There are many ways of laundering money, sponsoring
terrorism as well as manufacturing, acquisition
and distribution of weapons of mass destruction in
violation of national and international laws. This article aims
to inform you, the consumer, of some of the ways these illegal
activities are carried out.
Money Laundering Techniques
Money laundering involves taking illicit proceeds and
disguising their illicit source in anticipation of ultimately using
the criminal proceeds to perform legal and illegal activities.
Simply put, money laundering is the process of making dirty
money look clean.
The list of possible examples of money laundering is nonexhaustive
and changes over time. The following are examples
of such techniques or methods:
Smurfing: making a multitude of payments in different
periods of time and through different banks. This will have the
effect that a single money transaction is divided into several
smaller transactions in order to circumvent the bank monitoring
system, which aims to identify all those operations that exceed a
certain threshold value.
Gambling: In most cases criminal organizations clean up
their money using gambling houses and casinos. They buy
gambling chips in large quantities in order to play, but use
only a small part of them or don’t use them at all. The purpose
of these operations is to convert the chips into money and
simultaneously be issued by the gambling house a document
that certifies the win.
Backing of financial loans i.e. giving a loan to oneself: In
this method a member of a criminal organization deposits dirty
money into a bank account in a “financial haven”, also known
as a jurisdiction known to have few restrictions on legitimate
business-activities and requiring little or no income tax.
In the second step the criminal organization asks for a
loan from a bank, taking as collateral the money deposited
with the first bank. Next the loan granted by the second bank
will be reinvested in real estate, companies or other financial
instruments.
Fictitious transactions in properties: this method involves
the sale of property at a price higher than its market value.
Shell company: also known as a company which serves as
a vehicle for business transactions without itself having any
significant assets or operations.
Terrorist Financing Techniques
Terrorism financing refers to activities that provides financing
or financial support to individual terrorists or terrorist groups.
The sums needed to mount terrorist attacks are not always
large, and the associated transactions are not necessarily
complex.
There are two primary sources of financing for terrorist
activities. The first involves financial support from countries,
organizations or individuals which may come from legitimate
sources while the other involves a wide variety of revenuegenerating
activities, some illicit, including smuggling and
fraud.
A new phenomenon in terrorist financing has been the
emergence of Foreign Terrorist Fighters (“FTFs”), these are as
a result of the increasing efforts by terrorist groups working to
radicalize individual’s often young people and inciting them to
leave their homes to become foreign terrorist fighters.
These FTFs are largely self-funded and have revolutionized
terrorist financing. The following are other examples of terrorist
financing methods and techniques:
Private donations: direct financial support can come from
individuals to terrorist networks. There is also a movement
for newer terrorist organisations to look for different small
scale sources by using fundraising through social media. Also,
wealthy private donors can be an important source of income for
some terrorist groups.
Abuse and misuse of non-profit organisations: Terrorist
entities target may target some non–profit organisations
(NPOs) such as charities and religious institutions to access
materials and funds from these NPOs and to exploit their
networks.
Proceeds of criminal activity: terrorist organisations will
engage in a variety of illegal activities to generate funds. For
example, terrorist organisations engaged in identity theft to
raise funds via credit card fraud.
Legitimate commercial enterprise: some investigations and
prosecutions have found a connection between a commercial
enterprise, including used car dealerships and restaurant
franchises, and terrorist organisations, where revenue from the
commercial enterprise was being moved to support a terrorist
organisation.
References
FATF (2015), Emerging Terrorist Financing Risks, FATF,
Paris www.fatf-gafi.org/publications/methodsandtrends/documents/
emerging-terrorist-financing-risks.html
http://www.moneylaundering.it/2015/05/14/methods-
and-techniques-of-money-laundering/
