Among the slew of financial crimes facilitated by the Internet, money laundering draws importance due to its enormous size and the diverse methods used online to legitimise ill-gotten profits. The practice of money laundering carried out online has been coined the term: cyber-laundering. Money launderers are constantly looking for new ways to avoid detection from law enforcement, and the internet has provided them with a wealth of opportunities.
The Asia/Pacific Group on Money Laundering (APG) says that the Internet-facilitated money laundering and terrorist financing can be broadly understood as “the use of the internet to conduct predicate offences (Cybercrime) and the use of the internet to launder proceeds of crime or fund terrorist acts (Cyber-laundering)”. APG is APAC’s anti-money laundering/counter-terrorist financing (AML/CFT) regional group.
Cyber-laundering emerging in APAC
While cyber laundering is nothing new to the western world, it’s an emerging trend in the Asia-Pacific (APAC) region. APG has recently come up with its Yearly Typologies Report for 2018.
The yearly reports from APG provide insights into the techniques and trends used by money launderers to assist governments and other stakeholders, who can devise countermeasures to mitigate the threats. The 2018 report highlighted some trends in the money laundering and terrorism financing space and has given a special focus on Internet-facilitated money laundering and terrorist financing.
Prominent cyber-laundering methods in APAC
APG states that cyber fraud is a prevalent threat in APAC with a 35% year-on-year growth, according to a 2017 survey.
Account takeovers and payment fraud constitute a major part of the total cybercrime volume in the region. It also lists a number of ways by which cyber-laundering is happening in the region.
The following are some of the notable cyber-laundering methods in APAC:
1. Use of Social Media
According to cases mentioned by APG in the report, fraudsters use social media platforms like Facebook to prompt the public to deposit funds into their bank accounts. In one case, the offender used radical ideologies to inspire like-minded social media users and called for money.
In another case, the offender, posing as a government official, allured people with posts of non-existent financial aid from the government and made them deposit a portion of the promised amount in advance as security money.
In the above cases, the ill-gotten money was withdrawn in a short period of time or transferred to other bank accounts or mobile financial services accounts of the fraudsters.
2. Identity Theft
Here, offenders use a victim’s name or identity to commit crimes. Identification details of a person including name, national identification number, financial information (account number and PIN) are obtained through various methods such as phishing through electronic media, voice calls or instant text messaging platforms. The information is then used to commit offences including credit or ATM card fraud and unauthorised transfers using internet banking.
3. Online Gambling
There are online platforms facilitating gambling by means including poker, casinos and sports betting. Many Asian jurisdictions ban or restrict online gambling. However, some criminals make money through these options and transfer the ill-gotten proceeds to bank accounts to make them legitimate.
4. Business Email Compromise
Here, executives are fraudulently prompted over email from apparently genuine people to transfer money to accounts related to criminals. In order to gain trust, criminals establish or use company names similar to the victim’s, including renowned international companies. They will also use forged documents to defraud victims. Often, the amounts siphoned off were not too high or within a company’s normal range to avoid suspicion by the victims. Once received, the funds are immediately withdrawn from the account, either in cash or via transfers to proxies.
5. International Wire Transfer Fraud (Money Mules)
This is a crime trend started in early 2012 where criminals hacked into the email accounts of victims to send fraudulent instructions to the victims’ banks to transfer funds to bank accounts in another country. In some cases, victims fell for scams, including internet love scams, and made the transfer of funds at the criminals’ instruction.
Singapore has been one of the prominent off-shore locations to park such criminal proceeds. The bank accounts in Singapore are held by locals who befriended members of criminal syndicates, mainly through social networking websites on the internet. These local bank account holders also known as “money mules”, at the request of a criminal syndicate, agreed to receive remitted money in their account and thereafter transfer the funds elsewhere, usually to bank accounts overseas. The “money mules” usually receive a commission for their role in the transfer of the funds.
6. Online Lottery Scam
In this fraudulent scheme, a victim is deceived by a criminal who pretends to be coordinating an online lottery programme, often in the name of a reputable organisation. The victim is asked to send a certain amount to the criminal’s bank account to release the winning lottery cheque. Often, the criminals will add the names of government offices to contact to add credibility to the scheme.
How to Tackle APAC’s Cyber-Laundering Problem
According to APG, there are several challenges in Asia that make internet-facilitated money laundering/terrorist financing (ML/TF) very difficult to identify and conduct criminal proceedings. However, better coordination between jurisdictions and additional law enforcement frameworks to handle the technology side of the crime can help detect and prevent the problem. Some tips to tackle new-age money laundering schemes are given below:
- Improve domestic coordination between Law Enforcement Agencies (LEAs) responsible for investigating cybercrime and ML/TF.
- Address the lack of legislation to combat cybercrime or elements of related technology changes. The nature of the cyber threat is constantly evolving as technologies change, the tradecraft of attackers develops and the attackers themselves change.
- Strengthen cooperation with the private sector. The online infrastructure operated by the private sector is not often developed with security and cooperation with law enforcement agencies as a priority. Cooperative rather than punitive approaches to gaining assistance from private companies, such as social media and telecommunications companies, may reap more benefits.
- Promote new-generation anti-money laundering software with a multi-dimensional detection approach within financial institutions.
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