Expert reveals latest ways villains clean up dirty cash

| 16/10/2011

(CNS): Financial services industry institutions need to look out for a slew of new methods criminals are using to exploit the system and launder money, turning the proceeds of crime into clean money, according to Antiguan anti-money laundering specialist Kem Warner, from KAW Management Services. Facebook, on-line gaming, phone cards, pre-paid bank cards, football clubs and insurance premiums are just some of the avenues criminals use to launder their dirty cash and keep onestep ahead of regulators and the law enforcement officials who are often too far behind the latest methods to stop them, the expert revealed during a conference last week.

“Criminals use the virtual world of online gaming through social media such as Facebook to create different personas for themselves or use other individuals to front for them. They then buy credits or virtual money to play these games and then redeem their purchases on the secondary market,” Warner told CNS at the seventh annual Global Compliance Solutions conference, held this week at the Marriott Beach Resort, as he identified many web-based and technology-driven tricks used by criminals.  “They then receive a payment or draft in exchange for this redemption thereby legitimising the proceeds of criminal conduct.”

Mobile phone technology presents another area of activity for money launderers, Warner said, with criminals using phone cards to transfer payments often across country borders, with the excess cash on these cards being redeemed for clean payments or drafts.

“Criminals love this type of money laundering because the technology moves so quickly,” he stated. “At the same time the regulators are too slow to keep up with the criminal activity, only catching up when it is too late and the criminals have laundered their money and moved on.”

ATM and prepaid cards usually used to allow access for students and family members to accounts are also being exploited.  Criminals migrate to these types of systems,” Warner said. “They set up a network of individuals and there is no trace of the identity of the individual withdrawing the funds. This allows the flow of cash across borders without a paper trail.”

Human trafficking was another issue on the rise, with migrants being illegally moved out of West Africa and the proceeds being invested in legal businesses in a bid to “clean” the funds.

“Such individuals running these operations try to set up offshore arrangements and so offshore jurisdictions need to be aware of this activity.” Warner warned.  “They might be using legitimate people to front these businesses so it is essential to know who the final beneficial owner is behind accounts. It all comes down to monitoring systems for due diligence and risk management.”

Money laundering could even be found within the world of football, particularly with the ownership of clubs in Europe and the UK. “Football clubs are not bound by the same corporate governance structures and duty of care as other corporate structures,” Warner said. “Proper due diligence is not always carried out on clubs. So the criminals use their ill-gotten funds to purchase clubs. The clubs go on to purchase players and expand and then the criminals eventually sell the clubs at a premium.”

Warner also pointed to a particularly worrying trend in money laundering with the use of non-life insurance policies to wash funds through to legitimacy. He detailed how criminals would take out an insurance policy for a marine vessel, for example, and then make a claim against that policy each month.

“The claim would always be lower than the premium, so the insurance company would not see any red flags raised as they were still making a profit and the withdrawals would be too small to raise concern,” he explained.

Warner said that this sector of the financial service industry had not been so well regulated but in Antigua at least the law was catching up in this regard and insurance providers in Antigua were all required to take out a licence with the relevant authorities, which required them to carry out proper due diligence and Know-your- Customer processes.

Category: Finance

Comments (4)

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  1. The Prophet says:

    How much money that we put in the banks, we can truthfully say it is all clean?  Most dollars are tainted in someway, it is either by drugs, guns, lottery, theft, dead people check, sale of humans, sale of something not yours, and even services rendered, money due and owing.  The list could go on.  Very few people who do not laundry money.   So what is the big deal anyway.

  2. Anonymous says:

    A Church could be a perfect cover! 

  3. Anonymous says:

    Great, lets tackle dirty cash by explaining to everybody exactly how to wash dirty money…..

  4. ICTA needs to prove its worth says:

    Our own ICTA is much too slient on iIF and HOW  they police our pay-as-you phone top-ups!

    We only have two companies. (Could not be easier….)

    One provides the service in-house and should have an easy one hour audit of "minutes bought and minutes used" each month.  Simply…"show me the money and show me the minutes" = one department and should only take one report.

    The second provider has a "supplier" who sell all the minutes to retailers and then reconciles with the red phone company.  However, there has been cases where the minutes do not match the volume (in the millions of dollars?) sooooo Mr. A and the ICTA, are YOU doing your job or just pulling down big paychecks?  Miss Wendy, time to look behind the scenes?