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Why should you be worried about transaction laundering?

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Why should you be worried about transaction laundering?

The world has well and truly moved online. But as regulators scramble to understand and regulate cryptocurrencies, there is another digital space that may be slipping under their radar – ecommerce. As highlighted by the Guardian last week and previously by cybercrime reporter, Brian Krebs, transactions that occur online are increasingly being used to launder money. The action is known as ‘transaction laundering’ or the more recently coined, ‘Cyberlaundering’. Cases of fake ebooks being sold on Amazon, “ghost” rides on Uber that never take place, and nonexistent stays in Airbnbs are just a few examples of how the internet is currently being exploited by money launderers.

So what can be done? Firstly, regulators need to understand the scale of the problem. Although only recently making headlines, cases of online commerce being used for money laundering and terrorist financing have been occurring for many years. In 2014 for example, an accused terrorist Hassan Butt sold fake electrical items on eBay to fund his activities, earning over £1 million before he was arrested. When you consider that globally over $2.3 trillion was moved through online shops last year, the potential for financial crime becomes massive. New regulations such as the FinCEN final rule will have an impact on how financial institutions are obliged to manage this risk but as more transactions move online perhaps it is time to bring in dedicated rules to counter this threat.

Shifting the problem off their shores?- The UK’s Sanction & Anti-Money Laundering Bill

This week the UK’s Sanctions and Anti-Money Laundering Bill passed through the Houses of Parliament and now only awaits royal assent before it becomes law. The bill will give the government the ability to form its own sanctions and AML policy once it has left the European Union. Although predominantly focused on sanctions and AML, lawmakers have taken the bill as an opportunity to also tackle one of the UK’s biggest financial crime weaknesses, corporate transparency.

After a backbench rebellion the government was forced to include an amendment which will make it a legal requirement for the UK’s overseas territories to produce public ownership registers. These registries will offer valuable insight into the often shady world of offshore company ownership and have brought much joy to transparency campaigners around the world. But not everyone is rejoicing. The registries won’t become a requirement until 2020, giving those hiding their wealth a fair amount of time to move it elsewhere. When it is moved it will likely be to jurisdictions where corporate transparency and fighting financial crime are low down on the list of priorities for policymakers. This law may help the UK fix some of its financial crime problems but in the process, will it make them somebody else’s?

iVamos Venezuela! The US issues more sanctions on Maduro and his cronies

Over the weekend Nicolas Maduro “won” Venezuela’s general election. This will allow him to stay in power for another six years and likely facilitate continued economic havoc on this beleaguered nation. In response the US, which called the election neither “free nor fair” issued an Executive Order banning the purchase of Venezuelan debt and accounts receivable from the government. This order is the latest in a chain of sanctions which the US government has placed on the nation and its political elite since mid 2017.

Why has the US continued to impose new sanctions on Maduro and his cronies? The US accuses them of allowing corruption to become endemic in Venezuela and for setting the country on a crash course to becoming a narco-state. Since Maduro took power, 123 member of his government, nearly all of which have been promoted while in office, have been tied to the “Cartel of the Suns” drugs network. Despite Venezuela being the most oil rich country in the world, long term mismanagement of this resource means that drug money is now the only reliable source of revenue that the government has. The US may be pursuing a tough line on Venezuela but if it doesn’t, the future implications could be catastrophic.

Originally published May 23, 2018, updated November 19, 2021

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