How criminals are advancing money laundering methods


In a recent post, Moody’s Analytics took the opportunity to provide a ‘money laundering 101’ case into how criminals launder money. 

Money laundering is not a novel concept; it is the age-old process of disguising illegally acquired money, making it appear to originate from genuine sources.

In a recent crackdown in August 2023, the Singapore Police Force arrested 10 foreigners on charges of money laundering and forgery. A staggering $737m in assets, including luxury properties, opulent items, and gold bars, were seized or frozen. From this pot, 105 properties faced prohibition of disposal orders, with many situated in Singapore’s prime locales.

However, 2023 has brought to light other significant money laundering crackdowns, pointing to a concerning trend: criminals are shifting gears. Virtual currencies, online gaming, blockchain tech, decentralized finance (DeFi), and investment scams are the emerging tools of their illicit trade.

With this shift towards technology and digitisation to launder money, it’s essential to understand these tactics and review the strategies, laws, and guidelines bolstering Anti Money Laundering (AML) and Counter-Terrorism Financing (CTF) operations.

How money is laundered

There are primarily three stages to money laundering: placement, layering, and integration.

Placement: It all begins with the ‘wash cycle’, where ill-gotten money enters the financial sphere. While sources like drug trafficking, gambling, organised crime, and fraud have always existed, the introduction of digital transactions has given these activities a significant boost. Shockingly, illicit usage in cryptocurrency reached a whopping $20.1bn in 2022, as highlighted by Chainalysis. To further emphasise this shift, AUSTRAC pointed out the rising use of cryptocurrency in mainstream money laundering and terrorist financing. Recently, the US Department of Justice brought charges against Tornado Cash founders for money laundering, while online gaming platforms are also emerging as a popular tool for criminals.

Layering: This phase is where criminals work overtime, weaving complex financial layers to hide their money’s origins. Some techniques to watch out for include blockchain technology, intricate shell company structures, securities trading, offshore trust intermediaries, and cryptocurrency mixers.

Integration: After meticulous layering, the money is reintroduced into the financial system, making it appear ‘clean’. Once integrated, laundered funds often find their way into legitimate businesses, real estate, and high-end purchases like art, yachts, and jewellery.

Combating the risks of money laundering in a digital age

In response to these ever-evolving methods, FATF and national regulators are intensifying their AML/CFT measures. Enhanced KYC checks and rigorous due diligence processes are at the forefront of these efforts.

Concerning cryptocurrency regulation, FATF made amendments to Recommendation 15 in 2019, incorporating virtual assets and their service providers. Their June 2023 review revealed that a majority of the jurisdictions were non-compliant or only partially compliant with these revised guidelines.

Online gaming is also under regulatory scrutiny, with organisations like the American Gaming Association updating AML protocols to include best practices for digital currencies and online gaming.

Furthermore, countries like Australia and Singapore are focusing on broadening regulations outside of the typical financial sectors to improve transparency and counteract money laundering threats.

Read more here.

Copyright © 2023 RegTech Analyst

Enjoyed the story? 

Subscribe to our weekly RegTech newsletter and get the latest industry news & research

Copyright © 2018 RegTech Analyst


The following investor(s) were tagged in this article.