Don’t Be Fooled – New Age of Money Laundering
We’ve all been there; your spam filter isn’t perfect and in slips an email from an individual in Nigeria requesting assistance with a large sum of money. With a quick click of the mouse, the sender has just targeted you for a money laundering scheme.
According to the United States Treasury, money laundering is defined as the process of making illegally-gained proceeds appear legal. The objective of money laundering is to disguise the origin of the funds with the purpose of avoiding penalties or legal restrictions and making the funds spendable in a way that would have been otherwise possible. Money laundering has become so common that it has recently been recognized as its own category of crime. The exact sum of illegal monies that are laundered annually is unknown, but are estimated to be anywhere between $500 billion to $100 trillion. As financial institutions continue to develop new ways to prevent and detect these illegal acts, money launders continue to find new techniques to filter their “dirty money” into the economy.
Most people’s concept of money laundering is the idea of moving money between sources by using other activities to keep the movement and origins hidden. The typical scenario would be shown through the movies; someone sells electronics internationally or on the black market and receives cash payments in duffle bags or brief cases. These individuals then use the funds to purchase homes, vehicles or pay off personal debt.
In the real world, these schemes take on many forms ranging from individuals such as grant recipients looking to bypass specified restrictions; political asylum seekers hoping to escape ethnical or religious persecution without losing their wealth; and criminals using a variety of activities including extortion, bribery, terrorism, smuggling, and tax evasion to obtain cash.
Traditionally these individuals follow a three step process:
- Step One: Placement – Money is deposited into a bank or other financial institution.
- Step Two: Layering – Complex transfers are created to disguise the original source of the deposited money and confuse an audit trail.
- Step Three: Integration – The money is integrated back into legitimate money supply.
In the past, money laundering required collusion and/or ignorance of many people and organizations, with the most important factor being the bank that transferred the money between locations, either knowingly or unknowingly. However, with the increasing popularity of the internet and the ever changing technology landscape, money launders continue to find new opportunities to funnel their “dirty money” into the financial system. They no longer focus on financial institutions, but instead look to prey on businesses and unsuspecting individuals who do not even know they are victims and are aiding the criminals until it is too late. These actions can be structured in a way that the activities are not considered illegal. Nowadays, it’s not uncommon to see money laundering schemes popping up on the internet and social media, such as:
- Job seekers – Money launders use online job postings to disguise their operations. They offer jobs to applicants and pay them an up-front “signing bonus.” From that bonus, they ask the individual to keep a portion for themself then wire the rest of the funds to a third party.
- Social Media – Facebook, Twitter and various other social media outlets have created avenues to reach people globally. Money launders send messages to individuals usually advising that he or she is inheriting money from a long lost relative or asking he or she to donate to someone in need. In many instances, these requests are nothing more than scamming unknowing individuals into participating and aiding in the laundering.
- Online Sale of Gift Cards – The sale of gift cards online is a growing trend. While many individuals re-sell their unwanted or unused gifts cards to exchange for cash, money launders use this process to easily convert funds. One way these individuals can obtain gift cards is by legitimately purchasing goods at a store, returning the items without a receipt to get store credit on a gift card only to then turn around and sell the cards online and receive cash.
With the mass amount of data and information found on the internet, it can be difficult to decipher legitimate from bogus transactions. All business and individuals should perform due diligence and make every effort to guard themselves from unintentional involvement in money laundering. As the saying goes, “If it doesn’t look right, it probably isn’t.”