Cyber-laundering, The New Face of Money Laundering in the Digital Age
The internet brings convenience in carrying out daily activities, no exception for money laundering. Therefore, the term cyber-laundering has emerged, the simple definition of which is the practice of money laundering carried out in cyberspace through online transactions. In principle, cyber-laundering is the same as the conventional money laundering practice which consists of three stages:
- Placement, placing dirty money into a legal financial system.
- Layering, transferring or changing the form of money through complex transactions to obscure the origin of funds.
- Integration, returning money that has been ‘laundered’.
Unlike the conventional money laundering, the online transactions offer a wide range, speed, ease, and low cost for money laundering perpetrators. In any corner of the world, the perpetrators can launch their actions as long as there is internet access.
Money laundering mode with online transactions
- E-Commerce
The perpetrators can leverage e-commerce as ‘washing machine’ for their dirty money through a legitimate payment processor. For example, last year there was a suspicion that a member of ISIS in the US moved their dirty money to sell computers on eBay. The perpetrator receives payment of transactions from abroad through a PayPal account.
Credit card scammers also use e-commerce as ‘washing machine’. The perpetrators leveraged from Airbnb services to launder the dirty money they get from credit cards with the help of account holders and homeowners (host). The perpetrators booked a room from the host and paid it with a credit card. Later, the host will return the money from the payment to them.
- Digital currency
Washing illegal money with digital currency or cryptocurrency is more complex than the conventional method, but the perpetrators can get better privacy to obscure the source of the money so that it is not traced by the authorities.
There are two ways the perpetrators place dirty money into the cryptocurrency system which are exchanging fiat money with cryptocurrency in an exchange digital (CoinBase, Bitstamp, Kraken or others that accept fiat currency) through a bank account or exchanging it via a Bitcoin ATM with debit or credit card. Generally, the exchange in digital exchange is preferred because Bitcoin ATMs usually implement Anti-Money Laundering (AML). In practice, the perpetrators usually pay intermediaries who have a clean track record for verification when opening an account in digital exchange.
The purchased cryptocurrency through the digital exchange is the primary currency (Bitcoin, Ethereum or Litecoin). Unfortunately, the primary currency implements a blockchain system that stores transaction audit trails. To obscure the audit trail and get privacy in the transaction, the perpetrators do a number of “layering” which among others are by exchanging major currencies with altcoins (alternative coins, which do not maintain audit trails) and using “coin mixers”. The currency stored in cryptocurrency will later be redeemed in the form of fiat wherever and whenever.
- Online games
Who would have thought online games could be used as a mode for money-laundering practice. Sony Online Entertainment a few years ago found one of its users to move large amounts of money from an account in the US to the one in Russia through online games with the mode of buying multiple virtual items that are rare and difficult to obtain for users.
- Crowdfunding
Crowfunding sites are easily accessible, user-friendly and have not implemented anti-fraud and AML systems yet in general, making it an ideal place for the perpetrators get their dirty money laundered. For example, a perpetrator may make a fictitious campaign and “donate” the money to the campaign and cash it later. The bank most probably will record the money as a legal transaction as it comes from the crowdfunding payment.
Digital solution
Digital technology opens up opportunities for perpetrators of financial crime to launch their actions, but technology also offers solutions to overcome them. Artificial intelligence is the front liner of combating financial crime in the digital era, including money laundering. The AML (Anti-Money Laundering) solution based on artificial intelligence helps analysts automate the search process, mapping and linking the activities of companies or individuals that have been marked as fraudulent activities.
Sumber:
https://www.casewareanalytics.com/blog/crowdfunding-new-cover-money-laundering
http://evercompliant.com/brief-history-money-laundering/
