What is Money Laundering - An Introduction

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WHAT IS MONEY LAUNDERING?
AN INTRODUCTION
Global KYC Enhanced Due Diligence Experts
Established since 1999

Money Laundering: A Definition
Money laundering is the process by which criminals attempt to conceal the true
origin and ownership of the proceeds of criminal activities. If successful, the
money can lose its criminal identity and appear legitimate.

$2 Trillion
The True Scale Of Global Money Laundering?
UNODC Website 2017

Estimated Scale of the Illicit Narcotics Industry:
$400 Billion (per annum)*
….with 400 million regular customers it is
bigger than the world’s oil and gas industry
*Economic and Social Consequences of DrugAbuse and IllicitTrafficking Report
by the United Nations

Money launderers will pay up to 30% of the total
of their “dirty money” to “facilitate” its laundering

“The problem is that this is a phenomenon that respects no
borders. The organized crime groups and terrorist
organizations are far more attuned to the realities of the
globalist century than western governments are”.
Senior law enforcement official commenting after 9/11

• Place money in the financial system, without arousing suspicion
• Move the money around, often in a series of complex transactions crossing
multiple jurisdictions, so it becomes difficult to identify its original source
• Move the money back into the financial and business system, so that it
appears as legitimate funds or assets
What a money launderer wants to achieve…

The Money Laundering Process
Placement
Integration
Layering

The Convergence Theory or Why the Traditional Money
Laundering Model Just Won’t do
• Globalization of markets & financial flows
• The dizzying rise of the Internet - a single unregulated market
• Competition, consolidation & collaboration
• Corporates/staff have to deliver (sales targets – bonuses)
• Technological advances
• Criminalization of politics
• Offshore Financial Centres (OFCs) - economic salvation found in offering
“anonymous” legal entities

Beyond Traditional Laundering Methods
• Correspondent banking
• Securities
• Credit cards
• Stock exchanges
• Professional advisors
• “Illegal” businesses
• Real estate
• Car dealerships
• White goods retailers
• Hotels
• Supermarket chains
• Clinics
• Construction companies
• Football teams

The Difference Between Money
Laundering & Terrorist Funding /
Financing

What is Terrorist Financing?
Terrorist Financing is the processing of funds from any source
(including legitimate ones) to finance terrorist activities or those
who encourage, plan or engage in terrorism

Terrorist Financing Differs From Money Laundering
• It is much more difficult to detect as funds may be clean and we are looking
for future activity
• The amounts required to finance a terrorist outrage are relatively small
• But both often display similar transactional features centering on
concealment

“While the 9/11 hijackers were not experts on the use of
the US financial system, nothing they did would have led
the banks to suspect criminal behaviour, let alone a terrorist
plot to commit mass murder…no financial institution filed a
Suspicious Activity Report with respect to any of the
transactions of any of the 19 hijackers before 9/11. Nor
should SARs have been filed”
9/11 Commission Report

Terrorist Attack Estimated cost
London transport system (2005) GBP 8 000
Madrid train bombings (2004) USD 10 000
Istanbul truck bomb attacks (2003) USD 40 000
Jakarta Hotel bombing (2003) USD 30 000
Bali bombings (2002) USD 50 000
USS Cole attack (2000) USD 10 000
East Africa embassy bombings (1998) USD 50 000
Terror Comes Cheap….

The Organized Crime - Terrorist Continuum
Organized Crime Terrorism
“Huge geopolitical plates which are slowly starting to shift and
grind together”

“Both criminal organizations and terrorist groups continue
to develop international networks and establish alliances of
convenience”
– Financial Action Task Force March 2008

Credible Evidence that the Nexus Exists & is Thriving
Terrorist groups fundraising raising through:
• Drug trafficking
• Credit card fraud
• Cheque fraud
• Extortion
• Multiple types of criminal activity combined e.g. cigarette smuggling, credit
card fraud, insurance fraud

Current Money Laundering Trends
• Use of the formal financial sector
• Trade sector – transferring value and goods through seemingly legitimate
trade flows
• Cash couriers (the “cash in the suitcase” concept is still here)
• Alternative Remittance Systems
• Mortgage fraud
• Real estate sector
• Prepaid cards
• Electronic purses
• Mobile phone payments
• Digital precious metals

“The adaptability and opportunism shown by terrorist
organisations suggests that all the methods that exist to
move money around the globe are to some extent at risk”
FATF March 2008

Remember You May Only See A Small Part of the Whole
Picture
It is very unlikely that you will see every stage of the money
laundering process - you will probably only see a small part of the
picture

Source of Diagram: USTreasury

AML: Anti Money Laundering
ATF: Anti-Terrorist Financing
CFT: Combating the financing of terrorism
KYC: Know your customer
Money Laundering Terminology
OFC: Offshore financial centers
BO: Beneficial owner
IBC: International business company
PEP: Politically exposed person

Proximal Consulting have unrivalled experience in providing KYC enhanced due diligence background reports on individuals and companies
on a global basis. We also offer a complementary range of services including AML training, country risk reports and bespoke investigations.
Our enhanced due diligence reports are tailor-made to our clients' specifications. They are totally different from the usual database-led
reports that often fail to meet enhanced due diligence requirements. Our reports present clear, accurate and confidential findings which
enable our clients to make informed business decisions and to fulfil their AML obligations.
We work with a variety of global clients including regulatory agencies, law firms, individual companies, private banks, trust companies and
other firms in the financial sector.
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What is Money Laundering - An Introduction

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