Using information technology

Information technology can never be a replacement for a well-trained investigator, but as money laundering techniques become more sophisticated, so too is the technology used to fight it. Before anti-money laundering programs became commonplace, the Bank Secrecy Act required financial institutions to file Currency Transaction Reports for cash transactions of $10,000 or more in the U.S. These CTRs prove invaluable for investigators, but money launderers began to structure their transactions to avoid the reporting requirements. As a result, the U.S. passed laws against structuring transactions to avoid the reporting requirements, and most structuring would trigger a Suspicious Activity Report by the financial institution.

Current Anti-money laundering software packages include capabilities of name analysis, rules-based systems, statistical and profiling engines, neural networks, link analysis, peer group analysis, and time sequence matching. In addition, there are specific KYC solutions that offer case-based account documentation acceptance and rectification, as well as automatic risk scoring of the customer taking account of country, business, entity, product, transaction risks that can be reviewed intelligently. Other elements of AML technology include portals to share knowledge and e-learning for training and awareness.

Financial Crimes Enforcement Network FinCEN, is an organization created by the United States Department of the Treasury. FinCEN receives Suspicious Activity Reports from financial institutions, analyses them, and shares their data with U.S. law enforcement agencies and equivalent Financial Intelligence Units FIUs of other countries. One of its strategic goals is to improve information-sharing through eGovernment. It offers training and advice to organizations of foreign governments to help improve the efficacy of their anti-money laundering programs.

Jurisprudence

The Supreme Court of the United States on June 2, 2008, rendered 2 judgments in favor of defendants, narrowing the application of the federal money-laundering statute.

First, in a 9-0 decision, Justice Clarence Thomas reversed Acuna, Mexico's Humberto Cuellar's conviction and ruled that "hiding $81,000 in cash under the floorboard of a car and driving toward Mexico is not enough to prove the driver was guilty of money laundering; instead, prosecutors must also prove the driver was traveling to Mexico for the purpose of hiding the true source of the funds." The Court further ruled "that federal prosecutors have gone too far in their use of money laundering charges to combat drug traffickers and organized crime; that money laundering charges under the Money Laundering Control Act of 1986, Sec. 18 U. S. C. § 1956(a)(2)(B)(i) apply only to profits of an illegal gambling ring and cannot be used when the only evidence of a possible crime is when a courier headed to Texas-Mexico border with $ 81,000 in cash proceeds of a marijuana transaction; it cannot be proven merely by showing that the funds were concealed in a secret compartment of a Volkswagen Beetlecar; instead, prosecutors must show that the purpose of transporting funds in a money laundering case was to conceal their ownership, source or control; the secrecy must be part of a larger “design” to disguise the source or nature of the money."

Second, in a 5 to 4 ruling, Justice Antonin Scalia reversed Efrain Santos of Indiana and Benedicto Diaz's convictions for money laundering based on cash from an illegal lottery. Scalia ruled that the law referred to the "proceeds of some form of unlawful activity; paying off gambling winners and compensating employees who collect the bets don't qualify as money laundering; the word “proceeds” in the federal money-laundering statute, 18 U. S. C.

US legislation

The UK legislation also creates a money laundering offence where a person enters into, or becomes concerned in, an arrangement which facilitates by whatever mean the acquisition, retention, use, or control of criminal property by another person. This has impacted upon lawyers and other professional advisers in the UK who act for a client whom they suspect may possess criminal property of any kind.

Because the UK legislation is wide-ranging, the UK FIU authority, the Serious Organised Crime Agency, receives a large volume of suspicious activity reports (SARs) - in 2005 just under 200,000 SARs were received. The number of SARs received appears to be growing by almost 50% each year. The UK legislation was relaxed slightly in 2005 to allow banks and financial institutions to proceed with low value transactions involving suspected criminal property without requiring specific consent for every transaction but the reporting of all transactions is still required.

The Bank Secrecy Act of 1970 requires banks to report cash transactions of $10,000.01 or more. The Money Laundering Control Act of 1986 further defined money laundering as a federal crime. The USA PATRIOT Act of 2001 expanded the scope of prior laws to more types of financial institutions, added a focus on terrorist financing, and specified that financial institutions take specific actions to "know your customer".

Legal considerations

Many jurisdictions adopt a list of specific predicate crimes for money laundering prosecutions as a "self launderer" the UK has an "all-crimes" regime. In addition, Anti-money laundering AML/CFT laws typically have other offences such as "tipping off," "willful blindness," not reporting suspicious activity, and conscious facilitation of a money launderer/terrorist financing terrorist financier to move his/her monies.

The "money laundering" legislation in the United Kingdom, under Sections 327 to 340 of the Proceeds of Crime Act 2002 (PoCA), and all of the Money Laundering Regulations 2003 and 2007, is wide-ranging and encompasses mere possession of criminal or terrorist property as well as its acquisition, transfer, removal, use, conversion, concealment, or disguise. In the UK "money laundering" need not involve money (it relates to assets of any kind, both tangible and intangible, and to the avoidance of a liability) and need not involve laundering either a thief's possession of the assets he himself stole is included. There is no lower limit to what has to be reported - a suspicious transaction involving a single £5 note may be required to be reported. All persons not just financial services employees and firms are technically required to report, and obtain consent for, their own involvement in crime or suspicious activities involving money or assets of any kind. So in the UK a thief who steals a vest from a clothes store commits a "money laundering" offence because he has possession of an asset derived from crime. He is technically required to seek consent from law enforcement for his continued possession of the vest if he is to avoid risk of prosecution for "money laundering."

Money Transfer

Money laundering cases are widespread and have even impacted NASA. From 1992 to 1996 a 9 agency Federal Task Force investigation led by NASA's Office of Inspector General investigated Omniplan Corporation of Houston and California, in what would become the largest count indictment and conviction in NASA history, with the owner of Omniplan, Ralph Montijo, being convicted of 179 felonies in his multi-million dollar embezzlement scheme. Five of his companies were also convicted of felonies, they were, Omniplan, Papa Primo's of Texas, Papa Primo's of Arizona, Omnipoint Production Services and Mercury Trust. These five companies, together with two unincorporated companies, Space Industries Leasing and Space Industries Properties were ordered liquidated. Each embezzlement count was associated with a corresponding money laundering count which resulted in dozens of convictions for money laundering. In a New York Times story NASA Office of Inspector General Senior Special Agent Joseph Gutheinz, who led the Omniplan task force investigation, was quoted as saying: "We didn't get any pizzas, but we got the bills", referring to the fact that some of the alleged mischarging to the NASA contract also involved costs associated with two of Ralph Montijo's pizza companies, Papa Primo's of Texas, and Papa Primo's of Arizona . ".

Corrupt politicians and lobbyists also launder money by setting up personal non-profits to move money between trusted organizations, so that donations from inappropriate sources may be illegally used for personal gain.

Captive business

Another method involves establishing a business whose cash inflow cannot be monitored, and funneling the small change into this business and paying taxes on it. All bank employees however are trained to be constantly on the lookout for any transactions which appear to be an attempt to get around the currency reporting requirements. Such shell companies should deal directly with the public, perform some service-related activity as opposed to providing physical goods, and reasonably accept cash as a matter of business. Dealing directly with the public ensures plausible anonymity of source.

An example of a legitimate business displaying plausible anonymity of source would be a hairstylist. Since it would be unreasonable for them to keep track of the identity of their customers, a record of their transaction amounts must be ostensibly accepted as prima facie evidence of actual financial activity. Service-related businesses have the advantage of anonymity of resources. A business that sells computers has to account for where it actually got the computers, whereas a plumbing company merely has to account for labor, which can be falsified. Reasonably accepting cash means the business must regularly perform services that total less than $500 on average, since above that amount most people pay with a check, credit card, or other traceable payment method. The company should actually function on a legitimate level. In the plumbing company example, it is perfectly reasonable for a lot of the business to involve only labour no parts, and for some business to be paid for in cash, but it is unreasonable for all of their business to involve no parts and only cash payment. Therefore the legitimate business will generate a legitimate level of parts usage, as well as enough traceable transactions to mask the illegitimate ones.

Irregular funding

If a person is making thousands of dollars in small change a week from a business (not unusual for a store owner) and wishes to deposit that money in a bank, it cannot be done without possibly drawing suspicion. In the United States, for example, cash transactions and deposits of more than a certain dollar amount ($10,000) are required to be reported as "significant cash transactions" to the Financial Crimes Enforcement Network FinCEN, along with any other suspicious financial activity which is identified as "suspicious activity reports." In other jurisdictions suspicion-based requirements are placed on financial services employees and firms to report suspicious activity to the authorities. Methods to conceal the source are therefore required.

This article may require copy-editing for grammar, style, cohesion, tone or spelling. You can assist by editing it now. A how-to guide is available. (January 2009) One method of keeping this small change private would be for an individual to give money to an intermediary who is already legitimately taking in large amounts of cash. The intermediary would then deposit that money into an account, take a premium, and write a cheque to the individual. Thus, the individual draws no attention to himself, and can deposit his cheque into a bank account without drawing suspicion. This works well for one-off transactions, but if it occurs on a regular basis then the cheque deposits themselves will form a paper trail and could raise suspicion.