Interrupting the Wash Cycle

By Laura Spadanuta

The other problem with efforts to fight money laundering is that criminals can be more nimble than the legal process. As criminals figure out new ways to exploit technology and businesses, it takes awhile to pass legislation that will address those new tactics.

So law enforcement is at a disadvantage. It’s unlikely that companies will opt on their own to spend extra money on compliance, due diligence, and monitoring when they’re not required to do so and are not at risk of a federal fine.

Virtual world. The most pervasive trend, highlighted in the latest FATF money-laundering report, is the movement into digital currency and other non-cash technology.

Prepaid debit cards. Prepaid debit cards or payment cards have become a more popular choice for money launderers in recent years. They provide anonymity, and they have been exempt from currency reporting laws. Now when one travels from one country to the next with them, it’s almost like carrying cash but you don’t have to report it.

In an effort to curb the use of prepaid cards for money laundering, the U.S. Financial Crimes Enforcement Network (FinCEN) recently issued new rules that impose suspicious-activity reporting and record-keeping requirements on certain prepaid cards, including high-value ones that are most vulnerable to use by money launderers.

E-currency and digital transfers. The FATF report spotlights e-currency services as a growing concern. E-Gold was a very high profile e-currency service company that was hit with a money-laundering conviction a few years ago. The ability to transfer the money digitally and anonymously without going through a bank proved an attractive service to money launderers. The founder and senior directors at E-Gold pleaded guilty to money-laundering charges, and the case has been held as an example to digital-currency providers that they must comply with federal anti-money-laundering regulations.



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