The many faces of money laundering today

The financial crime landscape is nuanced, with twists and turns. The growing gig economy adds its own layer of complexities to this cliff hanger, creating hitherto unimagined opportunities for criminals to launder money.  

The gig economy’s agile ecosystem with shorter work contracts and pay per service remuneration models, leave plenty of loopholes for exploitation by fraudsters.This new labyrinth of financial fraud, held together by instant electronic payment services and virtual currencies, over a network connected by the dark web, poses steep compliance challenges for businesses, regulators and law enforcement.

Cleaning dirty money in the gig economy

Laundering, in the gig economy, spans geographies. The techniques and models used to clean dirty money are shared quickly over the dark web and replicated elsewhere in the globe.

Here is a brief breakdown of some of these techniques that also go by names that really pique one’s curiosity:

In ‘acupuncture’, cyber criminals post advertisements on the dark web looking for Uber drivers and Airbnb hosts who can collude with them to launder their fraudulent funds into clean cash. These Uber drivers and Airbnb hosts are paid for duplicitous services that were not really rendered.

Overseas criminals also participate in this ring. These cross border criminals pretend to be customers by dropping pin locations along a driver’s route. The driver takes the route and is paid with illicit cash, a portion of which he then wires back to the criminal. This adds a layer of transaction that conceals the original source of funds.

Buying gaming currencies and selling them back through ebay is another popular way criminals introduce complexity between themselves and their criminal source of income. Then there are also ‘mixers’ who provide mixing services for a fee. These mixers split ill-gotten currencies across accounts. They introduce crypto currency in the mix and transfer it through several accounts into a new and clean wallet.

Coupled with traditional methods such as real estate where the criminal buys properties for renting or selling, in bullish markets under shell company titles, money launderers have quite a diversified portfolio for layering and cleaning their funds. It is high time that compliance outsmarts criminals and not just chases them.

AML compliance in the gig economy

These new methods introduce legal and compliance risks for workers, business owners, and banks alike. This means businesses have to shoulder a greater responsibility towards due diligence, transaction monitoring and reporting. However, this is not an altogether new predicament.

For example, real estate developers in Singapore are required to carry out CDD on their customers and report suspicious transactions. Businesses like Uber and Airbnb have also followed suit collaborating with law enforcement to identify and put an end to fraudulent use of their businesses.

However, there are a few hiccups along the road to compliance in the gig economy. These corporations use multiple banks across multiple jurisdictions. The KYC data that is shared between these entities is often incomplete and inconsistent. A Centralized KYC repository can improve inter-organizational communication and shed light on redundant and outdated data processes.

As the SWIFT KYC registry is now open to corporates, AML services need to be built in line with principles of information sharing and collaboration. The bottom line is that the future of finance is best built through collective responsibility.

2019-03-15T16:08:04+00:00March 15th, 2019|AML Solutions|