A Guide to Anti-Money Laundering for Crypto Firms

Spanish Authorities Break into European “Narco Bank”

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Over EUR 4 million in cash has been seized from an extensive criminal network providing illicit financial services in a joint operation between the Spanish Civil Guard (Guardia Civil) and the German Criminal Bureau (Landeskriminalamt) of Hamburg. The disrupted organized crime ring running the “bank” provided financial services to various criminal organizations predominantly linked to drug trafficking.

During an action day in May 2022, 44 persons of Chinese, Spanish, Moroccan, and German nationality were arrested in the wake of 50 house searches across Spain and Germany. Authorities also seized 23 luxury vehicles and jewelry.

A clandestine banking system

According to authorities, the criminal network moved large amounts of cash via a sophisticated underground banking system that allowed crime groups to make payments, receive funds, and even have their proceeds laundered. The clandestine banking system was largely based on funds from the illegal drug trade. One part of the organization sent up to 200 kilos of cannabis and hashish a week from Spain to other parts of Europe.

Those involved in the criminal network picked up physical cash directly from criminal organizations, then transported it in vehicles equipped with hidden compartments. The illicit funds were then fed into a shared cash pool dispersed across various international locations. The banking system allowed criminal organizations to use the cash pool to finance illegal activities or provide cross-border payments.

Within a few days of the action day, police seized 650 kilograms of cannabis and 51 kilograms of hashish. 

Professional money laundering 

The Financial Action Task Force (FATF) has previously identified four key types of dedicated money laundering organizations and networks identified through an analysis of case studies, including: 

    • Money transport and cash controller networks – Generally, the structure of these networks consist of individuals who control, coordinate, collect, and transmit illicit funds and operate together to negotiate deals with organized crime groups.
    • Money mule networks – Money mule networks have been used to open numerous individual bank accounts locally and in global financial centers to facilitate the movement of criminal proceeds.
    • Digital money and virtual currency networks – In many cases, online payments for illicit drugs are transferred to e-wallets and held in fiat currency or virtual currency.  Then the virtual currency is transmitted through a complex chain of e-wallets, which may include the use of mixers and tumblers further to enhance the anonymity of the virtual currency transactions.
    • Proxy networks – The main task of proxy networks is to move client funds to the final, pre-determined destination and to obfuscate the trail of the financial flows. In many cases, these schemes are supported by TBML mechanisms.

The report also highlights underground banking and alternative banking platforms as tools often used by professional money launderers (PMLs). 

Key takeaways

The investigation was carried out within the European Multidisciplinary Platform Against Criminal Threats (EMPACT) framework. Europol provided operational expertise and analytical and operational support to the Spanish and German authorities, demonstrating the importance of collaboration and cross-border information sharing

Ongoing geopolitical events, such as tensions between the US, Russia, and China, and the economic fallout from Brexit, have made anti-money laundering (AML) information sharing more critical than ever. With that in mind, compliance teams should know that industry and political groups will likely focus on innovative new ways to share information about cross-border financial crime.

Over EUR 4 million in cash has been seized from an extensive criminal network providing illicit financial services in a joint operation between the Spanish Civil Guard (Guardia Civil) and the German Criminal Bureau (Landeskriminalamt) of Hamburg. The disrupted organized crime ring running the “bank” provided financial services to various criminal organizations predominantly linked to drug trafficking. During an action day in May 2022, 44 persons of Chinese, Spanish, Moroccan, and German nationality were arrested in the wake of 50 house searches across Spain and Germany. Authorities also seized 23 luxury vehicles and jewelry.

A clandestine banking system

According to authorities, the criminal network moved large amounts of cash via a sophisticated underground banking system that allowed crime groups to make payments, receive funds, and even have their proceeds laundered. The clandestine banking system was largely based on funds from the illegal drug trade. One part of the organization sent up to 200 kilos of cannabis and hashish a week from Spain to other parts of Europe. Those involved in the criminal network picked up physical cash directly from criminal organizations, then transported it in vehicles equipped with hidden compartments. The illicit funds were then fed into a shared cash pool dispersed across various international locations. The banking system allowed criminal organizations to use the cash pool to finance illegal activities or provide cross-border payments. Within a few days of the action day, police seized 650 kilograms of cannabis and 51 kilograms of hashish. 

Professional money laundering 

The Financial Action Task Force (FATF) has previously identified four key types of dedicated money laundering organizations and networks identified through an analysis of case studies, including: 
    • Money transport and cash controller networks - Generally, the structure of these networks consist of individuals who control, coordinate, collect, and transmit illicit funds and operate together to negotiate deals with organized crime groups.
    • Money mule networks - Money mule networks have been used to open numerous individual bank accounts locally and in global financial centers to facilitate the movement of criminal proceeds.
    • Digital money and virtual currency networks - In many cases, online payments for illicit drugs are transferred to e-wallets and held in fiat currency or virtual currency.  Then the virtual currency is transmitted through a complex chain of e-wallets, which may include the use of mixers and tumblers further to enhance the anonymity of the virtual currency transactions.
    • Proxy networks - The main task of proxy networks is to move client funds to the final, pre-determined destination and to obfuscate the trail of the financial flows. In many cases, these schemes are supported by TBML mechanisms.
The report also highlights underground banking and alternative banking platforms as tools often used by professional money launderers (PMLs). 

Key takeaways

The investigation was carried out within the European Multidisciplinary Platform Against Criminal Threats (EMPACT) framework. Europol provided operational expertise and analytical and operational support to the Spanish and German authorities, demonstrating the importance of collaboration and cross-border information sharing Ongoing geopolitical events, such as tensions between the US, Russia, and China, and the economic fallout from Brexit, have made anti-money laundering (AML) information sharing more critical than ever. With that in mind, compliance teams should know that industry and political groups will likely focus on innovative new ways to share information about cross-border financial crime.

Originally published September 16, 2022, updated September 16, 2022

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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