In the anti-money laundering (AML) and counter-terrorist financing (CFT) context, the term “typologies” refers to the various techniques used to launder money or finance terrorism. Learning how organized plans (i.e., schemes) used by criminals for something illegal will help compliance professionals fight money laundering and terrorist financing effectively.
Some infamous money laundering related schemes would be dating back to old time, here are a couple of classical ones.
Hawala Money Laundering
In a basic form of Hawala Money Laundering, it works by transferring money without actually moving it. In fact, money transfer without money movement is a definition of hawala that was used, successfully, in a hawala money laundering case.
Lazy Susans/Round-tripping Scheme
"Lazy Susans" is also known as round-trip transactions. Round-tripping transactions generally refer to a series of transactions that involve circulation of money across persons, organizations, or jurisdictions (typically with weaker AML controls) culminating in its return to the person/organization and the jurisdiction of origin giving the impression that the funds have derived from a clean source.
And some money laundering schemes occurred recently may not be really “new” but with new tags labelled by media or professionals. Here are few money laundering schemes with “new” labels.
Snow-washing
Snow-washing was coined by Canadian newspaper The Toronto Star to describe the flow of dirty money entering the Canadian economy for the purposes of tax evasion or terrorist financing, and the term is now being used internationally. The term is a mixture of the words snow meaning purity as well as the cold Canadian climate and washing referring to money laundering.
Vancouver Model
In the past, there were many money laundering schemes named after some countries. But the “Vancouver Model” might be the first money laundering scheme named after a city. The model (highly used in Vancouver, British Columbia, Canada) uses casino gambling as a way for foreign and domestic criminals to launder illegitimate funds and exploits Canada’s traditionally lax regulatory approach to financial crime.
Cuckoo Smurfing
According to Australian Transaction Reports and Analysis Centre (AUSTRAC), organised criminals use “cuckoo smurfing” as a method of laundering money to disguise and integrate their funds across borders to profit from and further enable their illegal activities. Generally, this method of money laundering relies on exploiting the accounts of customers expecting to receive legitimate funds. These customers are often unaware that the funds transferred into their accounts are the proceeds of crime.
Money launderers and supporters of terrorism have demonstrated creativity in combining traditional money laundering techniques into complex money laundering schemes to avoid criminal prosecution while still spending their ill-gotten gains. Understanding Organized criminals and behaviours could enable compliance professionals to win the fight against financial crimes.
Take the “Vancouver Model” as an example, funds were deposited to the banks in one jurisdiction and cash paid out in another jurisdiction. Or cash was loaned out (often secured against real estate owned in Vancouver) in the scheme. Using the bundles of cash is one of the characteristics of the “Vancouver Model”, therefore cash related activity monitoring is an area that the AML/CFT detection technology should focus on. Of course, to detect the unregistered remitters/loan lenders who route funds is critical as well.
Take the “cuckoo smurfing” as another example, AUSTRAC provided the detailed guide for fighting organized criminals/professional money launderers who use the “cuckoo smurfing”:
· Bad actors - organized criminals/professional money launderers (criminal syndicates), and corrupt remittance service providers
· Common steps of “cuckoo smurfing” which may have different paths that could involve financial institutions in multiple countries:
o A (sending) customer deposits legitimate funds with a remitter to send to a beneficiary (receiving) customer (based in Australia).
o The remitter is corrupt and facilitating money laundering on behalf of a criminal syndicate. The corrupt remittance business does not send the money to the beneficiary.
o The corrupt remittance business gives details of the transfers, including the amount of funds and the beneficiary’s account (also known as the “cuckoo’s nest”) details, to the professional money laundering syndicate.
o The professional money laundering syndicate employs smurfs (in Australia) who meet up with criminals to collect the equivalent transfer amount in cash.
o The smurfs deposit the cash into the “cuckoo’s nest”.
o The deposits are often made by smurfs in amounts less the regulatory reporting threshold (structuring).
o Once funds have been deposited in the beneficiary’s account, the corrupt remittance business gives the legitimate funds received from the customer to the criminal syndicate.
Hence, for the “cuckoo smurfing” scheme, the AML/CFT detection technology should focus on multiple detection scenarios, such as smurf or third-party agent, structuring, offsetting and etc.
How can the AML Shop ("TAS") help?
The AML Shop is well-positioned for helping clients about launder money or finance terrorism typologies and schemes. View our list of amazing TAS advisors for more information here.
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The information provided in this document is for general informational purposes only. It is provided in good faith; however, we make no representation or warranty of any kind, express or implied, regarding its accuracy, adequacy, validity, or completeness. Users should seek advice regarding their particular circumstances.
