Methods & Trends

Typologies research is the study of methods, techniques and trends in money laundering and terrorist financing. The UFA undertakes detailed and relevant typologies research to better understand the money laundering and terrorist financing environment in the Asia/Pacific region. Conclusions and findings of the research provide decision-makers, policy experts and law enforcement authorities with up-to-date empirical information to develop strategies to combat these threats.

The UFA's typologies framework includes processes for collection and analysis of information and case studies, and for sharing this information within the UFA membership, the global AML/CFT network and with the private sector.

The following examples provide a few key money laundering and terrorist financing methods, techniques, schemes and instruments:

Association with corruption (bribery, proceeds of corruption & instances of corruption undermining AML/CFT measures): Corruption (bribery of officials) to facilitate money laundering by undermining AML/CFT measures, including possible influence by politically exposed persons (PEPs): eg investigating officials or private sector compliance staff in banks being bribed or influenced to allow money laundering to take place.

Currency exchanges / cash conversion: used to assist with smuggling to another jurisdiction or to exploit low reporting requirements on currency exchange houses to minimise risk of detection - eg purchasing of travellers cheques to transport value to another jurisdiction.

Cash couriers / currency smuggling: concealed movement of currency to avoid transaction / cash reporting measures.

Structuring (smurfing): A method involving numerous transactions (deposits, withdrawals, transfers), often various people, high volumes of small transactions and sometimes numerous accounts to avoid detection threshold reporting obligations.

Use of credit cards, cheques, promisory notes etc: Used as instruments to access funds held in a financial institution, often in another jurisdiction.

Purchase of portable valuable commodities (gems, precious metals etc): A technique to purchase instruments to conceal ownership or move value without detection and avoid financial sector AML/CFT measures – eg movement of diamonds to another jurisdiction.

Purchase of valuable assets (real estate, race horses, vehicles, etc): Criminal proceeds are invested in high-value negotiable goods to take advantage of reduced reporting requirements to obscure the source of proceeds of crime.

Commodity exchanges (barter): Avoiding the use of money or financial instruments in value transactions to avoid financial sector AML/CFT measures - eg a direct exchange of heroin for gold bullion.

Use of Wire transfers: to electronically transfer funds between financial institutions and often to another jurisdiction to avoid detection and confiscation.

Underground banking / alternative remittance services (hawala / hundi etc): Informal mechanisms based on networks of trust used to remit monies. Often work in parallel with the traditional banking sector and may be outlawed (underground) in some jurisdictions. Exploited by money launderers and terrorist financiers to move value without detection and to obscure the identity of those controlling funds.

Trade-based money laundering and terrorist financing: usually involves invoice manipulation and uses trade finance routes and commodities to avoid financial transparency laws and regulations.

Gaming activities (casinos, horse racing, internet gambling etc): Used to obscure the source of funds – eg buying winning tickets from legitimate players; using casino chips as currency for criminal transactions; using online gambling to obscure the source of criminal proceeds.

Abuse of non-profit organizations (NPOs): May be used to raise terrorist funds, obscure the source and nature of funds and to distribute terrorist finances

Investment in capital markets: to obscure the source of proceeds of crime to purchase negotiable instruments, often exploiting relatively low reporting requirements.

Mingling (business investment): A key step in money laundering involves combining proceeds of crime with legitimate business monies to obscure the source of funds.

Use of shell companies/corporations: a technique to obscure the identity of persons controlling funds and exploit relatively low reporting requirements.

Use of offshore banks/businesses, including trust company service providers: to obscure the identity of persons controlling funds and to move monies away from interdiction by domestic authorities.

Use of nominees, trusts, family members or third parties etc: to obscure the identity of persons controlling illicit funds.

Use of foreign bank accounts: to move funds away from interdiction by domestic authorities and obscure the identity of persons controlling illicit funds.

Identity fraud / false identification: used to obscure identification of those involved in many methods of money laundering and terrorist financing.

Use “gatekeepers” professional services (lawyers, accountants, brokers etc): to obscure identity of beneficiaries and the source of illicit funds. May also include corrupt professionals who offer ‘specialist’ money laundering services to criminals.

New Payment technologies: use of emerging payment technologies for money laundering and terrorist financing. Examples include cell phone-based remittance and payment systems.

Virtual assets: exploitation of regulatory gaps in AML/CFT and lack of supervisions of virtual asset service-providers to launder illicit proceeds and fund terrorist activities.