Money laundering techniques: Tips for protecting your business

The bad guys will always try the latest techniques to launder money and avert detection. What are they using now and what should businesses look out for?

By , Senior Editor

September 22, 2010 — CSO —

Kevin Sullivan has a philosophy that he has carried through his two-plus decades in security and law enforcement: All crimes, whether they are digital or physical, are connected at the hip. A former FBI investigator who cut his teeth on financial crimes, what he found is that typically most fraud can be traced back to some kind of organized group. This particularly holds true for money laundering.

Money laundering is the act of making illegally-obtained funds appear to have come from a legitimate source. The criminal must figure out a way to make the cash appear legitimate so as not to alert the authorities to his real occupation and the actual source of the income.

"Money that is laundered is money that taxes would have been paid on if things were done legitimately," he said. "It's money that enables drug lords to buy new guns and new bullets to kill more people. There are a lot of bad things connected to it. People think it's just a non-violent crime. But there is actually a lot of violence that can go on to get that money. By allowing criminals to launder money, it allows them to continue what they are doing. "

See also: ACH fraud: Why criminals love this con and E-commerce: The latest criminal schemes

Sullivan, who is retired from law enforcement, is now owner and director of the AML Training Academy, a consultancy and education organization that counsels businesses about money laundering programs. By law, every U.S. financial institution is required to have such a program.

Sullivan spoke with CSO about the latest tricks money-laundering criminals are using to pull of their schemes.

CSO: What's the scope of money laundering right now? Are there any trends you are seeing this year?
Kevin Sullivan: The best possible estimate is that it's a one-and-a-half trillion dollars a year that gets laundered worldwide. Trends crop up so frequently there could be a trend of the day. Every time the good guys build a ten-foot ladder, the bad guys build an eleven foot wall. At best, we are trying to keep up with them. They spend a tremendous amount of time and resources trying to get around the latest plug you put in the dyke.

There are hundreds of money-laundering techniques being used. A new trend is virtual-money laundering. There are popular online games like 'Second Life' and 'World of Warcraft.' Criminals can launder money through these now. In the case of the virtual worlds, technically, money can be laundered by creating several online identities. Real currency is exchanged for virtual currency and then moved to other identities and the virtual cash redeemed for real money. It is quite simple in process. However, at this time, the amount of money that can be moved is very low and this method would not classify as one of the better ways to move a lot of money. However, it is a method and money launderers will use any and all methods. If the good guys start to believe that a certain method is not good, then that alone is reason enough for the bad guys to go there and use is as the feeling is that that it might be easier to fly under the radar. Currently, awareness of virtual money laundering should be in every money-laundering investigators play book. As the virtual worlds develop, the authorities should re-visit and re-analyze to determine the effectiveness of this method in the future.

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