COMPLIANCE OFFICERS, KNOW YOUR ENEMY; YOU MUST UNDERSTAND MONEY LAUNDERERS TO CATCH THEM

The Face of the Enemy

Most banks don't catch their money launderers in real-time; two years later, someone in law enforcement drops a subpoena on them, and they learn, to their chagrin, that their compliance officers failed to spot a major laundering operation while it was in process. In any case, it did not have to happen; a sharp compliance officer, using the appropriate tools, and knowing what to look for, could have interdicted the laundryman in the act. The question is: why didn't it happen?

For readers who are not familiar with my background, I spent a decade during my youth as a career money launderer, and therefore understand the unique perspectives of laundrymen. Successful launderers generally have a number of strategies and tactics in common, simply because they are effective, and when compliance officers fully grasp them, they are in a far better position to identify ongoing laundering operations in progress.

1. DISINFORMATION, MISINFORMATION AND MISDIRECTION: Like any military organization that is weaker than its opponent in the field, they employ asymmetric tactics. Laundrymen stay up night and weekends to create cover stories, front companies that appear to be legitimate, and money laundering pipelines that look like normal business transactions. What you need to do is to analyze your customer's financial transactions, in the context of that specific type of business, then extracting any transactions that are clearly inconsistent with either that trade or industry, or for a company at that stage of development and operation, ultimately finding what you were looking for; illicit operations.

2. LOW RISK IS NEVER SAFE: Most compliance officers only closely monitor those customers whom they identify as high-risk, and generally ignore those that they have categorized as low-risk, post-account opening. However, those are the clients that money launderers have chosen to move and clean dirty money through, and they usually succeed, because your attention is elsewhere. You need to examine your low-risk customers, and ferret out those whose indicators suggests they have a propensity to be coopted by laundrymen. There are software programs available for that purpose, and it is humbly suggested that you use them.

3. DON'T LET YOUR GUARD DOWN: Many laundrymen choose the eve of a holiday weekend to move money, correctly calculating that your best compliance staff is already hatting out, leaving only very inexperienced, junior people to field questions from frontline tellers. The days of major sports events, such as the World Cup or World Series, are also the best times to quietly push dirty money through your bank, with impunity, as many people are distracted, or weary from their attention to such sports Also, the morning after such events, when you might be either hung over, or stuck in traffic, also works. Remember, money launderers are students of human nature. Just as armies often strike when their opponents are most vulnerable, laundrymen also choose their places and times to strike carefully. Where are you most at risk?

4. USE IT AND LOSE IT: Money launderers know that they must continually change horses in midstream; they constantly employ permutations and combinations of their tactics, to bring confusion to  anyone in compliance that might just tumble to their pattern of activity. This can work to the advantage of the compliance officer if he or she understands such a strategy. Is your bank client especially, and continually, diverse in its operations? Perhaps they are intentionally shaking up their methods, then abandoning them and moving on to something new.

5. LAUNDRYMEN ARE ONLY LIMITED BY THEIR IMAGINATION: Given that the outcome of discovery of their operations are often the loss of large amounts of client money seized or frozen, as well as the constant threat of indictment and prison time, money launderers are constantly brainstorming, and refining their operations, lest they be caught in the act. Compliance officers who are complacent, clock-watchers, and check-the-box types, will never catch the good money launderers. You need to be as driven as your opponents, ladies and gentlemen of compliance, if you wish to catch them. I have just scratched the surface, regarding the strategies and tactics that I employed during my experience as a laundryman.  if you believe that your compliance department or other entity would benefit for a tutorial on the subject, feel free to discuss it with me at miamicompliance@gmail.com

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