Money laundering is the process of making illegally-gained
proceeds appear legal and clean. Money obtained from certain crimes, such as
extortion, insider trading, drug trafficking, and terrorist activities is
"dirty" and needs to be "cleaned" to appear to have been derived from legal
activities. The use of the Internet allows money launderers to easily avoid
detection. The rise of online banking institutions, anonymous online payment
services, peer-to-peer transfers using mobile phones and the use of virtual
currencies have made detecting the illegal transfer of money ever more
difficult. Moreover, the use of proxy servers and anonymizing software makes the
third component of money laundering, integration, almost impossible to detect,
as money can be transferred or withdrawn leaving little or no trace of an IP
address. Money can also be laundered through online auctions and sales, gambling
websites and even virtual gaming sites. Here are some unconventional methods to
watch out for:
Today’s sharing economy has enabled individuals to earn additional income off of
their resources. Whether it’s sharing their accommodation, their ride, or some
skill they possess, the sector is exploding. As a result, there has been a rise
in micro-merchants, individuals who offer their products or services through an
online marketplace. In one example, money launderers make fake bookings and
share the revenue with the host and the value can add up quickly – $3000 a pop.
The growing trend of instant messaging apps have quickly gone from simply
sending text and images to offering a number of services, including payment
functions. One of the most significant, used daily by 600 million users, is
WeChat Pay. It allows people to pay with a tap or a photo snap and it, along
with main competitor Alipay, have made cash transaction in China almost
non-existent. Similarly the Facebook’s Messenger service has integration with
PayPal, MasterCard, American Express, TransferWise, and Western Union. While the
volume and number of accounts are enormous, all the transactions are digital,
making tracking and monitoring for illegal activity that much easier.
A digital currency, designed to work as a medium of exchange, offers a new
avenue for criminals to clean their money. The most well-known digital currency
is Bitcoin, created in 2009 by a hacker who wanted to create a currency that
would be free of government regulation. Bitcoins can either be earned by
competing against others to solve complex math problems, or bought from someone
on a currency exchange website. The cryptocurrencies are so volatile, disparate
and subject to decentralised control, it is easier to make anonymous payments
that are difficult to track. Recently the crypto exchange Coinbase has released
a debit card that let people use their stored digital assets to pay for goods
online and in stores. The Facebook has recently announced issuing its own
cryptocurrency namely Libra which shows the popularity.
The most common scheme is transaction laundering, in which illicit merchants use
an approved merchant’s payment credentials in order to process e-commerce
transactions. It’s easy enough to set up an online storefront for illicit sales,
and then reroute transactions through a legitimate merchant.
5.Digital Payment Platforms
Criminals use everyday digital payment platforms to launder money. For instance,
a Paypal transaction of $10,000 would flag AML alerts. But 100 Paypal
transactions of $100 each would attract no notice from watchdogs. Other digital
payment platforms such as Venmo are also used to move illegal funds. FBI busted
a gang involved in laundering $6 billion online under the guise of a digital
currency called "LR," by using "third-party 'exchangers,'" from countries like
Malaysia, Russia, and Nigeria, where government oversight was negligible. These
exchangers received payments, and then credited back into criminals account,
6.Online Bid Sites
Criminals use online bid websites for micro laundering. From fraudulent auctions
on Ebay to imaginary job postings on Fiverr, money can be transferred easily and
quickly. In 2017, the FBI thwarted a terrorist attack on American soil. They
found that the perpetrator received his funding by posting fraudulent auctions
on eBay that were “purchased” by ISIS agents.Individuals may be hired as “mules”
to apply for online job postings, only to transfer the money back to the
In this scheme, fraudsters may load cash onto a variety of prepaid cards, such
as Visa gift cards or store cards. With a little legwork, those amounts can be
extracted into cash deposits into bank accounts.Fraudsters can copy the serial
numbers of the cards; scratch off the security code and then cover them up.
Then, when the card is activated, they then can access the funds on the card.
While they can’t redeem the funds for cash directly, they can use them to buy
products that they sell for cash (shipping the product directly to the
By using stolen debit or credit cards, criminals quickly purchase prepaid cards
in bulk. They can then sell cards for hard cash. The prepaid cards are traded
face to face to avoid any record.
The ill-gotten money is converted into gaming currency, then transferred back
into real, usable and untraceable "clean" money. The criminals set up numerous
accounts in multiple jurisdictions, purchase in-game credits and transfer those
credits around to wash the money.
Criminals participate in a casino and buys chips with online payment. They play
for a while and then encash the chips by getting a receipt so to show the
proceeds as gambling winnings.
11. Other gambling methods
Money is spent on gambling, preferably on high odds games. One way to minimize
risk with this method is to bet on every possible outcome of some event that has
many possible outcomes, so no outcome(s) have short odds, and the bettor will
lose only the vigorish and will have one or more winning bets that can be shown
as the source of money.