Anti-money laundering and counter terrorism financing (X post from DarknetmarketsOz).

I posted this over at /r/darknetmarketsOz but this information applies to anyone.

I've been seeing a lot of posts on our parent subreddit about people looking for or seeking advice regarding laundering money generated from illicit trade.

I'm an investment banker with a few masters and a research paper on drug economics, I hold graduate level qualifications in AML/CTF, have worked in and consulted in AML/CTF for 2 of the 4 major banks - so I'm some what qualified to give a dumb down version of how all of this works.

While I'm niether a purchaser or a dealer, I firmly believe that gaol doesn't rehabilitate people so I thought I'd provide some background information on how AML/CTF works in the banking world.

Firstly, AML/CTF stands for anti-money laundering and counter terrorism financing, it is the process in which banks assist government agencies in identifying funds which are likely generated from illicit trade or likely to be repatriated to a terrorist cell.

Secondly, the word likely is important as even people not involved in any of the above may be flagged during this process.

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Why people launder money

I'm going to skip over CTF as the blanket statement as to why people finance terrorist is because they are assholes.

Money obtained illegally is money that cannot be used freely for major purposes and if used while dirty can lead to seizures of clean money as well.

If you understand why you tumble coins, the reason you launder money is exactly the same.

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How the AML process works (high level)

All banks and mutual societies are linked, they all operate on the real time gross settlement platform (RTGS) and all payments made between banks can be traced relatively easily.

Each day banks do huge marry up of transactions to ensure their trades (of money) for the day match up (fun fact: they used to physically hand over a cheque).

Banks make money off what we call John's and Jane's, or people with typical reoccuring transactions and spending habits, and due to the typically reoccuring nature of people this comprises around 99.5% of a banks customer base.

As technology improved banks got so accurate in seeing peoples spending habits that when the government approached them and wanted to crack down on money laundering and subsequently terrorism financing the banks built a system to identify anomalies that fit this criteria.

Because this process is not foolproof once an anomaly was flagged it is then sent to a team of people to review the nature of the transaction, these teams are typically not very large as the number of items that the systems flag and subsequently send to the team is very very low.

Once the team gets the information they take a data dig to basically see where your money is going, where you are shopping and if your profile warrants a referral to the police.

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What are they looking for

Typically, people are idiots, they do not know about about how money works to obscure transactions, and in at least 40% of cases their idea of laundering money is running money through a casino or club by taking cash in running it into chips or slips then getting a cheque, these are your low hanging fruit of the AML/CTF world - these places have their own AML/CTF team. So in a majority of time teams don't even need to look, a glace at your bank statement will give it away.

Structuring - this is the process of making numerous small deposits across numerous banks to avoid the $10k trigger. Remember that RTGS thing? If you are making cash deposits outside of your profile the banker will likely order a reconciliation of all your accounts, if you are participating in structuring it will be immediately obvious, money isn't easy to get so if you are all of a sudden making cash deposits at numerous (or one bank) it'll likely trigger a flag.  

Asset staggering - this is the process of purchasing high value goods for the intention of reselling to get clean money (IE. Purchase a car with cash, then resell car and get a bank cheque from the new purchaser. This is likely the most common and most idiotic way, if at any point the asset goings into your name flags are raised and if it doesn't and you deposit a cheque flags are raised. They WILL call the person the cheque is from and they will look up your government asset register (RMS / PPSR).

Gift vouchers - This is a fairly well known strategy and involves paying cash for gift vouchers (up to $1,000 to $2,500) and either using these yourself, selling them or cashing them out. Due to the cocktail of options this is a lot harder to trace but more importantly due to the low value and inability to purchase high value assets (without triggering structuring flags) is only really useful for low value.

Online casinos - This is what a lot of street dealers do and while it's stupidly obvious they are doing it, it's a very low value endeavor, involves buying vouchers for online casinos and running money through them, 9/10 they will just lose their money.

Bitcoin - Yes banks flag transfers to bitcoin websites, not much is happening in this space aside from a huge collation of names and some subpoenas sent to coin websites.

Out of habit spending habits - Lets say you have lived week to week for 5 years, then all of a sudden you are spending less money, your pay is the same but your regular bills and shopping have slowed or stopped, you'll be flagged. If you start receiving money in cash deposits, you'll be flagged. People don't oft change, so if you all of a sudden start being different you might get a call.

Non-bank AML triggers - not something banks look for but too important not to mention. Holidays are a huge trigger of AML flags, if you are on government support but can afford to fly to Europe for 1 month you'll be investigated, along with everyone you are with, if you lie and say your parents paid, they'll check their records too.

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How can you minimise flags

Simply put, unless you have a significant volume of cash, correctly laundering money will be both expensive and difficult, by avoiding the above you can typically stay off the radar.

If you have a small volume of cash use it for intangible investments, like education, then thank all the cash heavy chinese students.

If you have a large volume of money (larger anyways), consider the reach of the banks and consider typical activities in international countries.

If you have any questions that are not "how can I launder this $1k i made" or about how to launder money (i'm not here to be complicit to your crimes) free to ask.

If you are really interested in AML/CTF, maybe consider a professional certification through www.afma.com.au

Edit. Formatting.


Comments


[26 Points] MDMangel:

If you have any questions that are not "how can I launder this $1k i made" or about how to launder money (i'm not here to be complicit to your crimes) free to ask.

Nice of you to come here and do this. You definitely seem to know what you are talkin' about.

Do you get excited when you find money in the laundry? I found a twenty in the dryer today and nearly shit a gold brick! Talk about doubling the value. Now that's how you really clean money where I'm from.

How 'bout weed? You ever just say "fuck it" and blaze up? All this money, money, money, has to drive you crazy eh?


[9 Points] Al-ze:

Hi. Do you have any examples of a laundering scheme that almost flew under the radar and what went wrong?


[8 Points] None:

[deleted]


[2 Points] Insanity_-_Wolf:

Theoretically, how would you go about laundering mid 6-figures/low 7-figures annually? I feel like this is above the "low amount" threshold and below the "high amount" to do anything crazy like international investing. Assuming that all assets are already in cash.


[2 Points] MrJuanPablo:

GOD DAMN I was waiting for a post like this. Thank you for supplying all my diamonds


[2 Points] None:

[deleted]


[2 Points] earthmoonsun:

If you want to launder drug money, just talk to your local HSBC consultant.


[2 Points] bacondev:

Let’s say that I don’t launder money, but I buy Bitcoins on Circle once in a blue moon. I transfer these Bitcoins to the darknet market (obviously not directly) to buy drugs. If my account gets flagged for the Circle transaction or anything else, Circle would likely be questioned about this transaction. They’d of course provide information on my transfer, which the investigators could trace to the actual destination, the darknet market. So let’s say that they notice that I’m likely buying drugs, would they care enough about this to report this to authorities or do they strictly care about money laundering?


[2 Points] yescan:

Throwaway for obvious reasons. I've worked the other side of the ledger on this one (Aus govt investigator), although my knowledge of the system is a few years old now. So take that as a big caveat up front.

In my experience, bank tellers are remarkably diligent at reporting 'potentially structured transactions'. Even though most of the data collection is automated, I came across a number of these 'manual reports' during a number of investigations. If memory serves, money transiting either to or from overseas via financial institutions (e.g. banks) goes straight in to the system, regardless of the amount. I vaguely remember there being some difficulty with tracking credit card cash advances or somesuch, but the details are a bit hazy. It's also likely that AUSTRAC have fixed this part of the system since when I used it.

Whether or not you'll be detected laundering money depends on who is investigating you, and why. There are multiple government agencies who use AUSTRAC, ranging from traditional law enforcement to the more mundane tax authorities (who, in my opinion, have the strongest analytical capabilities, and the most data to match against). In some of these cases, and if the amount is 'small' enough' (relatively speaking), simply transferring the money to a foreign jurisdiction and then moving it on again to another foreign jurisdiction means it's not worth an investigator's time and effort to follow the trail. In others, it provides you with little defence.

And this probably goes without saying, but if you're involved in serious criminal activity, skipping the country to a 'safe' jurisdiction is a pretty effective way to defend against investigation. I still remember wasting half a day analysing someone's recorded transactions, looking up their file, and the investigation stopping dead in its tracks when I noticed their forwarding address was somewhere in Morocco... On the flip-side, coming back in to the country under the belief that things have 'blown over' or that you can 'fly under the radar' is pretty damn stupid; you may find yourself in cuffs before you even make it out of the airport terminal. It's happened in the past.

I suppose what I'm getting at is: don't underestimate the more 'physical' methods of evidence gathering. That is, you could have left hardly any electronic trail, certainly not enough for a conviction, but the authorities always have another other methods collecting evidence: physical surveillance and the dreaded 7am knock on the door (yes I know, we're monsters). And even if you've been very careful re: physical evidence, it only takes 1 stroke of bad luck for some evidence to be missed by you and subsequently uncovered. For example, someone in your household grabbing a 'scrap of paper' to write a note on (or whatever), and that piece of paper not finding its way back to the shredder pile, can cause you a lot of long-term grief...

And like the OP, I'm not going to give you advice on how to dodge the system. It'd probably be a bad idea to follow my advice anyway, given my knowledge of the system is outdated. Just adding what I hope is an interesting perspective to the conversation.


[1 Points] brrrrr_:

I appreciate the information, but I believe (and I may be wrong) that most of the posts in this sub involving laundering involve laundering bitcoins rather than money. From what I've seen, unless you're a big time dealer/vendor, laundering money isn't really something people here worry about. The issue is laundering bitcoin in such a way that a DNM purchase cannot be traced back to you. The purchase/sale of bitcoins is the point where DNM users/vendors expose themselves, so if those bitcoins can be traced to illegal transactions, buyers and sellers are effectively doxxed by law enforcement. Therefore, I believe most of that information isn't relevant to 99% of the people on this sub.


[1 Points] tthrowschucknorris:

Online Service Provider :)


[1 Points] None:

What if your general pattern with a bank, since opening an account, say over 10 years, has always been various lumps of cash? Say, a few thousand at a time, sometimes 0 deposits a month, sometimes 3 or 4 deposits a month? If your pattern has always been like this, it wouldn't be breaking a pattern, but the pattern itself looks conspicuous. In those amounts would it be low enough no one would care?


[1 Points] manchasingpaper:

Quick question, say you deposit 5k or so and you claim it was profit from an online business of selling virtual items in a pc game for bitcoin (with fake invoices etc) and the business is legally registered. those transactions are untraceable unless they personally logged into my pc game account. Would this be ok?


[1 Points] None:

[deleted]


[1 Points] Selectivescammer1:

What exactly does being investigated entail? How do you snare money launderers? - Get the proof that that is what they are doing?


[1 Points] Bitcointhrowaway2Q:

How much does it actually take to throw a flag? Say you had a very low time dealer (under 4 digits a month) with cash comming in and going to Bitcoin sites. Would that even be enough to raise questions?


[1 Points] None:

[deleted]


[1 Points] eel-literate:

What about the gift card websites that sell cards for bitcoin? Are those flagged? Also, are these rules for all countries, or just Australia?


[1 Points] moneymonkey1:

Interesting theoretical scenario, lets say you had 5-10 million sitting in a US bank account, how would you launder it and get it offshore as discretely as possible?


[1 Points] moneymonkey1:

What about trade based money laundering, do you find that it's hard to catch?


[1 Points] craterk1ng:

Hi this is an old thread but maybe you'll still help out. How much do you have to be bringing in per month to where the "offset your living expenses with dirty money" method gets attention? I know you said somewhere that a >20% change of habits is noticed.. but if you exceed that but only offsetting with $2K per month? Does anyone care? Or are they looking for >20% changes with offsets totals more than $5-10K per month?


[1 Points] None:

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