Professional Money Laundering Networks
The elusive world of Professional Money Launderers unfolds as investigators navigate through layered transactions and digital trails to uncover hidden criminal enterprises. Through the lens of modern technology, they expose the underground networks and strategies used by criminals to launder billions of dollars annually. From traditional cash smuggling to sophisticated virtual currencies, this exploration unveils the evolving tactics of money laundering and the relentless pursuit of justice.
Money laundering is the process by which criminal actors disguise?the illicit origin of funds in order to funnel them into the legitimate banking system, increasing transferability and flexibility while reducing the risk of prosecution, seizure, or theft from other criminals. As financial infrastructure evolves and regulations tighten, the elusive figures behind money laundering operations continually adapt and innovate to stay ahead. However, throughout the processes and schemes engineered by Professional Money Launderers (PMLs), Open-Source Intelligence (OSINT) investigators can still uncover suspicious transactions, relationships, and other indicators of illicit behavior.
The secretive world of money laundering employs a variety of mechanisms and networks to conceal the spoils of criminal actors. This brief analysis of PMLs describes the methods they use to thrive as well as key tools and approaches to expose and stop them. Although money laundering schemes are often complicated, they always involve a Logos of three core inputs, or sources:
In much the same way that traditional businesses rely on accountants, Organized Crime Groups (OCGs) rely on third-party professionals to handle their illicit funds. As a service, PMLs launder the proceeds of their crimes for a commission or fee. Criminals, whether working solo or in union, may rely on PMLs either due to a lack of in-house expertise or to put distance between themselves and their funds.
Apathetic to, or deliberately ignorant of, the origin of the funds, PMLs tend to launder money through multiple jurisdictions on behalf of their “elite clientele”, being anyone with the motive and sufficient funds. To do so, PMLs rely on their own specialized knowledge and expertise to exploit legal loopholes, and they find other opportunities and venues for diversification as well, ultimately to preserve the proceeds from illegal enterprises and legitimize them for use in legal ones.
The many and varied techniques of laundering illicit funds have made it difficult, historically, for investigators to follow their movement, and therefore to prosecute offenders. Investigating money laundering poses puzzles and problems to “white hats” across such industries as law enforcement, government, and traditional finance (“trad-fi”) . To successfully disrupt laundering operations, they require the technical tools to get the right intelligence to ensure that they understand how money flows, and the legal tools to take timely enforcement action.
The number of people who effectively understand the first tool-set is small, the number who understand the second set is arguably smaller (especially when you factor in corruption, see below), and their cross-section is almost nonexistent, given the speed at which the competition innovates.
PMLs (be they black, grey … or off-white) market themselves almost exclusively through word of mouth and utilize shadow accounting systems that contain detailed records with code names. PMLs may work on their own, or as part of a Professional Money Laundering Network (PMLN). Moving up the food chain, a consortium of such networks is known as a Professional Money Laundering Organization (PMLO), which you can expect to see at the transnational level.
A detailed example is given in the piquant anecdotes in my video Currency Racketeering & The Bullish Case for CBDCs , adapted from “Shantaram” by Gregory David Roberts . Although it’s highly stylized, like all my videos, it is nevertheless worth watching for serious students of transnational capital flow via black markets and/or fans of “Monkey Thieves”. For whatever reason, it’s banned in India, despite falling under YouTube’s Fair Use clauses.
PMLs use whatever mechanisms, organizations, and networks they require to move funds, usually during the placement and layering stages of the laundering cycle. These include transport, “Mules”, virtual currencies and proxies. Tracking capital flow through these mechanisms, however, is a resource-intensive effort. In recent years, heavy investment by investigators in AI and ML-driven tools aims to alleviate manual burdens by automating many of the key steps.
TRANSPORT
Money transport and cash controller networks assist criminals that generate substantial amounts of cash. These controller networks receive and transfer illicit funds internationally while charging a processing fee. Cash controllers substitute illicit proceeds for legitimate goods through an account settlement system for many OCGs.
Cash controller networks orchestrate the laundering of the proceeds of crime for multiple OCGs, with unwitting customers’ bank accounts being used to swap illicit funds for their legal funds. Alternatively, funds may be transferred in physical cash and channeled into the financial system through the purchase of goods like second-hand vehicles, spare parts, and equipment. When working internationally, accounting settlement systems may be used to balance money amongst several customers and keep money in the same jurisdiction to avoid riskier cross-border transfers.
MULES
PMLs recruit networks of money “Mules”. These individuals are paid to transfer money through their personal bank accounts and wire it to other accounts. Mules are typically recruited unknowingly through job advertisements for positions like “transaction managers,” or knowingly through social media under the guise of get-rich-quick schemes. PMLs may manage their Mule network themselves or employ a manager, known as a “Herder”.
When dealing with physical cash, Mules are frequently recruited from underserved communities or countries with struggling economies. They are incentivized with cash payments and free travel. Besides my video on the Indian Rupee, the Gold Mafia docuseries produced by Al Jazeera in 2023 is another excellent deep dive into the human sea of operatives and physical incentives.
On the other hand, when washing money digitally, herders seek Mules who appear legitimate, such as students and young employees with established bank accounts. While a single Mule transferring a small amount of funds may appear to be a low-level offender, OCGs can tap into networks of hundreds of them to move significant sums of cash. The bank scene in Denis Villeneuve’s 2015 film “Sicario” briefly features a high-level Mule-hunt, beyond the scope of any OSINT investigator but narratively useful to understanding the potential scope and scale. Mule networks have even been known to establish companies that appear as legitimate businesses but exist only to employ at scale, as well as to facilitate the sale of illicit goods through online stores.
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VIRTUAL CURRENCY
With many criminals looking to cryptocurrencies for “work-arounds”, PMLs also create “off-ramps” that enable them to cash out their proceeds into fiat currency. The latter are those issued by governments (literally “by decree”) that is not supported by any tangible asset (i.e. gold), including the euro, the British pound, and the US dollar. While cryptocurrency, by contrast, has been a Wild West so far, the long arm of the law is coming to town.
PMLs transfer essentially virtual currencies through a chain of so-called “digital wallets” for layering. The funds may be split up during transfer, mixed with other illicit funds, and sometimes legitimate funds, too, to hide the trail. With the digital trail masked, funds can be sent to their final digital wallet destination, liquidated, and transferred to exchanges and banks to be withdrawn in cash. The bank accounts used commonly belong to recruited Mules who then redistribute the funds among various criminals.
PROXIES
Some PMLs utilize proxy networks, a banking service that relies on multi-layered transfers to obfuscate the trail of the financial flows heading to their final destination. Proxy networks develop multiple layers of shell companies in many jurisdictions, which exist purely to redistribute and mix funds from a myriad of sources in order to make a client’s funds untraceable. PMLs identify loopholes and other possible purposes for payments that provide a veneer of legitimacy to the transactions.
During the proxy network processes, funds are transferred to accounts opened in the name of shell companies, often using legal entities. If the illicit proceeds were cash, controllers deposit it into the shell companies’ accounts. Such funds are then moved through a complex chain of accounts and mixed with other clients’ funds. From there, they are transferred under fictitious contracts, loan agreements, consultancy services, or investments to other companies controlled by the PML. Finally, the funds are returned to accounts controlled by the PML’s clients, or else goods and services are otherwise purchased on their behalf.
PMLs not only manage funds, many also facilitate large-scale tax evasion schemes, leveraging several layers of shell companies between the importer and the producer of goods. At the final stage, funds are transferred to corporate bank cards, followed by subsequent cash withdrawals. The number of shell companies and personal bank accounts involved may exceed several thousand, limiting detection and diversifying possible losses.
It is estimated that roughly $2 trillion US dollars are laundered every year and that institutions spend hundreds of billions each year on financial-crime compliance and investigations. To make an impact on money laundering at scale, investigators, whether in government, journalism or private practice increasingly leverage automated tools to investigate those with suspected links to illicit funds.
Perhaps the greatest challenge to those affected by finance-sector OCGs, namely the legitimate daily users of a currency, are the lawmakers themselves, many of whom have not only the motive and the opportunity, but even unique means of malfeasance.
While corruption is beyond the scope of money laundering techniques, per se, a number of the tools in use by law enforcement are becoming more widely available to investigative journalists, with and without accredited degrees. One notable example is The Pandora Papers , the 2021 leak of almost 12 million documents by the?International Consortium of Investigative Journalists (ICIJ). The details, worthy of a look as they may be, more generally indicate that governments will always need oversight from nongovernment actors.
THE OSINT ANGLE
Money laundering is an ever-pervasive plague upon governments and other financial institutions, internally and externally, across the globe. Besides the vast human networks involved in money laundering, the overwhelming transaction volumes make manual investigation techniques unfeasible. They can no longer keep pace with the velocity and scale of bad actors. The emergence of AI/ML-driven automated OSINT solutions, however, opens new doors, providing investigation teams with the platform tools they need to detect and disrupt money laundering activities in real time.
One way is to incorporate automated fraud and risk signaling solutions that assess public data in individuals’ and businesses’ digital footprints. By building this functionality into existing systems via an Application Programming Interface (API), investigators are identifying patterns and anomalies that otherwise go unnoticed by legacy methods.
The automated pattern-recognition abilities of Large Language Models (LLMs) and other cybersecurity-related tools make it possible to comb through a vast array of public data, such as consumer records and social media, and to quickly generate comprehensive, court-ready reports on high-risk individuals and businesses.
Investigators are no longer constrained by labor-intensive research involving internet searches for data like business filings or social media content. Instead, they can target the most relevant information, allowing them to reach more informed conclusions much faster. The elimination of manual processes enables investigators to optimize their inquiries and to concentrate on detecting the leading indicators of money laundering.
? adrian dyer, 2024