Cyberlaundering : old school, new methods

Illicit cash flows has become a major challenge on the global agenda in recent years. Approximately $2  trillion, or 5% of global GDP is laundered annually through our economies.

With the advancement of technology we are witnessing revolutionary changes, both in money laundering  and the fight against financial crime. In this respect, the use of emerging technologies becomes more and more significant. However, criminals are also increasingly exploiting new  technology for illegal purposes, which is a new component in their arsenal of organised crime, in addition to  their old mechanisms. 

The link between money laundering and cyberlaundering 

In the Vienna Convention, money laundering has been described by FATF as “the processing of criminal  proceeds to disguise their illegal origin in order to legitimize the ill-gotten gains of crime.” The rapid change of money laundering trends has led to the idea of creating « cyberlaundering », as a new term. The latter consists of two complementary components, which describe the new reality of money laundering in the digital age. Some authors refer to cyberlaundering as “money laundering 2.0” clarifying that it just adds a technological feature to the money laundering.

According to the UNODC, the stages of money laundering include : 

– Placement (i.e. moving the funds from direct association with the crime) 

– Layering (i.e. disguising the trail to foil pursuit) 

– Integration (i.e. making the money available to the criminal, once again, from what seem to be considered as legitimate  sources) 

While these well-known stages are still in play, cyberlaundering also includes modern methods that put a new spin on the old crime. Consequently, an understanding of money laundering old school techniques has two purposes : to successfully fight against this crime and to identify new threats.

The use of new technologies

Cyberlaundering is based on the concept of e-money. The latter can be described as monetary value which is not in physical form but is represented in an electronic format. Electronic cash has a number of advantages for launderers. For instance, it is not voluminous like regular cash, it can be transferred anywhere in the  world in seconds, it can lead to anonymous transactions and finally, it is not individually identifiable. 

No financial institution, including digital platforms, is immune to money laundering. The criminals use legitimate financial services for laundering purposes, thereby harming such institutions. Online  banking, auctioneering and gambling are the main sectors that are targeted by criminals, due to the fact that they allow transfers of virtual currency through a simplified AML compliance check. Launderers can exploit the above-mentioned platforms to transfer money from one jurisdiction to another one, avoiding the regulatory safeguards to detect illicit financial flows. 

The legal framework

Cyberlaundering is a new phenomenon, which is currently in the construction phase, as a proper legal concept. To this end, the legal framework in the area of money laundering serves as a legal background for cyberlaundering, which is essential to establishing an anti-cyber laundering regime.

On the international plane, some steps have been taken. However, they have not been systematic. In 2008, the FATF recommended certain regulatory measures to which online casinos should be made subject. Similar regulatory measures were recommended by the World Bank Group. What it comes to the national plane, almost nothing has been done. 

In order to fill the huge gap, legal instruments should be put in place to establish the legal framework of  this relatively new phenomenon. This can be done through concerted efforts at an international level. 

Manuk SAHAKYAN

Master 2 Cyberjustice, Promotion 2020/2021

Sources :

Legal Principles for Combating Cyberlaundering : Daniel Adeoyé Lesile

https://www.unodc.org/e4j/en/organized-crime/module-4/key-issues/money-laundering.html

https://www.unodc.org/pdf/convention_1988_en.pdf

https://www.forbes.com/sites/vishalmarria/2019/01/16/is-technology-helping-or-hindering-our-fight-against-financial-crime/?sh=7cd0e5bc312e

https://www2.deloitte.com/ca/en/pages/risk/articles/combatting-financial-crime-in-a-digital-age.html

http://www.foibg.com/ijita/vol25/ijita25-02-p08.pdf

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