Money Laundering Techniques - March 2023

?? Once a month, let's discover new money laundering, terrorist financing and fraud techniques as well as ancestral methods.?

Brought to you this month by Dotfile, the modern operating system for Compliance teams. Dotfile helps you verify your individual or business customers anywhere in the world in less than 10 seconds! ????

On today's menu we have:?

• What legitimate use cases are there for using a mixer? ??
• A complex money laundering scheme from ChatGPT ??
• Turkish TikTok thieves ????
• The report on AML Trends for 2023 by ComplyAdvantage ??
• The AML content creator of the month - Marlen Parari ??

I hope you will like it and do not hesitate to contact me ?? if you have any suggestions for changes in the format or topics to cover.??

Enjoy your reading! ???

What legitimate use cases are there for using a mixer? ??

??? $1.5billion of illicit crypto was laundered through Tornado Cash alone, including $462.3m linked to sanctioned individuals.

Hundreds of millions have been “cleaned” through other platforms, such as Bestmixer, ChipMixer, Helix, Coin Ninja,..

So it’s no surprise that regulators view mixers as a hotspot of criminal activity.

However, should we just ban them? ?

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??? According to Tara Annison, author of the article of which this post is an (authorized) summary, the answer is no.

Banning technology because it has the capacity to be used by criminals is a dangerous step.

With this logic, we would have to ban kitchen knives ?? or Whatsapp (used by drug dealers).

Some might be tempted to say that the main difference here is that these are not predominantly used for evil purposes.

Well, so are mixers. ??

For example, $7.6billion went through Tornado, of which only 20% were illicit.

Indeed, there are numerous legitimate use cases for using a mixer, just like:

??? Donating to charity

Not everyone wants others to know which associations they have given money to.?

I’m sure Russian ???? citizens giving to Ukrainian ???? charities get the point.

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?? ??? Balance Hiding

People knowing how much crypto you own can be dangerous and several kidnappings have taken place because of it.

That is why many crypto citizens use mixing services to hide how they spend their funds.

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?? Investment Copycats

To avoid having their actions copied, some investors use mixers.

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?? Being Paid in Crypto

Companies can use mixers to send salaries to their employees and obscure who’s being paid what.

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?? Using Your NFT as a Verified Profile Picture

If you do this, mixers can be useful to avoid people following all your web3 activity.

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??? DAO Voting

This right to privacy mirrors the real world where our vote towards the local mayor is kept secret.

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?? Transacting with Journalists, Dissidents and the Oppressed

In many countries speaking out against your government can be a death sentence.?

So too can funding those who oppose those in power.

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With these in mind, do you think that we should ban mixers?

Or are there other ways to hinder criminal networks, while protecting our right to privacy, such as focusing on the gatekeepers of fiat?

AI-generated (ChatGPT) money laundering scheme ??

It's my turn to test what this new chatbot can do and I have to say it's quite impressive.

Apart from the lack of emojis, the result is pretty good! ??

One potential complex money laundering scheme could involve the use of multiple shell companies and offshore accounts in different countries.

The scheme could involve a network of individuals and businesses working together to transfer money through these shell companies and offshore accounts to obscure the origin of the funds and make it appear as legitimate income.

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The scheme could start with the individual or organization generating illegal funds, such as through drug trafficking or fraud.

These funds would then be transferred to a shell company in one country, which would use false invoices and transactions to make it appear as though the funds were earned through legitimate business activities.

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The shell company would then transfer the funds to another shell company in a different country, using a series of complex transactions and false documentation to further obscure the origin of the funds.

This process would continue until the funds reached an offshore account in yet another country, where they would be held until they could be moved back into the individual or organization's home country as "clean" money.

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Throughout the process, the individuals and businesses involved in the scheme would use a variety of methods to conceal their identities and activities, including the use of encrypted communication, fake documentation, and front organizations.

This complex web of transactions and deception would make it difficult for law enforcement to trace the origin of the funds and identify those involved in the scheme.

Turkish TikTok thieves ???? (It's alliteration Tuesday ??)

?? With about 29 million users, TikTok is massively popular in Turkey.

However, just like any other social media, it may be used for large scale frauds as well.

In just over a year, more than $80 million has been transferred through donations to TikTok users living there.

Earlier this summer, the Turkish Financial Crimes Investigation Board (MASAK) launched an investigation on the platform for suspicion of money laundering. ??

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?? Despite the large number of users in the country, a limited number of accounts shared the funds received.

Many of them are suspected of money laundering and/or terrorism financing.

Some users even created fake accounts to donate to their original account.

The probe also found that accounts linked to the terrorist group Daesh reaped large amounts of donations.?

It is most likely that terrorist groups use the platform to collect funds while avoiding surveillance and facilitating cash transfers. ?? ???

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??? The investigation revealed that accounts with very few followers were still receiving large donations.

Even though their live streamings only involved a still photo or even a black screen. ??

MASAK strongly suspects that donations were made with stolen credit cards.

The process involved can be assumed to be as follows:

1?? Fraudsters steal credit cards details (e.g. phishing attack) or acquire them on illegal forums hosted on the dark web ??

2?? They use them to buy Coins ?? (digital currency of TikTok) and make donations to users

3?? The users, that are either accomplices or even the fraudsters themselves, redeem the coins in dollars ??

4?? They keep their cut and send the remainder to the thiefs.

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?? A similar case involving Twitch had made the headlines last March, when Turkish authorities detained 18 suspects.?

They are accused of collaborating with Twitch users with a high number of followers to endorse them with cash through stolen credit and debit cards.?

Twitch accepts only "bits," a virtual currency, for users to financially endorse streamers.?

The suspects reportedly gave away bits by paying through stolen cards and received cash in return from streamers. ??

?? AML Trends 2023 ???

In association with ComplyAdvantage #partnership

?? Every year for the past 3 years, ComplyAdvantage has conducted a survey of hundreds of compliance decision-makers.

It reveals key current and upcoming trends in the financial landscape.

Without spoiling, I can tell you that 2023 promises to be a busy year for compliance professionals. ???

The research is split into four parts; below I provide an excerpt from each…

With continuing global economic volatility and ongoing geopolitical tensions, financial crime is on the rise ?? and new areas of risk are constantly emerging. The first report puts a spotlight on financial crime.

Here is a selected piece from it:

“Underlying industry caution is an expectation that, as in previous economic downturns, levels of financial crime will increase. This may not entirely come from hardened professional criminals, either. Economic pressure is likely to drive a wider increase in risk-taking behavior from previously legitimate actors, some of which will cross the line into financial crimes.?

The UK’s Financial Conduct Authority (FCA) has also warned that increases in the cost of living will lead to criminals exploiting people through loan fee fraud and authorized push payment scams. It should be noted that firms also told us they reported more suspicious activity reports (SARs) in 2022 than in 2021. 83 percent said they filed more, a nine percentage point rise on the number who told us they reported more in 2020 than they did in 2019. This indicates that the volume and variety of financial crimes firms reported to law enforcement is rising even before the pressures of an economic downturn bite.

99 percent of organizations globally told us..”

?? In 2022, sanctions shaped geopolitics on an unprecedented scale.?

This year, the industry considers questions about the prospects for Russia and Ukraine in the year ahead and the simmering tensions between the United States and China…

and why we should expect the return of familiar hotspots like Iran and North Korea.

The second report is dedicated to this continually evolving landscape:?

“The full-scale Russian invasion of Ukraine began in February 2022 and accelerated pre-existing trends in economic statecraft, with a coalition of democratic countries imposing massive coordinated sanctions against the Putin regime. This Ukrainian ‘playbook’ on sanctions could be used again in the event of similar crises in the future.

At the close of 2021, we expected the geopolitics of 2022 to be dominated by friction between

increasingly polarized camps of authoritarian regimes and a coalition of western-democratic countries (primarily the US, Canada, EU, UK, Japan, Australia, and several other European and Asia-Pacific jurisdictions), with economic statecraft playing a major role in the West’s approach to the contest.

Shockingly, our assessment was proven correct by..”

?? Regulatory speaking, 2023 should also be a year full of changes!

The FATF is revamping its mutual evaluation process with an increase in evaluation increased frequency and a focus on major risks.

At a European level, the long-awaited new 6-AMLD directive will be introduced, and much more! ??

Here is a selected piece from the Regulatory trends report:

“In June 2022, an agreement was reached on creating the AMLA and giving it direct supervisory powers over higher-risk and systemically important credit and financial institutions and crypto asset service providers. A provisional agreement was also reached on updating rules on transferring funds information to comply with travel rule requirements for crypto assets.

In December, the European Council agreed to close potential AML loopholes by launching the new rulebook and “new” 6AMLD. This includes extending AML/CFT rules to crypto asset service providers (CASPs) to carry out CDD on customers and when carrying out a transaction of EUR1,000 or more, plus additional risk mitigation measures for transactions in self-hosted wallets.”

?? How can compliance teams ensure they have a holistic, continually evolving approach to supply chain risk??

From use cases for AI in financial crime risk detection, to supply chain risk management to ESG and corporate credibility, the final section focuses on trends the industry is reporting.

The report dives into 7 key trends as well as detailing organisations’ biggest compliance painpoints and highlighting the areas that compliance professionals see as most at risk if their organisation were to be audited.

?? To read the full report in english (100+ pages!), it's this way:

For my French ???? speaking friends:?

AML content creator of the month

This month, let's discover a post from one of the most creative AML content creator I know,?Marlen Parari! ??

??? With over 5 years of fintech AML compliance experience, she investigates financial crime using OSINT, blockchain forensics, KYC/CDD/EDD and antifraud frameworks.

She also designs thorough and coherent AML compliance programs for financial institutions to comply with the regulatory framework and fight money laundering. ???

Finally, she educates AML professionals by providing digestible financial crime content with her Youtube channel:

?? The AML Pirate ?? ?? (Link below!)

"Introducing the AML pirate series:

?? Understanding AML risk... the pirate way! ??

Concepts covered:

? AML risk

? Understanding the risk profile

? Risk assessment

? Risk evaluation

? Risk categorization

? Risk based approach

? De-risking"