One of the reasons that money laundering continues to be repeatedly successfully practiced is its reliance on flexibility. While most compliance officers understand that most laundrymen have not only advanced professional educations that may exceed their own, and are zealous about their roles which comes from the criminal penalties that result from failure in their dark pursuits, the broad range of their operations, often even in the same financial institution, is often neither understood nor grasped.
We often remark how money launderers' only limitation is their imagination; they take the personal cost of failure seriously, given the possible wrath of their criminal clients should their illicit profits be seized and lost. Therefore, being fully aware of the possible adverse consequences of the loss of funds, they often engage in their own version of risk management: diversification in more than one dimension.
While they generally seek the most efficient ways to move and clean the proceeds of crime, they employ tactics designed to insure the best chance of success. Once compliance officers understand these principles, and why they are in place among many money launderers, the chances of uncovering one of their operations in progress increases.
Here are some of those tactics:
(1) ROAD-TESTING A PIPELINE: Repeatedly moving relatively small amounts of money through a specific account or accounts, prior to risking a substantial sum, which then is done only once, and then the account abandoned, and all connections at both ends severed, and not used again, ever. The laundryman the moves on to other banks. You then uncover his operation, but only after he has already. departed.
(2) ALWAYS OPENING AND CLOSING FRONT CORPORATIONS WITHIN THE REPORTING PERIOD, TO DENY THE DISCLOSURE OF ANY INFORMATION, OTHER THAN NOMINEES AND FRONTMEN: The so-called "window of opportunity," the time frame before annual reporting must be made to regulatory authorities, such as Secretary of State, and after corporate formation, or acquisition, is their sole period in which to utilize that entity. You allow the corp to be administratively dissolved, giving the appearance of a defunct legitimate entity that went out of business.
(3) REDUCING RISK THROUGH LIMITING VOLUME AND SPREADING RISK: insuring that there will not be one major loss, resulting from a funds transfer being seized, by dividing it up in a number of transactions, all using separate front companies and accounts. In that manner, should one account or transaction be exposed, all the others, being unconnected, pass through without incident. Drug traffickers often use the same method, in shipping narcotics, so that even if one aspect of their operation is discovered, all the others get through.
(4) IMITATING OR SIMULULATING LEGITIMATE COMMERCE: Shutting down successful operations for periods, so as not to establish a pattern of activity that might be evident, or reducing them, seeking to imitate the fact that legitimate businesses often have periods when profits or shipments decline, for seasonal or market reasons. The idea is to appear to be just another company in that particular industry, so you fit the low-risk profile.
The goal of laundrymen is to transfer the proceeds of crime, cleaning it in the process, before investing it elsewhere, and to artfully deceive you into ignoring their operation. Catch them in the act.