How to Clean Billions in Dirty Money….

Criminal moving money

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What does it mean to clean money?


The term was coined to detail the industrial process of cleaning money over and over again in huge volumes. Doing so through a series of shell companies and by a business set up of ‘financiers’ able to hide the real location of the money through legitimate looking business.

Cleaning  dirty money
Cleaning dirty money

Azerbaijani, Russian and Troika laundromats have been operating hidden in plain sight drawing in even the large banks to the murky world of dirty money. But how have they achieved cleaning $250 billion without raising attention to their criminality earlier? How did they get away with it for so long and what can the AML industry and regulators learn from this?

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I am constantly frustrated with the governance and management of AML, locally and globally. Here’s why;

  • There is under investment in AML;
  • It is extremely bureaucratic;
  • Front-line staff have no criminal awareness or training to speak of;
  • Governance is politically motivated;
  • FI staff can still be corrupted and go undetected;
  • Focusing on small fry obfuscates the major criminals;
  • A global investigative function is needed;
  • A global legislative function is needed;
  • Coalescence around one governance body and process is needed globally.

While huge laundromats are operating in plain site, we cannot accept nor acquiesce to the status quo which is clearly failing spectacularly. It is clear the operators of such cleaning industries are intent on hiding their operations but the fact they are operating with virtual impunity through open legitimate channels indicates just how poor the AML fight is globally.

How to Blow the Whistle on Money Laundering and Tax Evasion


The laundromats use a range of processes to operate. They are operated by paid administrators who are employed to move money round and round the legitimate system, through complex set ups of shell companies in apparent trades across jurisdictions. They take advantage of different legal and corporate boundaries to create barriers to uncovering the operation.

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But these guys are clever. They choose their prey very carefully and it is not beyond them to have analysis of weak areas of the system so they choose their prey ‘wisely’. They are, effectively, a professionally run criminal enterprise.

  • They choose small regional banks to avoid the more significant AML provision of the top tier banks – this to introduce the funds to the legitimate system. They do this because it is easier to ‘control’ elements in small banks than large tier one where there will be more levels of checks and more complexity to obtain control.
Regional Banks
Regional Banks
  • They create shell companies in legitimate regions like the UK, New Zealand and to a lesser extent, Cyprus and Hong Kong to commence a web of businesses to transfer the money between.
  • They choose ‘legitimate’ regions but then place beneficial ownership of the first tier of businesses in less transparent jurisdictions to provide a second layer of secrecy to the owner of the shell company.
  • Offshoring the Beneficial Ownership hides from subsequent investigators who it is that is behind the movement of money. Doing so as a second tier of the shell company creates a level of distance to the offshore locality that would potentially cause further enquiry into the shell company by account holding banks. Further layers like this are created, dividing up the beneficial ownership between different structures to again further complicate the network of ownership.
  • They then commence washing the money round and round the system, administrators employed to move the money in apparent legitimate cross border trading.
  • They use correspondent banking systems to move money across borders and back again. Cycling it through the network of bogus businesses and layers of beneficial ownership.
  • Movement of funds is rapid to prevent significant build up of credit balances that would raise potential suspicion.

Russian money moved through these industrial scale washing machines comes from a range of sources. Mafia, crooked business men, PEPs or simple traders and ‘normal’ people looking to move money out of Russia without notice.

Cash washing
Cash washing

International Sanctions can increase the level of activity. This is just one reason why global investigative and legislative control over AML needs to be in place. Operating from an intelligence led system, such a governance system would clearly ramp up activity around business transactions as they come out of sanctioned countries or individuals; especially as UN action is either imminent or actually in authority.

When cleaned the money is integrated into the legitimate economies with few globally escaping dirty money. Homes in New York, London and Paris. Yachts moored in Cannes, Monaco or the Caribbean. Jewelry around the necks of the ‘legitimate’ wealthy (at least in public). The ill-gotten gains are spread around the globe with apparently legitimate assets in open view and accepted as legitimate when held by the ‘respectable’ rich.

What is repeatedly coming to notice in these huge AML scandals is the apparent coalescence of AML and Banking staff within banking institutions. Either that or inadequate and/or ignorant banking institutions relating to their global responsibilities.

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The subsequent investigations into these operations needs to go deep and be relentless holding individuals to account both civilly and criminally. This, again, points to our view that the time is right for a global investigative and legislative body capable of bringing to justice those caught with their hands in the till. With the sheer value of fines being levied it isn’t beyond possibility to fund such a global body from the fines enforced.

Intelligence led ‘policing’ of the Financial Markets/Industry would include a macro view of the industry and led investigators to cause action in politically active environments. Examples would be;

  • A focus on the Soviet Union as it dissolved;
  • Venezuela focus on PEPs;
  • Iran sanction focus;
  • You get the picture…

The current governance with ‘guidelines’ issued by FATF is clearly not working. The focus on ‘Risk Based’ programmes is not working. In fact, it’s causing utter bureaucracy that essentially covers the biggest frauds. There is too much political interference and ‘plays’ by nations looking after their own interests rather than those of the global market and vulnerable citizens in countries impacted by corruption.

Are you confident your RBA is working? Talk to us.

Understanding the level of this criminality isn’t difficult. Getting countries/regions to cooperate around a global body that has bite most definitely is. It’s the politics that causes the problem not grasping of the issues.

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What does the AML industry take from these huge operations?

Banks need to understand beyond the layers of business. They need to identify how they can understand the transactions and activity between remitting, receiving and external accounts, identifying links to common ownership, common registrations/addresses, volumes of trade not just value, doing so in a recognized intelligence led system that isn’t ‘just’ monitoring transactions.

Smaller, regional banks need to understand they are targets for big dirty financiers. Especially those in close proximity to ‘risk’ jurisdictions and with correspondent facilities.

Banks need greater scrutiny of their staff. Legislative changes may be needed in some regions to allow banks to intrusively supervise their staff holding vulnerable positions. These professionals need remuneration that causes a consideration of the risk/reward matrix to reduce corruption potential. A more significant vetting process needs to be conducted that goes deep into the job holders background/connections/assets. Vetting needs conducting on them in a cyclical process with external record keeping.

C suite executives need to understand AML and be drawn in to decisions/information that effectively makes them criminally liable when scandals come out. A process/system to prevent a claim of ‘lack of knowledge’ of what is happening in their bank. A paper trail of decisions that puts them at the heart of prevention that is legally a requirement and criminally a responsibility.

Align your AML strategy to actual operational activity. Talk to us.

Lawyers, professional advisors and accountants need to have their ‘legal privilege’ removed during investigations to uncover paper trails and money movements through them. This could be achieved through a ‘middle’ way between them and the prosecuting body, only passed when the evidence of collusion is clear.

Integrating bodies/outlets into the real economy need drawing in to enforce inquiries via AML software providers that records the enquiry to enable tracking of assets post the uncovering of the laundromat. So whether you’re selling a yacht, a jet, a villa, jewelry or an investment product there is a legal requirement for you to record that sale and to enquire into AML via auditable recorded search. Those that don’t, need to be held accountable criminally.

Finally, there is need of a globally active whistleblowing application that allows individuals within banking institutions to report in complete anonymity. For those reports to be protected with end to end encryption. While some may see such a system as a threat, the industry needs to understand that in some jurisdictions standing up to be counted is significantly dangerous.

Better they report up than out. Talk to us.

A system to report internally in a jurisdiction that has corruption at it’s core can be a physically dangerous thing to do; especially when it’s likely elements of the legal/law enforcement system is involved in corrupt practice.

Talk to us about it.

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