Society prepares the crime, the criminal commits it.


  • Every year, an estimated amount in the range of US$800 billion-US$2 trillion (2-5% of global GDP) is being laundered globally
  • Regulators across the globe imposed US$1.7 billion in fines related to anti-money laundering compliance lapses in the first half of 2018, compared to US$2 billion in 2017
  • Fines by the US regulators accounted for more than US$1 billion in the first half of 2018

Banking watchdogs across the globe are making AML/CFT norms stricter for their subjects, which is forcing banks to upgraded their scanners for fear of huge fines. Having spent billions of dollars on new systems and personnel, they have been able to reduce money laundering activities to a certain extent. However, criminals have also grown smarter. They employ professional money laundering cells that do not operate within the confines of static, predefined, overly-broad transactional actions. They are able to circumvent a lot of regulatory norms, which were thought to be perfect, with the sophistry involved in latest financial technologies. At the same time, some of the technological advances like cryptocurrencies helped them avoid the formal financial systems for value transfers, while being able to pay and receive for goods and services. Banks, largely ignorant about the working of new technologies, are now helpless with governments’ ambitious programs to uproot money laundering and terror financing.

Money laundering — the process of making crime proceeds legitimate — is continuing with its all three steps: placing, layering and integration. The classical methods of money laundering include the structuring of large amounts of money into multiple small transactions at banks (often called as smurfing) and the use of foreign exchanges, cash smugglers and wire transfers to move money across borders. Investing in high-value and movable commodities such as diamonds and gold, discreetly buying and selling valuable assets such as real estate, foreign bank accounts, counterfeiting, gambling and shell companies are also actively used tactics of money launderers. In addition to these, criminals are now making use of advanced technology and the super-pervasiveness of the internet to obscure their presence and use their ill-gotten money at will. The following are some of the modern methods used by launderers.

#1 Online banking with loose norms

As banks are aware of the time and resources required to combat laundering activities in traditional banking, they oversee investments in these areas diligently. However, the loopholes of online banking are often undermined in the banking systems of many countries. This weakness proves to be a thriving ground for criminals who make use of these loose standards for money laundering and terror financing purposes. Online banking is currently the playground of many fraudsters who are using social engineering methods to access other people’s bank accounts in their favour. For money laundering purposes, a criminal may transfer money directly to such victim’s account and trick the person into sharing sensitive information such as passwords or into getting remote access to the victim’s computer. Then, the criminal can make an unauthorized payment from the victim’s account.

#2 Business Email Compromise

This is a systematic scam in which businesses working with foreign suppliers and doing regular wire transfers are targeted. Here, a criminal compromises legitimate business email accounts via social engineering or computer intrusion techniques to conduct unauthorized fund transfers. While the scheme is mostly used to defraud another out of money, it can also be an effective tool to layer and launder money with or without the knowledge of the victim.

#3 Synthetic identity

Fake identity creation on the internet is an easy task nowadays. Criminals are using a combination of real and fabricated information to open accounts for credit cards, online deposits and loans. Providers of these digital accounts, including banks, normally do not undertake rigorous checks on customers, and the basic security checks they have can be easily circumvented by the criminals. This crime is costing banks a lot of time and money along with reputational degradation. They are spending countless hours chasing down people who actually don’t exist. Only when they see some suspicious activity with these accounts, they realize there’s an issue. And when they try to take some action against these accounts, they would vanish all of a sudden, leaving no trace of the owners.

#4 Anonymous online payment services

Payment methods like prepaid gift cards, prepaid debit cards and prepaid credit cards can be purchased in a completely anonymous manner or with fictitious details. They can be purchased via cash payment as well. The value loaded in these cards can be redeemed online anywhere in the world without revealing the identity of the person.

#5 Virtual currencies

Cryptocurrencies such as bitcoin, due to their inherent anonymity feature, are one the most convenient ways to wash money. These currencies are not connected to a person’s identity and only depend on the private key connected to an account. Further, these currencies do not have a central record-keeping system that regulators can track. In addition, individuals, who use digital currencies, do not have to rely on intermediaries for value transfers. Digital currency platforms often do not carry out checks for the source of money, politically exposed persons (PEPs) and sanctions.

Experts are also of the opinion that enormous but unreasonable surge in the prices of cryptocurrencies may be because of their use by criminals to launder their illegal proceeds. Banks and financial institutions are concerned about the obvious association of cryptocurrencies with cybercrime and money laundering. As a growing number of people are trying to find their luck with cryptocurrency investments, the chances of using these currencies for illegal purposes are also rising.

Many banking regulators have banned financial institutions from dealing with cryptocurrency exchanges, and banks have restricted customers transacting in virtual currencies. However, both these transactions are happening in many countries, and there is a mounting risk of financial crimes involved. Holding the general hostility of central banks towards cryptocurrencies apart, some prominent global banks have started active cooperation with cryptocurrencies.

These modern methods of money laundering and the rising transaction volumes in them are becoming a major headache for regulators across the globe. Given the complexity involved in their technology and the difficulties in regulating them, many governments have blocked dealings in cryptocurrencies. The regulators are now required to step up their oversight to counter money laundering via these modern methods.

They have to implement stricter norms and reporting standards for the involved institutions, including banks. Banks have started realizing the fact that their legacy rule-based systems cannot effectively mitigate risks related to money laundering. Now, they need to embrace advanced technology that can effectively solve their problems. Financial institutions can effectively make use of solutions based on machine learning, such as Tookitaki’s AML Suite, to counter money laundering attempts.

By Jerin Mathew | Content Analyst, Tookitaki. For more email us at