Anti-money laundering service, SmartSearch details the new ways money laundering is taking place in the digital age
With the rapid advancements in mobile technology and internet accessibility, people can engage with financial institutions 24/7. In fact, 64% (YouGov) of Brits use their smartphone for online banking. This is altering Britain into a cashless society, with a rise in demand for real-time payments and transfers, which means the opportunity for cyberattacks and money laundering is ever more prevalent.
Demonstrating how new-age technology is becoming more of a threat, in a recent landmark case a LocalBitcoins seller was charged with money laundering and is facing up to 20 years in prison.
Cryptocurrencies, such as Bitcoin, can be used for a whole manner of illegal activities, not least money laundering. The same method behind traditional money laundering can be applied to digital currencies (placement, layering, integration). Although the premise of Bitcoin is founded upon blockchain technology (i.e. all transactions are recorded on a public ledger), making it possible to track all money and transactions, there are a number of ways to anonymise Bitcoin.
Most high profile cryptocurrency markets are regulated by anti-money laundering regulations, but some are unregulated and so are more susceptible to being exploited by money launderers. Other cryptocurrencies, such as Monero, are created with privacy in mind and therefore are completely untraceable.
2. Social media
With an estimated 3 billion people worldwide using social media, it is no surprise that money laundering schemes are present on these platforms.
Money launderers can run fake money-making schemes (such as pyramid schemes) across social media and set up accounts of people showing off luxury items and cars that lure in young or impressionable people to get involved with the scheme. Money launderers will then use the recruited person to funnel money through their personal bank accounts.
Adverts offering “no risk” earnings should be closely monitored and reported appropriately.
3. Online games
Many online games have virtual currencies, and while these may seem innocuous, they can be traded and exchanged for real money to buy in-game add-ons or upgrades. Money launderers can exploit this by setting up multiple accounts and transferring the virtual currencies around to wash dirty money.
These games are often not under as great scrutiny as other more typical money laundering avenues such as banks. Look out for virtual currency sites, these reseller sites attract a large number of gamers due to the currencies marked down price, and be sure to report them.
4. Online gambling
Much like traditional money laundering through a physical casino, criminals can launder money through online betting sites in a similar way. This is typically through depositing money into an account, betting the money (known as rinsing) and often losing on purpose to make it less obvious, then withdrawing the money. This leaves a paper trail for the money as it has come from gambling, which legitimises the funds.
If a large sum of money has been deposited into an online gambling account without many bets being placed, this could be a sign of money laundering and needs to be reported.
5. Gig economy
The gig economy has boomed in recent years and with the growth, money launderers have come to exploit the system. Tactics such as ‘ghost rides’ on app-based taxi services like Uber allow money launderers to collect money through journeys that never actually take place. Individually, it can take a long time to launder significant amounts of money, but high-level launderers can build up a network of drivers, which quickly leads to larger sums.
Other tactics include offering freelance services and never actually performing the work, cleaning money in the process. By placing electronic identity verification at the beginning of the customers onboarding process, online platforms can prevent fraud.
We are now living in an ever-growing digital world where criminals are using the latest technology to exploit people’s vulnerabilities, in order to orchestrate serious crimes where they are not bound by data protection or national borders.
We cannot use 20th-century methods to fight 21st-century crimes; only a digital-first approach will help to combat cybercrimes. We hope by sharing the new ways money laundering is taking place in the digital age, you will be more vigilant online.