Money laundering in a digital world

By Alexon Bell

With the advent of online platforms came fraudulent schemes used to scam people out of their money, hack accounts and defraud internet users. The proliferation of peer-to-peer websites, online banking and cryptocurrencies is now having a huge impact on the ways criminals launder the proceeds of their crimes.

Going to the cleaners
Modern e-commerce is fuelling money laundering schemes that use legitimate websites as payment processors. This means it’s now possible to make illegal purchases online and have them appear as lawful transactions on your bank statement.

Modern e-commerce is fuelling money laundering schemes that use legitimate websites as payment processors

‘Dirty’ money moves straight to online merchants, who funnel it through other legitimate payment ecosystems for criminal purposes such as financing terrorist activity.

Last year, it was alleged that an ISIS operative in the US had pretended to sell computer printers on eBay to move money. The operative received payments for these transactions from overseas accounts via PayPal.

Peer-to-peer marketplaces
Some of the internet’s biggest marketplaces are now being exploited by money launderers thanks to their online payment systems, ease of use and huge global adoption (which allows criminals to hide in plain sight among thousands of other users).

Last year, reports found that criminals were booking fake stays in Airbnb properties with complicit hosts in order to launder dirty money. The perpetrators used stolen credit cards to book rooms through the peer-to-peer platform and pay for their ‘stay’ online, turning illicit proceeds into ostensibly legitimate earnings.

News sources revealed that online Russian forums were linking criminals with corrupt hosts, allowing them to quickly and easily launder funds, in many instances across borders. No one ever stays in the advertised accommodation and fake reviews give the illusion of real transactions having taken place.

A similar scheme was recently discovered, with fraudsters laundering their criminal proceeds through fake Uber transactions. Here, middlemen use stolen credit cards to book ‘ghost rides’ – rides that never actually happen – with complicit drivers. The middlemen and drivers take a cut, leaving the rest of the now-laundered money with the client.

The ease with which this can be done is testament to the difficulty of policing thousands of peer-to-peer transactions across multiple territories. The current systems, put in place to monitor transactions and flag suspicious activity, simply aren’t stringent enough to spot these types of cons.

Social media scams
A number of recent reports have highlighted that social media is increasingly being used to recruit young people as money mules, often without them realising this is the case. The annual report from fraud prevention body Cifas found that the number of 14- to 24-year-olds allowing their bank accounts to be used to move the proceeds of crime hit 32,000 in 2017, a 27 percent increase on the year before.

Social media is increasingly being used to recruit young people as money mules

Young account holders are lured into the schemes through images of people enjoying expensive lifestyles, promoted on social media. Social media is increasingly being used to recruit unwitting mules through offers of ‘make money quick’ schemes or fake job offers. WhatsApp is a known communication method used by criminals to contact would-be victims.

Scale of the issue
Laundering money through online platforms is attractive to criminals for its simplicity, speed and low cost, as well as its global reach. Using these platforms, there is no need to create a fake business or other identities, and no goods need to be moved to maintain the illusion of legitimacy.

Online money laundering is only set to grow. Worldwide retail e-commerce sales are estimated to top $2.2trn annually, providing greater scope for criminals to conceal their laundering activities among high volumes of legitimate transactions. Likewise, the rise of cryptocurrencies and alternative payment platforms raises well-documented concerns about how such technology will make untraceable money laundering easier.

The solution is digital
The ever-expanding digital world is opening new avenues for criminals to launder their money in different and creative ways. But just as technology is supporting money laundering, it is also the solution to the problem. Technological developments that monitor transactions are helping to identify suspicious patterns amid the noise of legitimate payments and interactions.

Big data analytics is being used by contextual monitoring software to make links between transactions and parties, across internal and external third-party data sources. The aim is to place each transaction into a wider context. Only by looking at this wider network can companies gain a full view of their customers and identify unusual and illegitimate transactions consistently and accurately among thousands of genuine interactions

 

Analysis: What the Vatican does to stop money laundering

By Andrea Gagliarducci

.- The Council of Europe’s Moneyval committee has praised the Holy See’s financial intelligence unit, the Financial Information Authority, in a report published last week.

The report noted the progress the Holy See has made in establishing an effective reporting system for suspect transactions, and in its international cooperation with investigation and reporting of financial irregularities. The report recommended that the financial authority “actively pursue” pending criminal cases of money laundering.

Moneyval is the Council of Europe’s “Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism.” It evaluates how financial systems in European states work to counter money laundering and stop the flow of funds to organizations connected to terrorism.

The progress report is part of the Moneyval’s regular evaluation procedure, which it conducts for all members.

The Holy See applied to Moneyval in 2011, after issuing its first anti-money laundering legislation. Moneyval issued a general “mutual evaluation report” on the Holy See and Vatican City State in July 2012. That evaluation called for improvements to the Holy See’s financial oversight procedures, which the Vatican has since pursued.

After the first general report, each state is called to report on its progress the year after the general evaluation, and to submit subsequent progress reports every two years.

The Holy See submitted a progress report in 2013, 2015 and now in 2017. The next report will be submitted in 2019, and it is expected that there will be an on site visit by Moneyval inspectors in the course of 2018.

The reports’ data confirm that Vatican is now in the third phase of implementing effective protections against money laundering.

The first phase, “the assumption of responsibility,” led to a Monetary Convention between the Holy See and European Union in 2009, and Benedict XVI’s motu proprio that established the first Vatican anti-money laundering laws at the end of 2010.

The second phase was “debugging financial transparency reforms.” The Vatican’s anti-money laundering law was amended and substantially re-written, and this led to a generally positive evaluation by Moneyval. In 2013, the Vatican financial system was furtherly improved with the issuance of additional laws and policies.

The third and current phase is that of improving the effectiveness of the system.

The progress report highlights a sort of “two speed” situation for Vatican financial reforms. While the overall system is working, the court system still needs to be developed, as reports on suspected money laundering did not lead to prosecutions.

Both Monyeval and Holy See Press Office releases acknowledge that the Holy See’s Financial Intelligence Authority (AIF) has carried out a significant work in the past two years.

According to Moneyval, the Holy See “has established a functioning reporting system.”

“In the past two years,” a Dec. 8 Moneyval release said, “the Holy See has established a functioning reporting system. Both the AIF and the judicial authorities have sought and were responding to international cooperation requests in their work.”

The AIF has established 24 new Memoranda of Understanding with foreign financial intelligence units and 4 new Memorandum of Understanding with supervisory authorities.

The Holy See recieved 380 requests for cooperation from foreign authorities in 2015, a number that increased to 837 in 2016, probably due to the Institute for Religious Works remediation process that led to the closure of about 4,800 IOR accounts. In 2017, the number of international cooperation requests decreased to a total of 104.

Beyond the data on international cooperation, the report also provides data about money laundering investigations.

Since Jan. 2013, the report says, “69 disseminations to the Promoter have been made by AIF where money laundering was suspected”. The Promoter for Justice – the Vatican prosecutor – opened 27 criminal distinct investigations out of the 69 AIF disseminations.

Of those investigations, 8 investigations “have been closed formally without any charges”, while 6 investigations concluded without an indictment and their formal closure has been requested. There are currently 8 criminal investigation open as money laundering investigations.

These facts also bring to light the main problem highlighted by the Moneyval report.

The Moneyval report noted that “the Holy See had still not brought a money laundering case to court”.

The committee stressed that “while considerable amounts of assets continued to be frozen, no criminal case had yet produced a confiscation order.”  For this reason.  “Moneyval recommends the Holy See ensure that the money laundering aspects of all outstanding investigations in criminal cases by proactively pursued”.

“In this regard, the committee noted that the overall effectiveness of the Holy See’s engagement with combating money laundering depends on the results that will be achieved by the prosecution and the courts,” the release concluded.

However, there have been steps forward on the side of the Holy See’s judicial system that show how the Vatican is working to meet the requirements of its new money-laundering laws.

A Holy See Press Office release delivered Dec. 8 underscored that Moneyval welcomed “the creation of a specialized Economic Financial Crimes Investigation Unit within the Corps of the Gendarmerie and the appointment of a specialized Assistant Promoter of Justice.”

These two steps are crucial in making of the Vatican City State judicial system more prompt in prosecuting suspect money laundering cases.

It must be clear that the report is not about particular cases, and does not review any internal problem. Without naming them, the report describes five cases of Vatican trials that involved financial issues – some of them more recognizable, and some of them not.

But Moneyval is called to assess if the financial system to counter money laundering and financing of terrorism works, and not to judge on singular cases. The report is not in any way related to situations like, for instance, the recent firing of Giulio Mattietti, adjunct director to the IOR, which led to much speculation on the state of Vatican finances reforms.

It was a positive sign that the Vatican’s progress report was approved within Moneyval’s regular process. Otherwise, the Vatican would have had to submit a new report in a future plenary session.

The committee’s approval shows that the Holy See’s commitment, despite needed improvements, is welcome and appreciated by its European neighbors.

Moneyval’s progress report said that, despite some things that need to be fixed, the Holy See’s commitment to financial transparency, started under Benedict XVI, meets international standards, despite the unique reality of the Vatican City State and Holy See’s mission.

For the Vatican, finances are just a tool to carry out the mission of evangelization, and not an end in themselves.

https://www.catholicnewsagency.com/news/analyis-what-the-vatican-does-to-stop-money-laundering-33644