What Are Typologies of Money Laundering?

Before diving into the specifics of money laundering within the remittance and money service businesses (MSBs) sector, it's essential to understand what is meant by the term "typologies of money laundering" Typologies refer to various methods, techniques, or patterns that criminals use to launder money. These could range from straightforward transactions, like 'smurfing', to more complex schemes involving multiple countries and various financial instruments.

Understanding these typologies is crucial for both regulatory agencies and businesses themselves, as it helps in the identification of suspicious activities and the formulation of preventative measures.

Common Typologies of Money Laundering in the Remittance and Money Service Businesses Sector

Structuring (Smurfing)

Breaking down large amounts of illicit funds into smaller, less suspicious amounts before sending them via remittance services. This makes it difficult for authorities to spot transactions that exceed reporting thresholds.

Cycling

Repeatedly sending funds in and out of various accounts within the remittance system to obscure their origins. This constant movement makes it challenging to trace the money back to its original source.

Cross-Border Schemes

Using international remittance services to send funds to jurisdictions with lax anti-money laundering controls making it easier to integrate dirty money into other economies.

Layering Through Multiple Agents

Utilising multiple remittance agents or companies to make tracing the funds more complicated. Each layer further obscures the money's origin.

Use of Fake IDs and Accounts

Creating fake identities or using stolen identities to send or receive funds. This tactic makes it difficult for authorities to determine who is behind the transactions.

Invoicing Fraud

Faking invoices for goods or services to justify large remittances as payments for "legitimate" business activities. Over-invoicing or under-invoicing can also be employed.

Employment of Intermediaries or Brokers

Using middlemen to facilitate transactions, thereby distancing the money launderer from the transactions. This adds additional complexity to the money trail.

Trade-Based Money Laundering

Using remittance to pay for over- or under-invoiced goods to move money across borders. This type of laundering is often combined with invoice fraud.

Remittance in Phases

Slowly remitting funds over a period of time, disguising them as regular, smaller transactions like salary or maintenance. This avoids drawing attention to large sums being transferred.

Commingling Legitimate and Illegitimate Funds

Mixing illegally obtained money with legitimate earnings before remitting makes it difficult to trace the illicit funds.

Use of Money Mules

Criminals use third-party accounts opened with stolen identities to transfer funds. These 'mule' accounts obscure the origin of the money.

Use of Cash

Criminals exploit the cash-based nature of many remittance transactions to introduce illicit funds into the formal financial system.

De-banked Businesses

Criminals target remittance dealers that have been de-banked, as they may have less oversight or control.

Offsetting Arrangements

Value transfer using informal debit and credit arrangements between businesses to avoid reporting.

Cuckoo Smurfing

Using multiple individuals to conduct transactions on behalf of a central figure to obscure the source of funds.

Each of these typologies presents unique challenges for both regulatory bodies and remittance service businesses. Awareness and understanding of these typologies are the first steps in formulating effective countermeasures.

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