An astounding $800 billion to $2 trillion is laundered globally each year, accounting for a staggering 2-5% of the world’s GDP. While money laundering is not a new concept, the methods criminals use to execute it are constantly evolving.
With the advancement of technology and globalization, fraudsters are devising more ingenious ways to launder money, making it increasingly challenging for authorities to detect and prevent these activities.
When individuals become victims of fraud, the toll is more than just financial; it’s also emotionally devastating. On the flip side, financial institutions face their own set of repercussions. You risk losing not just hefty sums in penalties but also something far more valuable — public trust. Failing to rigorously comply with Anti-Money Laundering (AML) regulations doesn’t just put you on the wrong side of the law; it severely damages your brand credibility, which makes it important to have the right AML technology in place.
To arm you with the insights you need, this article uncovers seven crafty tactics that criminals are using to launder money. By understanding these devious methods, you’ll be better equipped to combat financial fraud.
So, without further ado, let’s dive right in.
7 Unconventional Money Laundering Methods
While you may be aware of the more common money laundering methods like bank laundering, smurfing, or fraudulence through cash, criminals are now using advanced technology and more unconventional techniques to carry out their fraud schemes.
Here, we discuss seven such creative money laundering methods to watch out for.
#1. Art Auctions
Art auctions, often perceived as the domain of the elite, have become a hotspot for money laundering activities. Criminals exploit the subjective nature of art valuation to manipulate auction prices, enabling them to move vast sums of money discreetly.
Typically, a criminal might purchase art using illicit funds. Once the artwork is bought, its value can be manipulated. For instance, the artwork can be sold at an inflated price to a collaborating party, effectively “cleaning” the dirty money. The proceeds from this sale are then presented as legitimate earnings.
In some cases, the artwork might not even physically change hands, but on paper, it appears to be a legitimate transaction. This method allows criminals to legitimize their illicit gains as art transactions.
Art auctions offer an ideal environment for money laundering due to several factors:
- Subjective Valuation: Unlike other assets, the value of art is highly subjective. Two experts might value the same piece of art differently, giving criminals the scope to inflate or deflate prices as needed.
- Privacy: High-end art auctions often cater to an elite clientele that values discretion. This desire for privacy can be exploited by criminals to make large transactions without drawing the attention of other clients.
- International Nature: Art is frequently bought and sold across borders, making it easier to move money internationally under the disguise of legitimate transactions.
A real case study of Matthew Green shows how he allegedly got involved with Beaufort Securities, a Mauritius-based company accused of fraud, stock manipulation, and money laundering. The company had previously laundered money by depositing it under false names in offshore banks and buying and selling real estate.
Green was approached by Beaufort conspirators to launder £6.7 million in exchange for a 1965 Picasso, Personnages. The plan was to create fake ownership papers for the artwork while keeping it stored, and later pretend to buy it back, keeping a portion of the laundered money.
In the past few years, many countries in the world have introduced AML regulations for the traditional art industry. This is why criminals are moving towards more advanced technology and the internet to use and legitimize their ill-gotten money.
The pseudonymous nature and highly fluctuating prices of NFTs make them an attractive option for criminals to launder funds without having to verify thei