MONEYVAL: Facing Traditional and Modern Money Laundering Methods

4 mins

The world faces a combination of traditional and newer money laundering methods, according to the Committee of Experts on the Evaluation of Anti-money Laundering (AML) Measures and the Financing of Terrorism or MONEYVAL.

In its latest annual report, the monitoring body of the Council of Europe, which includes 36 member States and jurisdictions, said the current money laundering challenges require co-ordinated action from governments in Europe and around the world.

The report provides a comprehensive overview of key compliance trends in the MONEYVAL member-jurisdictions. It also presents the agency’s activities in the area of mutual evaluations, research typologies, training, as well as external and internal engagement.

MONEYVAL is an associate member of international AML watchdog the Financial Action Task Force (FATF).


Highlighted Money Laundering Methods

“We are facing a combination of well-known money laundering methods and newer trends,” said Elżbieta Frankow-Jaśkiewicz, the Chair of MONEYVAL, in the report. Here are the money laundering methods emphasised by MONEYVAL:

Traditional Methods

Frankow-Jaśkiewicz pointed out traditional methods such as the use of offshore jurisdictions, and complex corporate structures. They help conceal the true ownership of assets behind several layers of so-called shell companies.

She also pointed out the Pandora Papers that revealed the growing scale of money laundering across the world. One of the largest global money laundering revelations in recent history, the Pandora Papers brought to light hidden wealth, tax avoidance and money laundering by some of the world’s rich and powerful personas.

The Pandora papers also showed that “gatekeepers” such as lawyers, accountants, and other service providers have been complicit in large-scale transnational money laundering schemes involving corrupt politicians and high-net-worth individuals.

MONEYVAL noted that it is working with the FATF to enhance the regulatory regime of these gatekeeper professions. In 2021, there was a change to the FATF Standard to regulate the transnational operations of “gatekeepers” and improve their global compliance.


Modern Money Laundering Trends

MONEYVAL pointed out the increasing use of cryptocurrencies and other components of the rapidly evolving ecosystem of decentralised finance (DeFi) are also posing major challenges.

According to the agency, the DeFi system removes “the traditional forms of control that banks and institutions have on financial flows and services, and creates new forms of financial products accessible through the internet from any point on the globe”.

Since the components of one single crypto business are spread across multiple countries, there are enforcement and supervisory challenges for governments. They include difficulties in determining the jurisdiction responsible for the oversight of these new-age businesses.

Supervisory cooperation in this field is at its very nascent stages, and is not yet keeping pace with the rapid evolution of technology.


Money Laundering Through Virtual Currencies

MONEYVAL said that money laundering methods using cryptocurrencies are becoming ever more sophisticated, and larger in scale.

  • Virtual assets are now abused to launder proceeds from crimes such as fraud and corruption as well as for tax evasion.
  • There is suspicion that criminals have created some of the smaller cryptocurrencies specifically for laundering.
  • The larger cryptocurrencies are susceptible to heavy market manipulation, which is a major predicate offence for money laundering.


MONEYVAL’s Response to These Challenges

The agency said it is taking “comprehensive measures” to address these challenges. They include:

  • Evaluations and follow-up processes that are closely looking into the regulatory framework for virtual assets in member States
  • A 2022 typologies study that will be dedicated solely to cryptocurrency money laundering trends
  • Projects aimed at developing the studying of the financial sectors and horizontal trends among member states
  • Partnerships with other entities of the Council of Europe in the areas of human rights, data protection, cybercrime and others.


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