Money launderers on the move

The recent FIFA scandal demonstrates just how far and wide money laundering now reaches, as all of the allegations incorporate elements of money laundering. The international body driving anti-money laundering (AML) laws and regulations, the Financial Action Task Force (FATF) celebrated a 25th anniversary last year and there is no doubt many successes have been achieved.

Of course as AML laws and regulations are enhanced, the money launderers evolve and adapt. As a phenomenon, money laundering impacts businesses way beyond banking and financial services. Consequently business people need to know how and why they may be vulnerable to potential exploitation and abuse by those seeking to launder money, in particular international organised crime groups. Thus it is necessary for big businesses in particular to identify where they may fit into the big money laundering picture.


Those corporate entities operating outside of the traditional regulated sector are now within the scope of the launderers and by extension the authorities pursuing the launderers. Launderers are limited by two primary factors: their imagination and the controls imposed by others. Thus, the increasing effectiveness of the controls within financial services is making it more difficult for launderers to achieve their objectives. As a result, launderers are seeking to identify new opportunities and new laundering methods. This is where the corporate comes in, because the corporate ordinarily has weaker controls or perhaps no controls at all. Nowhere is this highlighted more clearly than Miami in the US, which has long been targeted by parties seeking to launder the proceeds of drug trafficking, often with the aim of repatriating funds to Mexico, Columbia and Bolivia. The US authorities have applied huge penalties to banks for failing to implement adequate controls to prevent the laundering of the proceeds of drug trafficking. As a consequence, banks have improved their controls, causing criminals to look for alternative laundering methods and service providers (inadvertent or otherwise).

In April of this year, the US authorities imposed restrictions upon corporate entities selling and exporting mobile telephones and other consumer electronics. By way of a legal order some 700+ corporate entities were required to report any transactions which involved sums of cash greater than $3000. The small piece in the big picture is the high value, low volume commodity, which in this instance is primarily the mobile telephone, but undoubtedly extends to watches (including the iWatches and of course Swiss watches) and other high value consumer goods.


To better understand how and where corporate entities fit into laundering, it is helpful to replace the word money with the word value. Corporate entities sell goods and services, the sale is for value. Whereas, the launderer is seeking to exchange cash for value in one country and subsequently, the value for cash in another country.

For some time, banks and other regulated businesses have been monitoring for value laundering, through which launderers seek to acquire the high value, but not always low volume goods. There have been instances of banks and law firms being used to acquire aircraft, boats, real-estate, an oil rig and other vehicles. Thus the senior managers of corporate entities need to have an understanding of their normal business activity; how they sell value; where they sell value; average quantities sold and the profile of an average customer.

Often the best ways to counter the launderer’s imagination is to think logically and imagine how we would undertake the purchase of the goods a business sells. This thinking equips people to challenge the unusual, the suspicious and in doing so they will likely prevent value laundering. In the event a customer seeks to pay with cash, an employee should ask him/herself the question: would I do the same? Would I feel comfortable carrying large sums of cash or would I feel vulnerable? Essentially this is all about risk; in the event a customer takes big risks with cash, we should ask, what other risks are they taking and in the value supply chain, what risk are they exposing the corporate business to?

If a person can run the risk of losing a large quantity of cash, by way of mishap, robbery or otherwise, what other risks do they run? Do they really care where the money comes? Many drug traffickers in Mexico and Columbia sell USD and EUR to businesses seeking to import goods. Thus, the legitimate businesses use the value of illegitimate cash to buy the goods their businesses rely upon and trade in.


Cash is a commodity with exceptionally high risk; many corporate entities are limited in the quantity of cash they are permitted to handle within the terms of their business insurance policies. Of course cash is but one method of payment. The employees of corporate entities should also challenge payments made for goods and services by third parties who are not actually customers. The potential risks increase significantly when such payments originate from an unconnected country or from multiple third parties.

Previously Latin American drug traffickers have used a black market exchange to sell reduced price foreign currency to local brokers for local pesos. The foreign currency is then sold to local companies operating internationally and importing goods from other countries/jurisdictions such as the US and EU. The challenge being the USD and EUR are held within multiple accounts in different banks, which leads to corporate entities receiving payments from a number of different parties, none of which are customers. Payments can also be made by multiple cheques, some launderers actually trade in cheques which have been used to pay debts to third parties who have insisted the payee details not be applied to the cheque. This creates an instrument of value which can be sold to third parties. Essentially the cheque changes to a bearer2 form, often with a very high value.

In other instances launderers seek to over pay for goods, once again using cheques and request the difference between the purchase price of the goods and the value represented by the cheque be paid back in cash. The incentive for the corporate entity is the sale of the goods. It is the unusual nature of the proposed transaction which carries significant risk. In such a scenario an employee would do well to pause and reflect, ‘Would he/she pay for the goods in such a way?’ Given the answer will likely be no, such transactions should be rejected.


The new frontier for AML is tax evasion, as post the global financial crisis (GFC) governments are broke and are therefore hunting unpaid taxes, nationally and internationally. The impact of this change of focus is an increased demand for alternative, nonbank money laundering services, high value goods and obscurity. This particularly applies to businesses operating internationally. A good way of demonstrating how this impacts corporate entities is to consider the trade of high value watches. Whilst many retailers of high value watches are regulated, manufacturers and international wholesalers are not, as a consequence opportunities and vulnerabilities arise. In 2011, a major Swiss based jeweller sold a watch with a value of $25 million. Cluttered with jewels and diamonds, the watch fits as neatly upon a wrist as any other watch, albeit it has absolutely no obscurity. For sure the watch holds value and travels easily, characteristics which are attractive to a launderer.


As businessmen, launderers are impacted by market trends, logistical challenges and threats to their business, be they commercial or legal. As a result launderers are responsive, dynamic and often innovative. Presently the border between America and Mexico presents increasing numbers of obstacles and hurdles which the launderers and traffickers need to carefully navigate. The risks of being caught have increased substantially, in line with the increasing number of law enforcement resources being allocated to the border. This has led to the traffickers and launderers seeking out new, safer routes for the drugs and laundered proceeds.

Such routes now include West Africa, where the US Drug Enforcement Agency (DEA) arrested senior figures in Guinea Bissau, including the head of the country’s navy who, having been charged with drug trafficking is now awaiting trial in New York. The Sinaloa Cartel has established there are significant opportunities within West African countries and communities. One commentator proposed Guinea Bissau was now a satellite state of the Cartel. The impacts of these diversifications include increased money laundering risks for banks and corporate entities operating in West Africa. Such risks can be transferred through supply chains, including correspondent banking. Thus, whilst money laundering is on the move, some of the moves are circular and ultimately take the money/assets to the same place, but via a different vehicle, product or route.

All of these changes need to be carefully considered by the senior managers of both regulated financial service businesses and unregulated corporate entities. Whilst the AML laws and regulations may not fully apply to some entities, this does not present some form of immunity from law, likewise it does not stop an individual reporting any suspicion to law enforcement agencies.

Those persons showing disregard for the origin of funds or assets will be more likely to be exploited by launderers and thereafter interviewed or prosecuted by law enforcement agencies. Actions and inaction send messages; be careful to ensure your business is sending the right message to all parties. Money launderers are seeking new homes and new opportunities: are they looking for you?

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