Do the names Second Life, Club
Penguin and Zwinktopia mean anything to you? These “virtual worlds” may seem like harmless places on the
Internet that provide simple entertainment,
but in reality, they are increasingly serving
as money laundering hubs for criminals all
around the globe.
“These are legitimate sites and legitimate
business is conducted over these sites.
However, if you do business with a launderer — who you thought was a legitimate
customer — you’re involved even if you
didn’t know it,” cautions Theresa Mack,
CPA, CAMS (Certified Anti Money
Laundering Specialist ) senior manager,
investigations, for Cendrowski Corporate
Advisors LLC. “Virtual banks are another
high-risk area. Anonymity may be convenient, but you incur greater risk when you
don’t do business face-to-face.”
Smart Business asked Mack about other
emerging issues in money laundering.
What’s a simple definition of money laundering?
The conversion or transfer of property,
knowing it is derived from a criminal
offense, for the purpose of concealing or
disguising its illicit origin, or of assisting
any person who is involved in the commission of the crime to evade the legal consequences of his or her actions. Willful blindness is considered having knowledge in the
U.S. courts.
Has it become more prevalent today?
The International Monetary Fund estimates the aggregate size of money laundering in the world could be between 2 and 5
percent of the world’s gross domestic product. Money launderers are always looking
for new ways to launder their ill-gotten
funds. Economies and countries with growing and developing economies but inadequate controls are especially vulnerable.
Why do companies need to be educated
about this topic?
If you do business with a customer/client
who is involved with money laundering, you are at risk of being involved in a money
laundering investigation. If you are buying
a company, money laundering could overstate sales or have a direct impact on the
expenses. Crimes like this can infiltrate
financial institutions, entwine businesses
and acquire control of large sectors of the
economy through investment, or bribes to
businesses, public officials and governments. Money laundering can weaken the
social fabric and ultimately decay the institutions of our society. In countries moving
to democratic systems, this criminal influence can undermine the transition. Fundamentally, money laundering is linked to the
underlying criminal activity. Willful blindness of entities/people who allow money
laundering or turn a blind eye to it are often
found to have knowledge in the eyes of the
U.S. courts, hence criminal prosecution,
jail time and hefty fines are the consequence of not being educated on this subject matter.
What are some of the newer things criminals
are doing to launder money?
- Prepaid cards are currently the most
significant money laundering threat. There is an estimated $30 billion in payments
going to Latin America from the U.S. each
year alone. These are branded by AMEX,
MasterCard, or Visa and operate like traditional credit or debit cards. These cards
facilitate the cross-border movement of
funds without a declaration requirement.
The funds can be loaded anywhere in the
world, there often is no maximum load
limit, they can be used at ATMs, no bank
account is needed and they can be activated online. - As mentioned above, virtual worlds on
the Internet are high-threat areas. At sites
like Second Life, users can buy and sell
with money that can be ‘purchased.’
Activity is constant and unmonitored for
the most part. Law enforcement has taken
note as are these sites who are increasing
their monitoring of the transactions. - ATM businesses that are also issuing
agents of money orders are using their independent ATMs in these stores with illicitly
derived cash and allowing launders to use
the ATM instead of using a bank ATM. - Money services businesses. The USA
PATRIOT Act of 2001 enhanced law
enforcement organizations’ ability to combat money laundering through these businesses by amending federal statutes making it a crime to operate an unlicensed
money service business under 18 USC
Sect. 1960. Individual states have their own
laws regarding licensure. Enforcement is
trying to keep up.
How can a company protect itself?
Do proper due diligence on everyone you
do business with. If you have any suspicions
about a transaction involving a company or
individual, protect yourself by anonymously
filing a Suspicious Activity Report (SAR),
and keep a copy for your own records
should you ever be approached about the
activity. You can download a SAR at the
Financial Crimes Enforcement Network
Web site at www.fincen.gov. SARs can only
be used by law enforcement for intelligence
gathering and cannot be entered into a court
of law.
THERESA MACK, CPA, CAMS, former Special Agent of the FBI, is senior manager, investigations, with Cendrowski Corporate Advisors
LLC. Reach her at (866) 717-1607 or [email protected].
