Wednesday, December 20, 2023


Yes, the urban legend is true, Mr. Compliance officer; money launderers stay up nights and weekends just to to outwit you and your staff. There job is simply to beat you. I did it for more than a decade. Let's take an inside look at the thought processes and analyze how laundrymen approach the creation of new methods of operation. You might learn something that will enable you to more efficiently ferret out novel and new money laundering tactics in progress.

First if all, understand that your laundryman opponent is most likely a lawyer, banker, accountant; that means  someone with familiarity with the financial world, most likely through hands-on professional experience. They know intimately how banks treat transactions, know how AML compliance programs  are administered, and most importantly, understand what makes a suspicious transaction. They take that fund of knowledge in with them when brainstorming over the birth of a new operational method of moving money undetected by compliance.

Often, a specific industry, business type or specific trade is targeted, because it is not known to have ever been the subject of attention, or have been a target, of financial criminals. It may have industry characteristics which do not lend itself to being abused by money launderers. Whatever the reason, laundrymen are drawn to industries and businesses that have always been low-risk, and no deserving of any attention by either compliance or law enforcement. They then adapt the business type to accept, an cleanse, the proceeds of crime, generally by modifying the operation to conceal dirty money placement.

Another trick of the trade is to learn as much as possible about what we commonly know and call trade secrets, which is often just inside information about how such a business operates successfully and at a profit. It may just be methods not commonly known in the business world outside that industry, such as payment quirks or strange internal policies quietly shared between like businesses, or actual confidential information about operational details that is intentionally withheld from the general public for profit reasons.

In any event, and irrespective of the precise reason why these internal facts are concealed, the money launderer seizes upon them, as twists them into a formula that would support the concealed placement of criminal proceeds, or facilitate its layering in some important, and covert, way. What I am saying is that laundrymen typically latch on to such a valuable bit of information, which will not be known to compliance officers, and cannot be extracted, to achieve his goal of a safe pipeline for his clients' money.

Therefore, the next time a junior compliance officer raises a question about transactions involving a small company designated as low-risk, strictly domestic, or some other label that means its is safe to ignore, do a deep dive, to rule out the possibility that he or she has stumbled upon an ongoing money laundering operation being pushed through a bank client whom you have previously discounted as low-risk, and disregarded during transaction monitoring sweeps. 

For further reading;

Advanced Money Laundering Tradecraft

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