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More focus required on professional money launderers

International Compliance Association

AML , Big Comp Convo

The Financial Action Task Force (FATF) has recently produced a report looking at the ways in which individuals and organisations, known as professional money launderers (PMLs), are charging fees or commission for providing a money laundering service to criminals.

 

A PML is a subset of third-party money laundering, which the FATF define as the laundering of proceeds by a person who was not involved in the commission of the predicate offence. What sets a PML apart from other third parties is that they provide their services in exchange for a commission, fee or other type of profit.

 

One of the findings from the recent fourth round of mutual evaluations performed by FATF has been that many countries limit their anti money laundering (AML) investigations to ‘self-launderers’ – criminals who launder their own proceeds of crime – and tend to ignore money laundering activity through third parties. This has enabled the services provided through PMLs to flourish in many jurisdictions.

 

Anti money laundering

 

How do PMLs operate?

 

PMLs tend to belong to one of three categories:

  • an Individual PML – specialises in providing money laundering services while also acting in a legitimate professional occupation
  • Professional Money Laundering Organisation (PMLO) – a structured group or two or more individuals, whose core activity is laundering funds
  • Professional Money Laundering Network (PMLN) – usually operates globally as a collection of associates who work together to facilitate money laundering schemes.

 

Generally speaking, PMLs follow a three-stage process when executing a money laundering scheme.

 

  1. In the first stage, funds are transferred, physically or electronically, to PMLs or to entities operating on their behalf. The precise manner of introduction of the funds into the ML scheme varies depending on the types of predicate offence(s) and the form in which criminal proceeds were generated.
  2. In the second stage, or layering stage, the majority of PMLs use account settlement mechanisms to make it more difficult to trace the funds. A combination of different ML techniques may be used as part of one scheme. The layering stage is managed by individuals responsible for the coordination of financial transactions.
  3. In the last stage, funds are transferred to accounts controlled by the clients of the PML, their close associates or third parties acting on their behalf or on behalf of affiliated legal entities. The PML may invest the illicit proceeds on behalf of these clients in real estate, luxury goods and businesses abroad (or in some cases in countries where the funds originated from). The funds can also be spent on goods deliveries to a country where the funds originated or to a third country.

 

PMLs will not be involved in the activities that initially generate the proceeds to be laundered; that will be done by the criminals themselves. Instead, the PMLs will utilise their expertise in constructing appropriate schemes to launder the proceeds in return for a fee or commission.

 

The services offered will usually be in the form of a menu of generally applicable services, which will follow well-practised laundering techniques, and could include identifying investments or purchasing assets, establishing companies or legal arrangements, acting as nominees, managing a network of cash couriers, creating financial accounts and providing account management services.

 

Offering a pre-determined menu of services in this way allows PMLs to deliver to multiple criminal groups through established routes, rather than develop bespoke routes for each criminal client individually. It’s a very efficient business model.

 

What impact do PMLs have on global money laundering?

 

As already mentioned, many countries focus their AML resources on the criminals who are laundering their own money, and there is some success in the measures being adopted here. However, this has allowed the PMLs, to a certain extent, to provide money laundering services undetected, and this activity continues to grow. 

 

Although PMLs are usually not involved in the predicate offences that generate the proceeds to be laundered, they are fully aware that the money they move is not legitimate. Their primary concern is ensuring the proceeds reach the destination by the safest and most efficient route. With this in mind, the PML will use any number of money laundering tools and techniques to achieve this result, such as international trade, underground banking and account settlement schemes. Some of the methods used include:

 

  • consulting and advising
  • registering and maintaining companies or other legal entities
  • serving as nominees for companies and accounts
  • providing false documentation
  • comingling legal and illegal proceeds
  • placing and moving illicit cash
  • purchasing assets
  • obtaining financing
  • identifying investment opportunities
  • indirectly purchasing and holding assets
  • orchestrating lawsuits
  • recruiting and managing money mules.

 

The above suggests that the impact of PMLs on global money laundering is definitely significant.

 

What can be done to mitigate the risks presented by PMLs?

 

In order to do anything about the risks presented by PMLs, authorities must first be able to identify who they are. Understanding the types of individual or organisation prone to this activity is important, so some focus should be given to the likes of lawyers, accountants, money value transfer services, trust service providers, tax advisors, dealers in precious metals/stones and real estate professionals, to name but a few. These entities can use their occupation, business infrastructure and knowledge to facilitate money laundering activities.

 

Even bank employees can provide certain services to enable money laundering to go undetected, such as monitoring (or not) of money flows to and from controlled accounts, coordinating financial transactions and accepting fictitious client documentation.

 

Once identified, authorities should look to develop strategies that will disrupt the activities being undertaken by these entities. This will include law enforcement and supervisory action that utilises appropriate regulation at a national level, but also, crucially, allows for cooperation between international jurisdictions and the sharing of relevant information.

 

Conclusion

 

What is apparent from the report is that if authorities can focus their energy and resources on tackling PMLs, it will go a long way to reducing the amount of global money laundering that takes place. Perhaps the information and recommendations put forward in this report will help encourage this change of focus.

  

 

This article forms part of the #BigCompConvo - Join us as we explore and debate the latest challenges and issues facing you and regulatory and financial crime compliance professionals all over the world. If you’d like to contribute an article as part of the Big Compliance Conversation get in touch with us at contributions@int-comp.org

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Want to find out more?

The ICA Certificate in Anti Money Laundering provides an excellent introduction to anti money laundering and is a good basis for further study in the subject.

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