What AML Operators Need To Know About Illicit Trade.

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Multiple forces are at play on the world stage to facilitate illegal trade globally. Many will say that human greed is at the heart of it, others will blame over regulation; these two factors influence nation states that struggle to compete and are held to ransom by major corruption or criminality. It’s not so much one for all as ‘one for one’ in those economies driving the economy ever downward as legitimate business flees.

Afghanistan is a case in point. At war for over 45 years with differing nations, an entire generation knows how to do little but survive. And if surviving means you look after your family and beggar everyone else so be it. USD flows in to support the fragile democracy, and flows out in corruption, drugs and laundered/smuggled cash.

Illicit trade is growing. In today’s globally connected systems, money, goods, services and people are traded as commodities across international lines. Technology attempts to control this but fails miserably as the mnemonic ‘GIGO’ abruptly demonstrates. If a human puts garbage in, it’s garbage that comes out. I refer here to the ease with which criminals can over or under invoice or over/under the volume of goods thereby transferring the value across international lines with ease.

And of course it is much easier to abuse invoicing for services as they aren’t a physical asset. Consider Paul Manafort and his multi million charges for ‘political advice’. Really?

The declining role of the ‘superpowers’ and democratization of commerce through increasing technological advances, shipping and skills in ‘third world’ states has hastened a gap that criminals, terrorists and insurgents have filled. The US and EU have been focused on their own economies watching manufacturing flow to China and India and this has hastened the populist movements on both continents (among other political moves, migration being one).

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Into the vacated space and the new world economy of ‘ship it’ criminals have flourished. Trading as legitimate businesses exchanging invisible goods and services from ‘political advice’ to ‘shell company finance’ the technology cannot keep up to identify laundering and tax evasion. Criminals rather than being stopped by technologies ever increasing advance, have harnessed it. Using technology to communicate, transfer value and trade illicitly via the dark web. Nefarious forces are benefiting more from technology than not.

This is somewhat concerning as ‘Regtech’ moves into the market in huge volumes of investment to ‘solve’ the problem that technology created in the first place. While the use of Artificial Intelligence is welcomed to streamline ‘false positive’ reporting of transactions and customer checks, it should not be seen as the answer. Technology will not solve the problem of illicit trade in any form. It is a false dawn being beckoned in.

The answers to solving illicit trade are within the gift of public policy makers. The sheer yawning gaps in nation state disparity, lack of understanding of the limits to growth and the growing necessity to control global warming are inextricably linked to criminality and terrorism. Of course these are huge global issues that aren’t solved on a banks shop floor but it is always wise to have an understanding of the problem as it relates to the macro not just micro world we live in.

It is not possible for individual states to control illicit trade or money laundering as the flows go ‘to and fro’ across borders . That is obviously why we have FATF, Wolfsburg and the Basel Committee to name but three geo-political organisations. Yet the responses from the global institutes focus the problem on the shop floor of banks. Guiding policy to focus on SARS.

Sar filling

Bringing in a RBA to global finance has merit, of course it does. Focusing that down to the micro environment has some merit. But the sheet volume of effort to create literally millions of alerts is folly. It is a huge waste of resource that could and should be spent on more effective means in a true public/private partnership that requires a more joined up approach to the problem. Even a street dealer knows the limit of a cash drop to avoid an alert. Not only are SARS ineffective, they are actually clouding the problem.

Elephant tusks.

Illicit trade has been around for centuries. From the real Silk Road, to Mesopotamia and the Aztecs through to intra-state micro level poaching on a royal estate. Nowadays, it isn’t technology driven, but aided. It is a human driven concept to ‘do the deal’ . Weighing risk to reward. The common global presence of stolen property, piracy, counterfeiting, human trafficking and laundering, in all corners of the globe is evidence of that. From the natural disasters causing the smuggling of food and shelter, harbouring it from Government requisition so it can be sold, to failed nation states and the PEPS raping and plundering assets, these are humans doing bad things to others.

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Yet the global focus on RBA boils down to micro actions within financial institutes that fail to deliver any meaningful results. I repeatedly quote that it is estimated just 1% of laundered value is recovered globally each year. That is the only figure that matters because it is ultimately the outcome of input.

Challenges outside the scope of individual institutes such as, a decline of the Earth’s resources, extreme weather disasters, conflict, displaced people and under employment are just five drivers of illicit trade. Humans escaping adversity. Add in to the mix a burgeoning world population to 7.4 billion, declining resources such as fish in the sea and the macro view isn’t rosy.

It is estimated (UN) that 68.5 million people are displaced globally. Be that through conflict, natural disaster or desertification (mainly due to palm oil trade). That’s almost 1% of the world’s population, the highest volume since records began. Again the rise of populism can be seen from this as migrants flooded Europe, and the US is building a wall on its Southern border. This for migrants, often means life and death situations. Poverty fueling human trafficking and abuse for example. People resorting to depraved acts to survive, abusing each other on a micro level while the profits go to those in influence. Inadequate aid and provision pushing people to do acts that wouldn’t be discussed over breakfast in a traditional western setting let alone contemplated.

In a South Sudan camp for displaced people a seconded British Police Officer was trying to set up ‘community’ policing. Basically get them to police themselves because there wasn’t enough ‘real cops’ to police the camp. He uncovered the retribution for rape was to tie the offender to a tree and castrate him. It is as feudal as that. This is human reality on the verge of survival.

Morocco disturbances

In Morocco a fisherman jumped into a garbage container after his illegally caught fish were seized. He was crushed in the machinery and died. Sustained rioting in Morocco ensued as the populous sought justice for a man who was trying to provide for his family, a man with little to his name, yet the authorities were failing to replace labour for the fishermen caught up with a reduced living. The protest wasn’t just about the fisherman but the corruption keeping those in power in a life that can only be dreamed of by the fishermen. Who do we prosecute the fisherman or the corrupt?

In India a parent will sell their child for a fixed number of years, forced to by abject poverty to afford medical bills to secure the rest of the family’s survival. These are daily choices faced by the vulnerable in our global civilization.

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In the neighbourhood that you reside in you may see these issues on a smaller scale. The lack of opportunity for today’s youth. The need for some to turn to criminality to survive; the same issues the Moroccan fisherman faced but in a contemporary suburban setting in New York, Paris or London.

But what does it all mean? The sheer size and complexity of the problem only serves to confuse. If you’re working as an AML officer in a bank, what does this mean to you? How can you make a difference? Are we, as an AML industry actually solving anything?


Without understanding the causes of illicit trade we can’t secure a resolution. This has been going on for centuries. AML should not be about catching a street dealer in Chicago trying to launder his cash. As much as that’s a problem and needs dealing with, it should not be a banks job to uncover that. Especially when you consider just because someone is structuring payments doesn’t mean they are laundering cash. It is highly suspicious but not criminal to make multiple drops of under threshold cash.

Illicit trade survives because states, companies and powerful individuals benefit from it. Illicit commerce has helped to build as well as destroy whole nation states. States can obtain competitive advantage through illicit trade, it’s as old as raids on the caravans of the silk road. Consequently, when states are involved there is a lack of political will to resolve it. Consider Great Britain at the height of her power using drug smuggling into China to undermine the power structures in the 1800s. Now consider the Chinese illegally produced fentanyl pouring across US borders.

Consider for a minute if sanctions cause more or less illicit trade. Iran selling oil through a Turkish bank or N Korea selling drugs through the US and Sudan surviving on smuggled gold sales. Sanctions cause economic hardship that should mean AML operations focus with a laser expecting movements in trade and value from traditional routes to others less so.

AML should be about laser focus. Criminals aren’t nice people but it is easy to understand why some are driven to crime. The police catch the easy prey., the visible prey, the street dealer. They don’t have the resources to pursue, in any detailed way, the significant money launderers at play across borders. There are significant structural issues to prevent them.

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AML needs to focus on the real launderers and terrorists. The real PEPs, criminals and terrorists who do it not to survive or live a ‘normal’ life. But do it to secure obscene wealth, privilege and power. Who abuse others, not even with their own hand but through convoluted webs of others/technology or shell businesses.

Criminal moving money
Criminal moving money

As AML operators you should have focus for the real criminals. They won’t present in a hoody. They won’t present as suspicious. But they will present because they have to use the financial system. And they will hide their criminality without a hand upon it. So digging is most definitely required. Report up what you see, maintaining an investigative mindset to follow the evidence. Don’t be dissuaded by others if you have a gut feeling. Experience has shown me that gut feelings are frequently well placed.

If you lead a team of AML operators listen when one of your team uncovers something. Follow the evidence and ensure it is investigated. Ensure you give time and space to allow a genuine inquiry into the activity. Report up what you are finding and do not be dissuaded from acting. Encourage collaboration with other institutes and public authorities. Maintain a network to support you and them. Set up networking events and conference calls. Talk to each other about what you’re seeing.

If you’re a policy maker consider for a minute this figure.


If you’re setting policy you are being judged by all on that outcome. There is a dire need for global cooperation on investigation and prosecution of the significantly influential, powerful and wealthy. It isn’t about setting guidelines FATF style, as good as those are. It’s about setting requirements. A global system should have global power not just persuasion.

The power to seize on suspicion until lawful and legitimate inquiries can be conducted with the acquiescence of the state, business or individual. Criminal sanctions should follow for any and all criminals uncovered with prosecutions and fines levied going deep into the system for those aiding and abetting criminality.

Heroin Trade

National Security’ is a phrase over used to protect PEPs from International scrutiny. It is a shroud used to protect the influential and should be legislated upon internationally to actually define it against a common global standard. This was evident when the US and its allies ignored the drug trading of the Karzai family in Afghanistan. Ignored for political expediency rather than the pursuit of natural justice.

It’s time for change. CYW play a minute part in this global picture. But we do aim to play a part as we pursue criminality at the highest level through all means. If you’re sitting in an office now, knowing you’re seeing flows of laundered money contact us. We are here to help. Our whistle-blowing app is coming which will allow you to report anonymously and through an end to end encrypted means. We look forward to hearing from you.

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