Insight

Old crimes, new methods

Written by David Povey on Monday December 6, 2021


Times and technology may change, but the fundamental means by which criminals attempt to launder money and carry out their nefarious acts are still rooted in the same criminal process – commit a crime, evade capture and benefit from the proceeds.

Here, we will highlight traditional money laundering methods and show how they are now being conducted using slightly different, and in some cases more technical, means.

 

COVID-19 forced criminals to find novel ways of getting their illicit funds into the financial system. Typically, criminals would deposit cash in high street banks, but with lockdowns all over the world and the closure of physical banking facilities, they have had to explore new methods to keep the criminal underworld turning. Moving into online banking was just the first step; but entering the cryptoasset space has really seen criminals kick on.

Old crimes, new methods

Below we will take a look at a number of criminal methods that are involved in money laundering and compare the more ‘traditional’ approach to what we are beginning to see today. A quick key point – we’re not saying that new ways are replacing the old ones, which are still taking place. We’re simply shining light on some of the emerging challenges in preventing money laundering.

 

Criminal methods

 

Smurfing

  • Criminals split large piles of cash between individuals to deposit into different bank accounts around the country in an attempt to avoid detection.
  • More recently this is being done by splitting cash between individuals and then making multiple fiat deposits at cryptoasset ATMs up to the standard deposit limit or at frequent intervals.

Deposit and withdrawal

  • Money that is deposited into an account but then withdrawn almost immediately is a classic sign of criminal activity, especially if it is repeated on numerous occasions.
  • With advances in technology, this can be carried out by a customer suddenly receiving a large amount of cryptoassets directly from a decentralised exchange-associated account and then attempting to cash out immediately.

Multiple deposits

  • Criminals are aware that depositing a large amount of cash raises suspicions amongst bank branch staff. To avoid this, they will often break their money up into smaller amounts and deposit them over a short period of time.
  • Today, we have seen high-value funds sent from multiple cryptoasset addresses via ATMs to a single recipient wallet address, again over a short period.

Targeting the elderly and vulnerable

  • Mail order and telephone scams that target the elderly and vulnerable have been a constant stream of revenue for criminals. By applying pressure in person or over the phone they can convince victims into handing over large amounts of savings.
  • The elderly and vulnerable are still targeted by criminals, but now in even more complicated ways. People who do not understand cryptocurrencies and who may appear confused when questioned about their activity are prime targets. Criminals will deliberately overwhelm them with complex details, convincing them to invest large amounts of money before disappearing with it all.

Gambling

  • Casinos have long been used by criminals to launder money. The process of simply exchanging cash for chips and reversing the process is the purest way of cleaning money. Much has been done by casinos to increase KYC legislation and to better police this practice.
  • Criminals, however, have now turned to online casinos, both those that accept physical money as well as cryptocurrencies, and this has proven to be very effective for cleaning illicit funds. Chips are purchased using the dirty money with new funds received when they cash out their winnings. This is the same process as traditionally conducted in brick-and-mortar casinos, only now using cryptocurrencies in an attempt to evade suspicion.

Prepaid cards

  • Loading up a prepaid card using cash from illegal activities is a tried and tested way for criminals to move money and avoid the financial system.
  • Criminals today move funds directly from an illicit source – such as ransomware funds or Dark Web drug proceeds – to a cryptoasset prepaid card provider to use for rapid conversion into fiat, or to purchase physical goods and services.

What can you do?

Whether working in compliance, finance or any other industry, it is important that we keep a look out for these new techniques being utilised by criminals. A wise man once said that the definition of insanity is doing the same thing over and over again and expecting a different result; if we go on looking for the same methods being conducted in the same ways, then we are going to miss a huge amount of criminal activity. By looking for the basic premise of money laundering, rather than the method used, we will be better positioned to spot subtle (and more obvious) attempts to launder illicit funds.

 


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