The techniques used by money launderers are many and varied: they evolve to match the volume of funds to be laundered and the legislative and regulatory environment of the various jurisdictions in which they are laundered.
The sophisticated money launderer usually seeks the part of the financial sector, which is the least resistant or the weakest. For example, in a cash based society that has lax legal and regulatory controls, little effort is required to disguise illicit cash or its ownership. The criminal will fund his lifestyle in cash, or, where funds need to be transferred or surplus funds deposited or invested, the launderer will deal directly with the banks in order to abuse basic banking facilities. By having the funds laundered through banks, launderers are attempting to legitimise their criminal monies.
Where cash is not the norm and legal and regulatory controls are sound, greater effort is required on the part of launderers to disguise the criminal source of funds and also their beneficial ownership. Launderers might have to set up corporate structures and trusts (both onshore and offshore) and attempt to present an appearance of legitimate commercial or financial enterprise as a disguise. It will be an added advantage if such corporate structures can be set up in jurisdictions where legislation and regulatory controls are lacking or where there are strict confidentiality controls. It is important to note that the money laundering techniques used by criminals will evolve and change according to the development of products and services pertaining to banking and other financial sectors.
There will also be cases in which launderers will develop methods/techniques that will be ‘new’ to the financial services industry. A case of catch-up will then commence.
The ‘dynamic’ nature of money laundering techniques is evident by the regular typology exercises conducted by the FATF since the mid 1990s, and more recently, by other international and regional bodies. The reports of these exercises are available via the Internet. They should be considered essential reading in order to keep up to date with emerging trends.
These typologies confirm that money launderers are becoming more sophisticated and adventurous, using areas in the economy that were previously considered ‘safe’ to launder their illicit funds. Enforcement agencies around the world recognise that money launderers are increasingly targeting non-bank financial institutions (NBFIs). This suggests that money launderers are forced to look elsewhere because of increased vigilance on the part of traditional financial institutions. Money launderers are now seeking to build new barriers, e.g. by using intermediaries or setting up front companies, between themselves and financial institutions. The increased use of ‘professional launderers’, such as lawyers and accountants who are referred to as ‘the gatekeepers’, is a growing concern.
According to recent research, property purchases, cash rich businesses and front companies are now the most frequently identified methods for laundering money in the UK. Consequently legal professionals covering conveyancing and accountants undertaking auditing and book-keeping have an important role to play in combating money laundering.
Money laundering typologies and techniques tend to fall into a number of discrete groups. Customarily all typologies/techniques reflect variations upon the basic money laundering process.