting character. Raised in Serbia from a working class family, he has traveled extensively as can be seen from his social media presence. Paris, New York, China.

Boiko had expensive tastes. He drinks Moet, drives a Mercedes and wears a Hublet watch. All of which could be either fake or of course rented/loaned, but what stands out from his profiles is a propensity to like the finer things in life while simultaneously not having an income to support it – and yet support it he does.

While in Paris he posted on several job websites looking for work with a friend, “Two, strapping lads (21 & 22 years old) in search of work in the European Union. Currently we are in France but we’re prepared to go wherever there is a reasonable offer. No bad habits. We are open to any employment offers.”

It would appear this post changed his life dramatically. Probably picked up by an OCG and then he was ensnared in crime. He re-appears in China. It is suggested he was working as a ‘middle-man’ in the trade of goods between China and Russia but the movement of funds suggest otherwise. In one ‘cash’ transaction he sent his parents a ‘package’ that contained 1.5 million Roubles, given to them by an ‘associate’.

“Lots of people ask me, what am I doing in China and where does all the money come from,” (we bet they do!) Boiko wrote on VKontakte. He explained he had become a trading rep which for 10% commission he supplied Chinese goods to Russia. Boiko assured his readers the commissions were the source of his limitless and legal “hustle” – slang for making a profit.

However, the owners of the Russian company paying the commission were reluctant to state Boiko was an employee of theirs. They agreed he was in China and had done some work but distanced themselves from saying he worked for them. The volumes of cash he was being imaged with do not align with trading commission as an ‘ad-hoc’ employee – and why cash when clearly the business would be online international payments? Sometimes suspicion isn’t hard to find.

His arrest by the FBI has revealed much deeper links to the criminal underworld and a network that laundered over $4 billion. He was linked via social media and email to an organised criminal gang who’s stock-in-trade was fleecing Crypto currency (among other more traditional crime). The FBI have since linked him digitally to the group through iCloud, email accounts and images. Digital is frequently the investigators choice for evidence. Unlike traditional crime there is no DNA, fingerprints and trace evidence of a physical nature that links individuals. It is, to a large degree, painstakingly detailed digital investigation.

The above story details the use of digital communications and social media that organised criminals make. They also scan social media for intelligence on possible victims.

Social Engineering

Sean O’Neill is a fraud and security advisor with Bedfordshire Police.

‘I’ve visited people who have lost all their ISAs,’ O’ Neill says. ‘They are often in debt after the attack, after falling in love with somebody online. The average loss is £70,000.’

He refers to the scam of online love. A tactic used to lure vulnerable people into parting with cash in the hope of a lasting romance.

But social engineering isn’t the skill used to conduct the criminal act. It is the skill of identifying the victim. Criminals will scan through social media looking for the right ques to identify a lonely or vulnerable individual. Getting this first bit right helps them save wasted time trying to scam people who are more robust in their ability to spot a fraud and more able to withstand the torrent of lies.

Ques like age, wealth, single/divorced, posts indicating a search for love, an illness, bereavement or other life trauma, images of family and friends, places and people – all used to lure the victim in and create a back story for the criminal.

Don’t click it!

Shortened web links on social media can be dangerous. Criminals use these to get you to click and visit the malicious website, that will then infect your device. According to Websenses threat report, 32% of malicious links on social media are shortened URLs. Be careful what you click!

In more serious cases, criminals have used social media to lore people to locations that they wouldn’t have gone to and then sexually abuse or even murder them. A recent study of 61 homicides revealed startling detail of how predators lore victims, one as young as 12, to their death through creating false social media accounts and eventually engineering a meeting to violently attack the victim. Using direct references to sex or tactics seeking ‘pity’ from the potential victim are all used.

A study in 2011 identified that men looking to groom a child via the internet and social media, are generally under 30, white, single, employed and without a criminal record. Not someone that would ‘stand out in a crowd’.

A 2015 study identified homicides specifically facilitated through Facebook. The authors identified six personas for the suspects;

  • Reactors – Use an event to socially engineer the victim
  • Informers – Lore people by helping them.
  • Fantasists – Completely fabricated account.
  • Imposters – Posing as a friend in a hacked/cloned account
  • Predators – typically a male who has a ‘female’ facebook account.
  • Antagonists – An escalating argument that ends in a physical meeting.

In this post we have identified many forms of criminality that is enabled by Cyber and social media in particular. We have also briefly discussed what law enforcement do in terms of tracking digital evidence. Here at CYW Solutions we are working on a platform for the financial industry. This will network intelligence between institutes but also, crucially, use social media and the science of psychographics to identify links between people, entities, transactions and crime. We believe the use of this intelligence, appropriately graded will make the financial industry much safer and reduce significantly the options for crime. it would certainly have flagged Boiko much earlier in his alleged criminal pursuits.

Talk to us today to get an insight on what we are doing. And please do share and like this article if you found it interesting.

How to Technologically Enhance Money Laundering – to make it harder to trace illicit cash.

Technology enhanced money laundering

We’ve noticed that despite our target audience being the financial compliance industry, when we post with a heading to attract criminal attention, it gets read more!

So welcome to this post. In it we will discuss the steps that criminals take to use technology to hide their assets.

Firstly, a basic understanding of Placement, Layering and Integration are needed, you can find that here if you do not understand these three steps.

In the main, technology aids steps two and three. It helps criminals to layer their asset with repeated levels of trade of one sort or another. It then helps them to ‘cash out’ in the integration stage.

We do not make a distinction between a money launderer (professional) or a criminal (commits the predicate offence) other than simply. Similarly, with something like 150 definitions of an organised criminal or their enterprise, this post sets out to use the terms colloquially, inasmuch as any one of the three can act in any capacity so it’s fair to call them all criminals.

Europol define organised crime, not on a personal level as to state the activity of a single individual, but as to the commodities, groups and hubs that make up an OCG (Organised Criminal Gang). In the UK, the definition (loosely termed) relates to activity of a group rather than an individual or specific crime type. It more relates to criminals acting as groups at level two and above (above ‘street’ level crime and cross regional/international).

Money laundering is characterised as a secondary offence to the predicate offence that generated the illicit funds. It is a dynamic and flexible process with launderers actively adapting to fluctuating situational conditions. It is these dynamics that make it difficult to define, describe and prosecute. The levels of convictions are pitifully low globally and this is one area FATF are starting to push with the move to ‘Outcome’ based mutual evaluations at the national level.

As in our post describing the links between Nations that are high on the Corruption index and Bitcoin pricing, the links between laundering and regions that have lax controls and high levels of corruption are sought out by organised criminal groups to layer their transactions to conceal the real origin of the revenue. A research paper into Money Laundering has described it as the third largest industry globally, only oil and agriculture generate more revenue, this indicates just how professional the ‘sector’ is and the sometimes insurmountable odds the industry, regulators and prosecutors face.

Indeed it is these odds, and a nascent belief that the financial sector is inextricably and on occasion corruptly linked to OCGs that is forcing the political agenda to get tougher with sanctions and fines for firms that transgress and get caught. Certainly there are more huge fines than there are ‘bellies against the charge desk’ as I used to say in a former career.

I am going to deliberately steer away from the more obvious routes to launder money. This site covers the more obvious routes in other posts (search for money laundering in our search box and posts will come up). Instead I hope to show you more nuanced methods that a ‘professional’ launderer would use and hopefully point to ways for firms to identify those efforts.

It is obvious that the nearer the point to the actual criminal predicate offence, the more risk there is to laundering cash. The further the cash is layered, actually or digitally, the harder it is for an investigator to track the asset backwards. This is especially true of asset that moves across borders. It is also evident that the regulated sector, spends most of its time trying to detect this first placement into the system. Defeat the placement stage and the professional launderer has the odds stacked in his favour.

The key to laundering is therefore, the successful first step. To conceal it the launderer needs a Trojan horse. Digital transactions and cryptography along with ‘straw-men’ hide the identity of the original criminal. Again, in nations that have a large populous of poor communities, people are prepared to have their identity used as a placement vehicle; this influences the regional choices of OCGs. There are also cases showing more ‘middle class’ white collar workers prepared to lend their identities to support business transactions involving laundering transactions further into the layering process – this includes allowing legitimate business be used to clean money. It is these reasons that money laundering causes capital flight from an economy, investors fearful of the instability and risk attached to the market.

The Trojan Horse

Photocopier

A simple use of technology, a photocopier. Used in high value sales around the globe to prove the outlet checked the identity of the person purchasing- especially when paying in cash. It is a simple task to obscure the image of a passport, make it too dark or otherwise unidentifiable to help the launderer evade any future scrutiny. Purchasing gold, jewels and other high value goods.

Intelligent Deposit Machines

These machines were used to great effect in Australia where a gang used them to launder tens of millions of AUD. Enabling placement and movement of cash through the machines even when the banks were closed. The gang used a network of the machines at lower than threshold amounts to avoid suspicion.

e-commerce and mobile payments

OCGs setting up online storefronts that trade in transactions and not goods to help the launder layer his transactions in what appear genuine stores. No goods are actually moved. This problem is set to get worse as more fintechs operate in this space with a ‘less than conservative approach’ to regulations. One that shall remain unnamed even switched off its transaction monitoring for several months because it was alerting too much (!!)

Virtual World

An International internet payment provider was suspected of laundering on an industrial scale. Implicated were digital currency exchanges, precious metal dealers and more. The OCG had effectively infiltrated the entire system to move large sums in apparent legitimate trade.

Online Betting

An OCG used online betting and internet payment system to launder the proceeds of narcotic dealings. The gang used the two services to receive transactions and then move the funds offshore. In an investigation, it was found that two of the enterprises had the same registered physical address (our intelligence system would flag this as the transaction processed – even across institutional business lines). The gang transferred revenue acting as a remittance service and this disguised the origin of the transaction when the bank conducted the transactions. The gang also used the accounts to simply store funds, making passwords widely known so multiple members could draw on the accounts.

Sales Registers and CCTV

A nightclub had CCTV all over its premise except in the VIP lounge for ‘privacy reasons’. That lounge was then used to till up huge sums of cash transactions as ‘revellers’ purchased $800 champagne in huge quantities. Not so elaborate but an easy way to place cash into the legitimate system through bogus purchases of high value goods/services.

An old colleague of mine filmed a car wash over aperiod of several months to prove vehicles were indeed never washed there, helping to secure the conviction for the predicate offence and ML.

Elaborate ways to facilitate the first stage of money laundering are constantly evolving. As we have stated this is the most risky part of laundering. Not only because it’s the first and easy to trace back to the predicate offence, but also because policy focuses compliance agent attention on this first stage through transaction monitoring and identity checks.

Placement of the cash is the most risky stage of laundering

It is also likely the algorithms being adopted through machine learning technology are focusing on this ‘thick edge’ of transactions. At the front of the process. The more involved and professional launderer will adopt moving and flexible processes to move the money many times over, using no set pattern and through many jurisdictions, transaction types and institutes. This way, unless the whole financial sector had one Ai system, the individual systems in each firm will fail to spot the patterns of transactions/behaviour.

Other technologies are also being used by OCGs. From encrypted communications to virtual services and products and the darknet facilitating on a huge scale the market-place for many OCGs and their gang members.

It is safe to say that criminal gangs have business processes very similar to legitimate businesses. They use highly skilled financiers and skilled business people to move money and assets around as we have discussed previously in our post about cyber crime and money laundering.

This post only details a few examples of ‘how’ criminals use technology. It explains ‘why’ they use it. There is a much bigger study currently ongoing to identify the methods regulators, policy-makers and the industry can use to identify how to combat the professional OCG by understanding their methods. Unfortunately, my experience in these matters tends to lean me towards the opinion that this will be mostly wasted effort. The reason I say this is because;

  1. OCGs will know the models adopted before they are launched – they will almost certainly have informed people on the inside.
  2. The policy-setters will take far too long through bureaucratic channels to put something live.
  3. OCGs will adapt and change and this requires not a look to the past but an accurate prediction of the future to enable swift machine learning from new sets of learning data.

Here at CYW we are developing a networked system that will, for the first time, link the institutes intelligence together. With over 300 metrics to monitor from outside the sector, we will merge data and intelligence to pass it at the speed of transactions to enhance red flags and reduce false positives.

This is essentially providing public level enforcement typologies to the private sector to provide more effective and efficient means to stop transactions and put the onus on the criminal to prove it is innocent. It is our view this is the only way the industry can proceed to force change, cause reductions in criminal use of the financial system and increase the amount of seizures being made. stand alone transaction modelling, even with machine learning functionality, will be hampered by the lack of full data as money moves outside their dataset and comes back in again through different entitites/routes. The firm would have no way of tracking it outside of their own institute.

If you think this post is worthy of a like or a share we would really appreciate you taking the time to do so. We need more readers to influence the agenda.

Thank you.

See How Bitcoin and Corruption are linked.

See How Bitcoin and Corruption are linked.

In 2008 (yes only 12 years ago), Satoshi Nakomoto proposed a new electronic form of value that would allow two parties to exchange that value without the need for a financial institute to act as an intermediary.

Bitcoin was born.

There are of course lots of speculators that link Bitcoin to corruption, criminality and money laundering. But is anything they say backed up by actual evidence?

In this post we review a paper that compares the price of bitcoin and the traders within nations with high levels of corruption and lack of economic freedom. Is there a link? Read on to find out.

The author tested the hypothesis in 17 countries that rank highly for corruption in the Corruption Perception Index, lack of economic freedom in the index of economic freedom and changes in economic certainty in the economic certainty index. These measures are respected globally as a good indicator in their respective metric.

The period under examination ran from April 2017 to September 2018 and this gave the price of Bitcoin plenty of market movement, during the period Bitcoin valued at a high of $19000 in the US.

Of course the digital currency has had its fair share of controversy, not least the seizure of Bitcoin held by the infamous ‘Silk Road’ dark website, the rise and fall of Bitcoin exchange Mt Gox which filed for bankruptcy and other thefts of the currency, reported globally.

Clearly, because it provides anonymity, criminals are going to use it to transfer value secretly and help to clean their assets. But this paper posits the relationship to crime goes deeper.

The results of the study show a positive and significant link to traders being prepared to pay over the market value for Bitcoin in nations that are scored highly for corruption and lack of financial freedom. As corruption level goes up, so does the price and conversely, as corruption goes down, so does the price traders are willing to pay.

This is something which you could say is intuitive but it provides some empirical evidence that crime and Bitcoin are linked. The paper also uncovers, through prior research, that the prices for Bitcoin go up when the exchange requires less identification than one that completes more through CDD. This is probably due to supply and demand with the demand from criminal entities being more likely and willing to pay a higher cost and offset that loss as a cost to doing illegal business. This is one way to understand the link between the above cost of Bitcoin in markets in countries that suffer higher levels of Corruption.

Whether this provides regulators with a method to interrogate exchanges more thoroughly based on their locality is debate-able. With a new travel rule method apparently agreed it looks like virtual currencies and more specifically exchanges are set to be more transparent if they are to remain a viable medium of exchange. It would appear the best place to commence this would be in those high ranking corruption index nations.

Read the paper in full, the details of it are cited below.

Johnson, J. (2020). Bitcoin, corruption and economic freedom. Journal of Financial Crime, 27(1), 58-66.

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60 Best Money Laundering Research Papers, Books and web links.

60 BEST ANTI-MONEY LAUNDERING AND COUNTER TERRORISM FINANCING RESOURCES GLOBALLY

Research into money laundering goes deeper than reading ACAMS or Linkedin. Here we have provided links to the 60 Best Money Laundering Research Papers, books and web articles.

In the coming weeks we will be blogging about these articles and what they mean to the industry. Stay tuned and register with the site (bottom of the page) if you want to get our posts via your inbox (sent once a month only – no spam!)

We would really appreciate you sharing this resource if you find it useful – it took a long time to research!! Thank you. Simply use one of the sharing links or copy the web address and post about it.

NB: Scroll left and right for small screen views

Title & LinkAuthor & Link to BibliographyDescription
(scroll to left to read)
Money launderingM Levi, P Reuter – Crime and Justice, 2006 – journals.uchicago.eduTechniques for hiding proceeds of crime include transporting cash out of the country, purchasing businesses through which funds can be channeled, buying easily transportable valuables, transfer pricing, and using “underground banks.” Since the mid-1980s …
 Dirty money: The evolution of money laundering counter-measuresWC Gilmore – 1999 – ncjrs.govThe first chapter provides an overview of the problem, as it notes that estimates of money from criminal activities range from 300 to 500 billion US dollars annually, money that is available for laundering. Such quantities of money, often linked with organized crime …
How big is global money laundering?J Walker – Journal of Money Laundering Control, 1999 – emerald.comKnown incidents of money laundering involving large amounts of money generated from crime are of tremendous public interest and are consequently given wide publicity. A wide range of national and international agencies have attempted to quantify organised crime …
 Macroeconomic implications of money launderingPJ Quirk – Washington, Fondo Monetario Internacional, WP, 1996 – elibrary.imf.orgThis paper reviews the main analytical, empirical, and policy issues related to the macroeconomic implications of money laundering. The paper discusses, first, how money laundering can be measured, given that it is unobservable, and reports cross-section …
 Chasing dirty money: The fight against money launderingP Reuter – 2005 – books.google.comOriginally developed to reduce drug trafficking, efforts to combat money foundering have broadened over the years to address other crimes and, most recently, terrorism. In this study,[the authors] look at the scale and characteristics of money laundering, describe and …
 Money laundering: a new international law enforcement modelG Stessens – 2000 – books.google.comThis book gives a broad analysis of the legal issues raised by the international fight against money laundering. It offers an extensive comparative research of the criminal and preventive law aspects from an international perspective. Stessens portrays money laundering as a …
Money laundering: muddying the macroeconomyPJ Quirk – Finance and Development, 1997 – search.proquest.comIMF staff went to a small island country to assess economic developments. As they walked around the capital, they noticed a surprisingly large number of small banks (more than 100 in a country of less than 100,000 people). A year later, it was revealed that many of these …
Money laundering and its regulationM Levi – The Annals of the American Academy of Political …, 2002 – journals.sagepub.comThis article examines definitions of” money laundering” and the conceptual and actual role its regulation plays in dealing with drug markets. If laundering is prevented, incentives to become major criminals are diminished. It identifies and critiques three aspects of harm …
Money laundering: the economics of regulationD Masciandaro – European Journal of Law and Economics, 1999 – SpringerEconomic research has not yet systematically undertaken the analysis of the existing interactions between criminal economy and financial markets. The present work belongs to a research field increasingly interested in such issues and focuses on the economic analysis of money laundering …
Money laundering: some factsF Schneider, U Windischbauer – European Journal of Law and Economics, 2008 – SpringerThis paper tackles the quite difficult topic of money laundering. After defining money laundering, and after explaining the three stages (steps), placement, layering and integration, the paper tries a quantification and estimation of the volume and development of …
Money laundering and the international financial systemV Tanzi – 1996 – ideas.repec.orgThe IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues …
Measuring Global Money Laundering:” The Walker Gravity Model”J Walker, B Unger – Review of Law & Economics, 2009 – degruyter.comMeasuring global money laundering, the proceeds of transnational crime that are pumped through the financial system worldwide, is still in its infancy. Methods such as case studies, proxy variables, or models for measuring the shadow economy all tend to under-or …
Money laundering—a global obstacleB Buchanan – Research in International Business and Finance, 2004 – ElsevierOne of the biggest obstacles to maintaining an effective operating international financial system is money laundering. A global phenomenon and international challenge, money laundering is a financial crime that often involves a complex series of transactions and …
An inquiry into money laundering tools in the Bitcoin ecosystemM Möser, R Böhme, D Breuker – 2013 APWG eCrime …, 2013 – ieeexplore.ieee.orgWe provide a first systematic account of opportunities and limitations of anti-money laundering (AML) in Bitcoin, a decentralized cryptographic currency proliferating on the Internet. Our starting point is the observation that Bitcoin attracts criminal activity as many …
 Black finance: the economics of money launderingD Masciandaro, E Takats, B Unger – 2007 – books.google.com” The recent dramatic wave of terrorist attacks has further focussed worldwide attention on the money laundering phenomena. The objective of this book is to offer the first systematic analysis of the economics of money laundering and its connection with terrorism finance …
 Critical reflections on transnational organized crime, money laundering and corruptionME Beare – 2003 – books.google.comTransnational crime, organized crime, money laundering and corruption are four concepts that have gained and continue to gain an international and domestic profile. Is the information given to the public concerning these concepts distorted by the vested interests of …
 The amounts and the effects of money launderingB Unger, M Siegel, J Ferwerda, W de Kruijf… – Report for the Ministry of …, 2006 – ftm.nl0.4. The amount of money laundered is sizeable 0.5. Where is the criminal money being laundered and placed? 0.6. The Netherlands are a transit country of crime and criminal money 0.7. What are the effects of money laundering? 0.8. The long term dangers of money  …
The consequences of money laundering and financial crimeJ McDowell, G Novis – Economic Perspectives, 2001 – ncjrs.govMoney laundering is seen as critical to the effective operation of transnational and organized crime. However, money laundering effects a country’s economy, government, and social well-being. This article briefly reviewed both the economic and social costs of money laundering …
 Money laundering: A guide for criminal investigatorsJ Madinger – 2011 – books.google.comMany changes have occurred in the twenty-five years that have passed since the enactment of the Money Laundering Control Act of 1986. The law has been amended, new underlying crimes have been added, and court decisions have modified its scope. The Act remains an …
 The hawala alternative remittance system and its role in money launderingPM Jost, HS Sandhu – 2000 – peacepalacelibrary.nlThe components of hawala that distinguish it from other remittance systems are trust and the extensive use of connections such as family relationships or regional affiliations. Unlike traditional banking or even the’chop’system, hawala makes minimal (often no) use of any …
The fight against money launderingH Geiger, O Wuensch – Journal of Money Laundering Control, 2007 – emerald.comPurpose–To provide an economic view on the costs and benefits of anti‐money laundering (AML) efforts. Design/methodology/approach–Based on a international, comparative study conducted in Switzerland, Singapore and Germany, the authors outline the impact of AML …
Bitcoin and money laundering: mining for an effective solutionD Bryans – Ind. LJ, 2014 – HeinOnlineTechnology forges ahead at a rapid pace, whether we like it or not. Criminals recognize this inevitability and use technological improvements to advance their craft,’committing crimes from half a world away in real time. Meticulous criminals also use technological …
Corruption and money laundering: a symbiotic relationshipD Chaikin, J Sharman – 2009 – Springer
 Financial havens, banking secrecy and money-launderingJA Blum, M Levi, RT Naylor, P Williams – 1998 – amnet.co.ilThe major money laundering cases coming to light in recent years share a common feature: criminal organizations are making wide use of the opportunities offered by financial havens and offshore centres to launder criminal assets, thereby creating roadblocks to criminal …
A typological study on money launderingP He – Journal of Money Laundering Control, 2010 – emerald.comPurpose–The purpose of this paper is to make objective descriptions on various money‐laundering techniques and to put forward countermeasures in order to combat money laundering more effectively and efficiently. Design/methodology/approach–This paper …
 Reference guide to anti-money laundering and combating the financing of terrorismPA Schott – 2006 – elibrary.worldbank.orgThis second edition of the Reference Guide is a comprehensive source of practical information on how countries can fight money laundering and terrorist financing. Aimed at helping countries understand the new international standards, it discusses the problems …
 Money laundering policyPC Van Duyne – Fears and Facts, 2003 – petrusvanduyne.nlIt is difficult to argue about the nature of smells. Some of them do not even have names. But one kind of smell has certainly been nominated and changed in our appreciation: the ‘moral smell’of money. Today the adage ‘money does not smell’does not apply any more. Now we …
Responding to Money LaunderingE Savona – 2005 – books.google.comResponding to Money Laundering has its origin in the International Conference on Preventing and Controlling Money Laundering and the Use of Proceeds of Crime: A Global Approach organised by ISPAC, the International Scientific and Advisory Board of the United …
 Dirty money: the evolution of international measures to counter money laundering and the financing of terrorismWC Gilmore – 2004 – books.google.comThis is the third edition of this publication which explores key issues in the fast evolving field of money laundering and terrorist financing, and which has been restructured so as to fully reflect the high international priority given to tackling the financing of terrorism since …
Money laundering and globalizationP Alldridge – Journal of law and society, 2008 – Wiley Online LibraryThe article traces the various imperatives generated by the combination of the money laundering panic of the late 1990s with the advent of globalization. If there is to be an attempt legally to regulate laundering, it (laundering) must be a relatively serious offence …
Money launderingN Morris-Cotterill – Foreign Policy, 2001 – JSTORFrom Moscow to Buenos Aires, money laundering scandals sap economies and destabilize governments. Policymakers blame crime cartels, tax havens, and new techniques like cyberlaundering. But dirty money long predates such influences. Without unified rules …
The economics of crime and money laundering: does anti-money laundering policy reduce crime?J Ferwerda – Review of Law & Economics, 2009 – degruyter.comAnti-money laundering policy has become a major issue in the Western world, especially in the United States after 9-11. Basically, all countries in the world are more or less forced to cooperate in the global fight against money laundering. In this paper, the criminalization of …
 Dirty dealing: the untold truth about global money laundering, international crime and terrorismP Lilley – 2003 – books.google.comPraise and ReviewsEntertaining, well written and well presented.JOHN MULQUEEN, The Irish TimesPaints an alarming picture of the power and scale of todays crooked and corrupt financial world. Lilley has done his homework.THE IODS DIRECTOR MAGAZINESChoice of …
System and method for analyzing and dispositioning money laundering suspicious activity alertsBJ Kloostra, C Dalvi, BN Behm – US Patent App. 12/258,784, 2009 – Google PatentsA system and method for analyzing, dispositioning, recording, reviewing, and managing potentially suspicious financial transactions. In some cases, the system models the steps taken by a subject matter expert to reach a conclusion so that a novice can follow similar …
A theory of “Crying Wolf”: The economics of money laundering enforcementE Takáts – The Journal of Law, Economics, & Organization, 2011 – academic.oup.comThe article shows how excessive reporting, called “crying wolf”, can dilute the information value of reports and how more reports can mean less information. Excessive reporting is investigated by undertaking the first formal analysis of money laundering enforcement …
Power and discourse in policy diffusion: Anti-money laundering in developing statesJC Sharman – International Studies Quarterly, 2008 – academic.oup.comTwenty years ago not a single country had a policy against money laundering; currently, over 170 have very similar anti-money laundering (AML) policies in place. Why have so many countries with so little in common adopted the same policy so rapidly? This extensive …
 Global financial crime: terrorism, money laundering and offshore centresD Masciandaro – 2017 – books.google.comThe scope for financial crime has widened with the expansion and increased integration of financial markets. Money laundering, terrorism financing and tax crime have all changed in both nature and dimension. As new technologies reduce the importance of physical …
AI fights money launderingJ Kingdon – IEEE Intelligent Systems, 2004 – ieeexplore.ieee.orgThe bank had approached Searchspace, formed by re- searchers from the Intelligent Systems Lab at University College London in 1993. It applies adaptive and learning- systems approaches to a range of business and finance tasks. However, until then, we had principally developed …
 Transnational criminal organizations, cybercrime, and money laundering: a handbook for law enforcement officers, auditors, and financial investigatorsJR Richards – 1998 – books.google.comWRITTEN BY A LAW ENFORCEMENT PROFESSIONAL FOR OTHER LAW ENFORCEMENT PERSONNEL IN THE TRENCHES This book examines the workings of organized criminals and criminal groups that transcend national boundaries. Discussions …
Trade-based money laundering and terrorist financingJS Zdanowicz – Review of law & economics, 2009 – degruyter.comMoney laundering can be defined, generally, as the process of concealing the existence, illegal source, or application of income derived from a criminal activity, and the subsequent disguising of the source of that income to make it appear legitimate. Deception is the heart of …
The tenuous relationship between the fight against money laundering and the disruption of criminal financeMF Cuéllar – J. Crim. L. & Criminology, 2002 – HeinOnlineThis article examines the fight against money laundering as a case study of the separation between an enforcement system’s objectives and performance. To launder money is to hide its illegal origin. The fight against money laundering is supposed to disrupt laundering in its …
 Detecting money laundering and terrorist financing via data miningJS Zdanowicz – Communications of the ACM, 2004 – dl.acm.orgThe use of international trade to move money, undetected, from one country to another is one of the oldest techniques used to circumvent government scrutiny. Either overvaluing imports or undervaluing exports can achieve this transfer. If an imported prod- uct is overvalued, the foreign …
Money laundering regulation: the micro economicsD Masciandaro – Journal of Money Laundering Control, 1998 – emerald.comThe analysis of the interactions between the criminal economy and the financial markets has not yet been systematically studied by the economists. This study belongs to a current research interested in this area, ie the economic analysis of money laundering. The work is …
Money laundering: The crime of the’90sGR Strafer – Am. Crim. L. Rev., 1989 – HeinOnlineIn the Money Laundering Control Act of 1986,’codified at sections 1956 and 1957 of Title 18 of the United States Code, Congress for the first time attempted to define and prohibit a category of activity known colloquially as” money laundering.” During an election year frenzy …
Applying data mining in investigating money laundering crimesZ Zhang, JJ Salerno, PS Yu – Proceedings of the ninth ACM SIGKDD …, 2003 – dl.acm.orgIn this paper, we study the problem of applying data mining to facilitate the investigation of money laundering crimes (MLCs). We have identified a new paradigm of problems—that of automatic community generation based on uni-party data, the data in which there is no direct …
Turnover of organized crime and money laundering: some preliminary empirical findingsF Schneider – Public choice, 2010 – SpringerAfter a short literature review, the paper quantifies the turnover of organized crime with the help of a MIMIC estimation procedure for the years 1995 to 2006 for 20 highly developed OECD countries. The volume of turnover from organized crime was US-270billionintheyear1995forthese20OECDc …
Money laundering: an international challengeLA Barbot – Tul. J. Int’l & Comp. L., 1995 – HeinOnlineIn the words of South American drug barons,” dirty money is best passed through clean hands.” 1 Money laundering is often defined as” the process by which one conceals the existence, illegal source or illegal application of income, and then disguises that income to …
Money laundering and its regulationA Chong, F Lopez‐De‐Silanes – Economics & Politics, 2015 – Wiley Online LibraryThe recent wave of terrorist attacks has increased the attention to money laundering activities, and the role played by the regulatory frameworks controlling feeder activities. We investigate empirically the determinants of money laundering and its regulation in close to …
 Money laundering: a concise guide for all businessD Hopton – 2009 – books.google.comWorldwide, anti-money laundering regulations and legislation have become one of the weapons of choice of governments that are fighting global terrorism and criminality. In this updated edition of Money Laundering, Doug Hopton explains how The Money Laundering  …
Virtual money laundering: the case of Bitcoin and the Linden dollarR Stokes – Information & Communications Technology Law, 2012 – Taylor & FrancisThis paper presents an analysis of the money laundering risks of two virtual currencies, the Linden dollar, the in-world currency of the interactive online environment Second Life, and Bitcoin, an experimental virtual currency that allows for the transfer of value through peer-to …
 Anti-Money Laundering: international law and practiceWH Muller, CH Kalin, JG Goldsworth – 2007 – books.google.comAnti-Money Laundering is the definitive reference on money laundering and practice. First an outline will be given of the general approach taken by supra-national organisations like the United Nations and the European Council. Next the approach taken by international …
 Crime, illicit markets, and money launderingP Williams – Managing global issues: Lessons learned, 2001 – carnegieendowment.orgPhil Williams organized crime is perhaps best understood as the continuation of commerce by illegal means, with transnational criminal organizations as the illicit counterparts of multinational corporations. During the 1990s, transnational organized crime—and the …
 Criminal finance: The political economy of money laundering in a comparative legal contextK Hinterseer – 2002 – books.google.comLike it or not, money launderers are major players in the world’s economy. Their strategies constrain national economic policies and undermine financial institutions. With the advent of secure transfer technologies, and with the help of modern financial theories of derivatives …
A comparative guide to anti-money launderingM Pieth, G Aiolfi – 2004 – academia.eduMoney laundering is the process by which criminals attempt to conceal the source and ownership of the proceeds of their illicit activities; if successful, the criminal maintains control and access to these funds when and where he chooses. The efforts to combat this …
 Money launderingFAT Force – Policy Brief July 1999, 1999 – bahamasb2b.comThe goal of a large number of criminal acts is to generate a profit for the individual or group that carries out the act. Money laundering is the processing of these criminal proceeds to disguise their illegal origin. This process is of critical importance, as it enables the criminal to …
Money Laundering: The Scope of the Problem and Attempts to Combat ItS Sultzer – Tenn. L. Rev., 1995 – HeinOnlineMoney laundering is the process of taking the proceeds of criminalactivity and making it appear legal. Money laundering has been called the” lifeblood” of crime because, without cleansing the profits of crime, the criminal enterprise cannot flourish. While drug money  …
Money laundering law: Forfeiture, confiscation, civil recovery, criminal laundering and taxation of the proceeds of crimeP Alldridge – 2003 – Bloomsbury Publishing
Money laundering and financial means of organized crime: some preliminary empirical findingsF Schneider – Paolo Baffi Centre Research Paper, 2008 – papers.ssrn.comAfter giving a short literature review, the paper tries a quantification of the volume of money laundering activities, with the help of a DYMIMIC estimation procedure for the years 1995 to 2006 for 20 highly developed OECD countries. The volume of laundered money was 273 …
Money‐Laundering: Estimates in FogPC Van Duyne – Journal of Financial Crime, 1994 – emerald.comThe paper examines certain problems in determining the extent of money‐laundering. The author first discusses the methodological problems inherent in assessing its volume. He then discusses two methods to estimate the extent of money‐laundering. One method is …

Conservative Firms less likely to be involved in Money Laundering

A recent study has found that firms that adopt a culture of conservative accounting are less likely to be involved in money laundering scandals.

The authors used three measurements of the concept of conservative accounting, and in all three the results were the same.

The degree of conservativism is significantly and negatively associated to the firm’s risk to money laundering

Bolgorian, M., & Mayeli, A. (2020). Accounting conservatism and money laundering risk. Accounting Research Journal, 33(2), 343-361.

The study reviewed 924 firms across a five year time-span and accounted for metrics like firm size and sector in the findings. The results open up questions that the financial compliance industry may find useful to consider.

  1. The lack of regulatory framework in offshore jurisdictions may encourage firms to be less prudent with standards.
  2. The lack of requirement to submit accounts in offshore jurisdictions may cause less routine rigour in day to day activities.
  3. Offshore regions may be more susceptible to money laundering and terrorist financing simply due to these points, as well as the more liberal use of business registrations without full due diligence.

Accounting conservatism has been shown to reduce risk in the value of a business crashing via the stock price and to favour longevity as opposed to ‘quick win’ capitalistic strategy.

It follows that the concept ‘dampens’ the temptation to over state accounts within a firm and inculcates throughout the firm a more robust approach to audit.

The questions raised by the paper relate a different reasoning to offshore money laundering from the firm side of the transaction. That is to suggest that criminals come to offshore for the perceived secrecy and confidentiality cloak, whereas the firms (Law, Accounting, Corporate Support, Accounting, Audit) operate more loosely because necessary regulatory rigour is absent. This effectively inculcates a less than conservative approach to business.

We suggest because of these two aligned concepts, regulators are more likely to find money laundering, tax evasion, bribery, fraud and other white collar crime in offshore regions because the criminals want to exploit the opportunity and the firms are less likely to turn them away. if they adopt a more relaxed approach to prudence.

Firms are advised to be cognisant of this research established metric and understand the culture in their firm to reduce the risk of wittingly or unwittingly facilitating criminality.

Contact us to review your firm’s cultural conservatism.

How to Hide 2 Million Barrels of Sanctioned Oil

Avoiding OFAC/UN sanctions is like a game of cat and mouse played out on the world stage. The players are office-bound analysts checking transactions for sanctioned individuals/nations, shipping lines trying to disguise their routes, customs and excise on both sides of the trade and the regulators honing in on troubled states.

Currently we have Iran and North Korea trying to peddle their wares through international trade. Oil from Iran and Coal from ‘Rocketman’ Kim Jong-un.

In this post we will describe how the two nations sneak their trades past banks and regulators using nefarious and devious tactics to avoid detection, focusing on oil from Iran.

In any deceptive activity one of the core methods is the art of disguise. And no matter what crime type, all crimes present opportunities to detect through Locard’s law. That is to say, in every crime a criminal will leave behind evidence, be that trace, physical or nowadays digital.

With that last paragraph established, any good ML analyst or Compliance Officer needs to consider how Iran is disguising activity and what can be used to link North Korea and Iran to sanction offences.

Going further, who else in the chain is culpable? What other international actors are involved in the chain – the financial chain or the customs chain?

Hide 2 million barrels of oil…

I’m going to focus on the movement of 2 million barrels of oil, at today’s prices about $64 million.

The Strait of Hormuz is a busy shipping lane. 21 million barrels of oil move through the strait every day – at least when we’re not in the middle of a pandemic anyway.

You would think moving a hulking great tanker full of oil would be impossible to do stealthily. Yet not so fast. In the image you can see the shipping traversing the strait on a busy day. Those markers are satellite tracking markers, tracking every ship on its route. The first step to break the link is to switch the tracker off.

This clearly hides the ship from satellite tracking and means the ship can go literally anywhere. So long as it stays out of the way of any military assets that will be able to spot the ship through a much more human way – the eye-ball!

So the next step is to obfuscate further by re-badging the ship to a neutral country, like the British Virgin Islands. Registering it with a ‘one ship’ company that has no place in the BVI other than to hide identity. Changing the ships name to further confuse what the tanker is doing in the strait.

Then the ship can simply meet up with another tanker and transfer the load, ship to ship out at sea or even in the strait itself. The re-badged ship will be on a bogus journey between two innocent states, making it look like the oil is coming from a legitimate source. And so the oil is transferred to the ship that then transports the oil to its destination.

An analyst searching the ships name for adverse inference will now find nothing – the new ships name can even replicate another ship on international registers further confusing the picture.

The focus now is on the paperwork. A credit letter from a credible bank to confirm buyer funds for transfer to the seller – usually from affiliate branches to large western banks and you are halfway through the financial trail. Of course not providing links to any individual or entity that is sanctioned. Credible explanation of goods in transit and value raise no flags – neither does the pick up port of the re-badged ship, nor the drop off port, which of course are both false.

Weeks later and the bill of laden offers no further insight, matching details of the credit letter and the beneficiary bank see’s no reason to suspect, so again the transaction is approved while the ship is in transit.

No alerts have flagged about the ship, the cargo nor the owners on either side as to sanctioned lists. The crime is complete.

Or is it?

There are more detailed checks that could go on to uncover this activity. A review of the historical shipping data would see the tracking switched off for significant periods. It would show the ship not following a course that indicates the identified journey is being taken, more that the ship is off track or offline altogether. The fact the ship has changed name and registration data, the fact it failed to visit ports as frequently as it ought to have, the fact its draft is wrong; these are all good red flags to something being awry.

So much so, the recipient bank should have refused the transaction and reported the activity to their local FIU.

The problem we have is putting the right tools in the hands of the Compliance Officer. Imagine a tool that identified automatically the tracking history of the ship, tracking days offline, days out of port, cargo transited and more. Imagine draft data to show the ship laden or not. Imagine data to indicate registration of the ship and identifying recent changes in ownership, name or locality. Imagine data that identifies the ship in red flag zones, like the strait.

That is all possible with the right IT provision. Now imagine it embedded with other more traditional checks, so the system flags automatically when things are not quite right. Reducing the foot-work of staff to only alert when flags are alerted collectively.

This is the provision we are planning. Building a networked solution, integrating software already in place, to facilitate one solution, one check, one result. Reducing false positives and focusing with a laser to uncover the real activity.

Talk to us for more.

Money Laundering Definition – How to understand what it is…

What is Money Laundering?

Money Laundering Definition
Money Laundering Definition

This post will help you to understand the basics of money laundering and at the foot of the post are some world renowned research papers, references and links to other content.

Money Laundering is essentially cleaning ‘dirty’ money to make it look clean to authorities. There are many, many methods to clean money. We have detailed many of them on this page.

Money laundering is defined as:

Money laundering is the illegal process of concealing the origins of money obtained illegally by passing it through a complex sequence of banking transfers or commercial transactions. The overall scheme of this process returns the “clean” money to the launderer in an obscure and indirect way

The process of money laundering is divided into three separate stages.

Placement, Layering, Integration - 3 stage money laundering
Placement, Layering, Integration – 3 stage money laundering
  1. Placement – Placement is essentially entering the dirty assets into the real economy. It can be putting it into a bank, buying shares or stocks, purchasing an asset like a house or gold, something that takes the dirty cash and uses it to enter into the money chain.
  2. Layering – Layering is ‘obfuscating’ the source of the money. Clearly, if you’re a drug dealer, you don’t want the authorities easily tracking the cash in your account to your illegal activities. So you might buy gift cards with it in cash and then sell those via an online market putting the money into your account from there. Or you might use ‘Smurfs’ (runners who deposit under threshold amounts of cash into an account to enter it into the financial system). Layers are usually multi level – each level dissapating the link back to the source.
  3. Integration – This is the stage where the money is used legitimately. The now clean money is used to buy every day objects- although for major money launderers this might be large ticket items like property, vehicles, boats, gold, yachts even planes. Anything to transfer the money back out of the financial system into tangible goods.

The best money laundering schemes use corporate vehicles in offshore territories that allow businesses, trusts or funds to be set up using nominee directors. This hides the real ownership of the assets and makes tracing it difficult for investigators – note I said difficult, not impossible.

MLAT - legal help to investigate Money Laundering
MLAT – legal help to investigate Money Laundering

Moving assets overseas repeatedly, in a kind of multi-national ‘tumbler’ also hides the real source of the asset and further adds bureaucratic layers for investigators to overcome. A US cop has no authority in the Bahamas for example. While there are ‘MLATS’ (Mutual Legal Assistance Treaties) between most developed nations, the time it takes to get responses to inquiries leaves investigators chasing shadows as the skillful launderer moves the money again before the response to his MLAT is received.

Resource for more reading…

Peter Temple, Essential Elements of the Prevention of Money Laundering, (Securities Institute Washington DC)

William C Gilmore, International Efforts to Combat Money Laundering, (Grotius Publications, Cambridge)

Peter Lilley, Dirty Dealing: The Untold Truth about Global Money Laundering,(Kogan Page Limited, London)

Guy Stessens, Money Laundering, (Cambridge University Press, Cambridge)

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N.C. DeAssis & S.M. Yikona, Financial Sector Development and Money Laundering, (Mission Press, Zambia)

Sandeep Savla, Money Laundering and Financial Intermediaries, (Kluwer Academic Publishers Group, Dordrechdt)

FATF. Financial Action Task Force on Money Laundering website.

http://www.countermoneylaundering.com/ By antimoneylaundering.net

IMF website on money laundering, very useful when looking at the financial implications of money laundering.

Schroeder, William. “Money Laundering: A Global Threat and the
International Community’s Response,” FBI Law Enforcement Bulletin:
http://www.fbi.gov/publications/leb/leb.htm

United Nations Office for Drug Control and Crime Prevention

U.S. Department of State. Money Laundering and Financial Crimes.
Washington

International Monetary Fund. Enhancing Contributions to Combating
Money Laundering: Policy Paper. Prepared by the staffs of the
International Monetary Fund and the World Bank. Washington, D.C.:
IMF, 2001.



World Bank website, deals primarily on the macro-economic consequences of money laundering.