THE MAGAZINE

Interrupting the Wash Cycle

By Laura Spadanuta

“I can’t tell you how many banks in the country use in some way or other a third-party payment processor for some aspect of their business, especially the smaller organizations. But you will also find many banks providing third-party payment processors with bank accounts and other banking services; banks provide that gateway into the payment system for the third-party payment processors,” says Van Cleef.

Bank accounts are potential vehicles for money laundering, terrorist financing, and other crimes, especially if you do not know your customer’s customer, says Van Cleef. Baseline due-diligence protocols have evolved as banks have become more aware of the vulnerabilities inherent in these accounts, she says.

“To the extent that [parties] are identified as third-party payment processors, the banks are urged to possibly do more due diligence and understand better who the third-party payment processor’s customers are; and then also to monitor the account more closely in terms of funds in/funds out, the nature of those products, and services being used,” says Van Cleef.

Near field communications. Another new technology for transferring money that money launderers are adopting is called near field communication (NFC). NFC allows for data exchange on two devices, such as two iPhones, that are in proximity to each other.

“In the modern money-laundering world, what you have is two guys standing on a corner texting each other. And the one guy texts the locker codes for the drugs at the locker around the corner, and the second guy texts the money from one phone to the other. What do the police see? The police see two people standing on a corner texting. They have absolutely no probable cause to arrest anybody,” says Turner.

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