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(CNS Business): Industry’s current anti-money laundering practices concentrate far too much time, energy and money on satisfying the requirements of other anti-money laundering entities in the AML chain and not enough effort on looking at how to really stop the practice by finding out what makes a money launderer tick, according to David Thomas, from the UK’s Financial Crimes Consultancy who was speaking at last week’s Global Compliance Solutions Conference on the subject of understanding the profiling and psychology of money launderers. The vast majority of money launderers were criminals committing the predicate crime who could not help but money launder the proceeds of their crimes. Changing AML tactics by getting to the source of the crime by putting a system of total confiscation of proceeds in place was the only solution.
Speaking to the assembled attendees of compliance officers and money laundering reporting officers at the Marriott Beach Resort, Thomas said he had devised his own personal classification of money laundering types accrued from many years of experience, including as head of the UK’s Financial Intelligence Unit.
The vast majority of money launderers were what he termed ‘simple’ money launderers.
“These are people who commit the predicate offence. These are people who are out and out criminals, commodity smugglers, fraudsters,” he said. “Their purpose in life is to commit a crime and make a living out of it. When they succeed in getting money, whatever they then do with that money is money laundering. But they don’t think they are money launderers. They are not necessarily aware of the efforts in place to detect money laundering. They are predicate offenders that have no choice but to launder money.”
Most dirty money came from such individuals, he said. The second category was what he termed the ‘fixer’, who was a career criminal who assisted other criminals with logistics such as transport, mobile phones, security, bribery of officials, as well as offering money laundering services, he explained.
“Others trust them, they are powerful. They don’t do it for money, they do it for power,” he said.
The employee, or the person running their own business, was the third type of money launderer. Thomas said he was not talking about employees who had in some way accidently money laundered; he was referring to employees in this category who “cynically and knowingly” committed money laundering.
The professional money launderer was the fourth type. These were individuals who did nothing else but launder money and they normally had criminal ties. There were not that many of this type of money launderer but they did exist and they had a different motivation for doing what they did, Thomas explained.
Thomas said that there was a lot of effort and money spent in trying to combat money laundering, but he believed that the majority of effort and stress was expended trying to meet the requirements of other anti-money laundering entities, such as the regulator, the police or the financial reporting authorities.
A money launderer’s motive was their vulnerability, he furthered. Understanding the motive meant it could be undermined.
“If you understand the motive, you understand the crime,” he said. “This is an approach used very much in counter-espionage and anti-terrorist strategies. Understanding motives is very important in devising strategy and tactics. What frustrates me is there is still no requirement in the international circuits to understand the motives of money launderers. There are no requirements to measure, collect data and draw conclusions.”
In addition, the motives of money launderers were misunderstood, Thomas said. The text books said that the goal of a money launderer was to generate a profit, which he said he did not agree with. “It’s missing the point,” he said, and challenged the popular notion that laundering was a processing of criminal proceeds to disguise their criminal origins.
“Profit is a very small part in the thinking of criminals. The money generated is working capital, it’s not profit. It’s ploughed back into the machine of organised crime … When you are devising policies and tactics you have got to understand the enemy. Disguising the original source is commonly understood as what money laundering is,” he explained.
Thomas said, however, that the majority of money from commodity fraud, for example, had nothing that inherently linked it to the crime, it was already disassociated. There was not a great need to separate the money from the crime. Instead, all the energy by the criminal went into disguising the beneficial owner, not the source.
“It’s all about disguising the end user via corporate structures and so on,” he explained.
The simple money launderer had no choice which meant he could not be deterred. “It does not matter what procedures are in place. He is committing crime, the money is rolling in,” Thomas said.
The only deterrent activity against this type of money launderer was to deter at the point of the actual predicate crime, which was a completely different tactic. The only way to deter such money launderers, which were the most common type, was to ensure total confiscation, Thomas said.
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