1. Blanchiment d’argent : les schémas d’aujourd’hui
Mercredi 21 février 2007, Genève, Hôtel de la Paix
Money Laundering via The Internet:
The Used Methods
dr Wojciech Filipkowski
School of Law
University of Bialystok
Poland
2. „The online revolution will undoubtedly be of
major import on money laundering.”
„Many transfers are now instantaneous form
account to account, and the trick is to
do it without leaving a trace or conceal
the transfer under legitimate trading
labels, all of which is easy to do.”
Victor T Le Vine, a professor of political
science at Washington University in St Louis,
Missouri (2000)
2
3. „Development in electronic payment as an
everyday means of settlement will
usher in a whole new epoch of global
liquidity for ill-gotten gains.” (2000)
„There is an enormous degree of hype being
generated on this issue of
cyberlaundering. It makes great copy,
but it really has not yet achieved the
level of sophistication that some
commentators would have us believe”
Rowan Bosworth-Davies former British Fraud
Squad officer (2001) 3
4. „The study found there is a legitimate market
demand served by each of the payment
methods analysed, yet potential money
laundering and terrorist financing
vulnerabilities do exist. Specifically,
offshore providers of new payment
methods may pose additional money
laundering and terrorist financing risks
compared with service providers
operating within a jurisdiction.”
Financial Action Task Force, Report on New
Payment Methods, 13 December 2006, Paris,
4
p. 18. (2006)
5. Agenda:
I. Characteristic of Internet – What attracts
launderers?
II. Financial services available on-line
through Internet
III. How Internet can be abused?
IV. Preventative measures – acting in
accordance with FATF
Recommendations
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6. What attracts launderers?
• Anonymity: fake identities, spoofing IP
address, modem connection, Wi-Fi
technology, pre-paid phones, encryption
• No Face-To-Face transactions
• Speed – instant transactions
• Globalization process: free movement
of goods, services & people and new
payment technologies
• Cross border activity: involves several
jurisdiction, mutual legal assistance
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treaties issues
7. On-line financial services
• Internet payment services (incl. mobile
payments, micro-payments or digital
precious metals)
• Stored value cards (smart cards, e-
purse)
• On-line banking
7
8. Cyberlaundering:
The process of legalization of ill-gotten gains
using services available on the Internet
(in the cyberspace) as a :
• reason (a legal title) to do transaction
(transfer of funds) or
• tool to do transaction (transfer of funds)
8
9. The Idea #1:
BANK 2
Service Bank Account B
Legal Title
for Transaction
Internet
Internet BANK 1
Bank Account A
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10. The Idea #2.a:
BANK 2
Internet Bank Account B
Internet BANK 1
Bank Account A
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12. How Internet can be abused?
Stages of ML:
• Placement – using ATM or ill-gotten
gains derived from cybercrimes
• Layering – wide range of services
available on the Internet
• Integration – i.a. transfer-pricing, on-
line gambling („winning ticket”), front
companies, loan-back
12
13. The used methods?
Including:
• e-banking and other on-line services
• use of credit cards in the Internet
• pre-paid cards
• on-line gambling and betting – sport
wagering
• on-line auctions
• mobile payments
• stock exchange
• digital precious metal
• virtual money laundering
13
14. On-Line Services:
BANK A Transfer of Funds
Deposits
Title
Internet
Opening an Account
Access&Payment
BANK B
Internet
Service Off-shore
Financial
14
Center
15. Credit cards:
BANK A Transfer of Funds
Opening an Account&Deposits
Title
Issuing
e-Card/Charge Card Financial
Intermediary
Access&Payment
BANK B
Internet
Service Off-shore
Financial
15
Center
16. Pre-paid cards:
Transfer of Funds
BANK A Internet
Opening an Account&Deposits
Company
issuing pre-paid cards BANK B
Issuing
Another A pre-paid card
country
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17. On-line Gambling:
Transfer of Funds
BANK A
Opening an Account&Deposits
Issuing
e-Card/Charge Card Financial
Intermediary
Access&Buying Chips
BANK B BANK C
Internet
Gambling Off-shore
Financial
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Center
18. On-line Auction Sale #1:
BANK 2
Bank Account B
Internet
Selling
On-Line
Auctions
Company
Title
Buying
BANK 1
Internet
Bank Account A
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19. On-line Auction Sale #2:
BANK 2
Bank Account B
Internet
Selling
BANK 3
On-Line Auctions&
Financial Intermediary
Company
Bank Account C
Buying Title
BANK 1
Internet
Bank Account A
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20. On-line Auction Sale #3:
BANK 2
Bank Account B
Internet
Financial
Selling Intermediary
BANK 3
On-Line
Auctions
Company
Bank Account C
Buying Title
BANK 1
Internet
Bank Account A
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21. Mobile-payments:
Phone Bill
Charging Pre-Paid Phone BANK 4
Mobile Phone
Operator
BANK 1
Premium
SMS, WAP
Mobile or Internet BANK 3
Network
Service B
Internet
BANK 2
Service A
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22. Stock exchange:
BANK A
Opening an Account Brokerage Transfer of Funds
&Deposits Company Settlements
BANK B
Internet
Access&Trading Stocks BANK C
Stock
Exchange
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23. Digital Precious Metal:
Transfering ownership
of DPM
Openning an Account
DPM
Company
Title
Openning an Account BANK B
BANK C Selling
DPM
Buying derivatives
Buying
DPM Gold
BANK A Market
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24. Virtual Money Laundering:
VR
Trading Openning an Account
Virtual Currency
Title
BANK B
BANK C
Openning an Account Buying&Exchanging
Virtual Currency
BANK A
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25. FATF’s cases:
Type of on-line service Number of cases
1. Pre-paid cards (open system) 3
2. Pre-paid cards (closed system) 2
3. Electronic purse 0
4. Mobile payments 0
5. Internet payment systems 0
6. Digital precious metals 3
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26. Polish experiences:
• Opening accounts with Internet access or getting one
for existing accounts (so called „sleeping account”).
• Smurfing – many people open accounts (for
commission) and then hand it over to launderer or
they receive money (usually from abroad), withdraw
them and hand it over to launderer – rather small
amounts of money (up to few thousands PLN).
• Collecting accounts by launderers.
• Banks usually inform the correspondent bank about
the suspicious transactions.
• Computer crimes or illegal on-line gambling abroad –
as predicate offences – e.g. phishing attacks, identity
theft.
• Asymmetric regulations concerning some of the
offences – pornography or on-line gambling – how
prosecute them? 26
27. Preventative measures:
Handbook on Inter Banking (1999):
• Unusual requests, timing of transactions or e-mail
formats.
• Anomalies in the types, volumes or values of
transactions.
• A customer who submits an incomplete on-line
account application and then refuses to respond to a
request for more information.
• An on-line account application with conflicting
information such as a physical address that does not
match the location of the given e-mail address.
• On-line applications for multiple accounts with no
apparent reason to do so.
• A customer who uses the bank’s on-line transaction
services to send repeated inter-bank wire transfers
between several accounts with no apparent reason to
do so. 27
28. Preventative measures:
Monitoring Cybercrimes According to FATF:
• Require ISPs to maintain reliable subscriber
registers with appropriate identification
information.
• Require ISPs to establish log files with traffic
data relating Internet-protocol (IP) number to
subscriber and to telephone number used in
the connection.
• Require that this information be maintained for
a reasonable period (possibly 6 to 12 months)
– data retention.
• Ensure that this information may be made
available internationally in a timely manner
when conducting criminal investigations. 28
29. Preventative measures:
FATF 40 Recommendations:
5# Recommendation:
Financial institutions should not keep anonymous
accounts or accounts in obviously fictitious
names.
8# Recommendation:
Financial institutions should pay special attention to
any ML threats that may arise from
developing technologies that may favour
anonymity, and take measures, if needed, to
prevent their use in ML schemes.
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30. Preventative measures:
FATF 40 Recommendations:
21# Recommendation:
To close off business relationships and
transactions with persons, including
companies and financial institutions, from
NCCT.
23# Recommendation:
At a minimum, businesses providing a service of
money or value transfer, or money or currency
changing should be licensed or registered,
and subject to effective systems for monitoring
and ensuring compliance with national
requirements to combat ML and TF. 30
31. Preventative measures:
FATF 9 Special Recommendations:
Special Recommendation VI:
Each country should take measures to ensure that
persons or legal entities, including agents,
that provide a service for the transmission of
money or value, including transmission
through an informal money or value transfer
system or network, should be licensed or
registered and subject to all the FATF
Recommendations that apply to banks and
non-bank financial institutions.
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32. Preventative measures:
FATF 9 Special Recommendations:
Special Recommendation VII:
Countries should take measures to require financial
institutions, including money remitters, to
include accurate and meaningful originator
information (name, address and account
number) on funds transfers and related
messages that are sent, and the information
should remain with the transfer or related
message through the payment chain.
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33. Preventative measures:
EU 3rd Directive:
It gives the possibility to EU countries to allow e-
money issuers not to apply customer due
diligence (CDD) in respect of e-money.
Simplified CDD applies to other products or
transactions carrying a low risk of money
laundering or terrorist financing.
Simplified CDD shall not apply in the case where
there is information available that suggests a
product is subject to a high risk of being
misused for money laundering or terrorist
financing purposes.
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34. Thank You for Your attention …
Dr Wojciech Filipkowski
School of Law
University of Bialystok, Poland
fwojtek@uwb.edu.pl
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35. No parts of this paper
have the aim to abet or help
somebody to commit a crime.
The presented methods serves only as an examples
to make a criminological analysis
of different modus operandi.
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