News

The Cornerstone Report

Safeguarding America Through Financial Investigations

June 2009 - Table of Contents

Case Examples

Case examples derive from the Financial Action Task Force (FATF) "Money Laundering and Terrorist Financing Typologies, 2004-2005" report and from our contribution to the 2009 typology study of money service businesses. These documents and more information on typologies and risk indicators are available at the FATF Web site.

Case Example: 2004-2005

A major human trafficking and money laundering case in the Netherlands began with suspicious transaction reports concerning transactions at a Hong Kong bank in which large amounts of cash were deposited into accounts and immediately followed by outward remittances into a personal account in the Netherlands. Following the suspicious transaction reports (STRs) (in 1999), the FIU launched an investigation into the account of Z., the head of a dismantled alien smuggling organization in the Netherlands, from which an address in the Netherlands was established.

The Hong Kong FIU contacted the Netherlands National Police Agency for background inquiries and was told that the agency had already started an investigation into Z.’s syndicate involving human trafficking. She coordinated with her accomplices for the purpose of smuggling mainland Chinese through Russia, Ukraine, Turkey and Slovakia into Western Europe. The final destinations were Canada, the United States and Mexico.

The Hong Kong FIU identified five accounts held by Z., with a total amount of $283,000 USD. The information was passed to overseas counterpart agencies. Throughout the period, the FIU continued to monitor the cash flows and the updated balance amounted to over 2 million euros. To avoid suspicion, Z. appeared to use several bank accounts in various countries in her own name or in the name of facilitators to hide and launder the illegal proceeds. Funds were wire transferred to foreign accounts. The investigation by the Hong Kong, FIU revealed that Z. had also triggered 8 STRs for purchasing casino chips with both Dutch and foreign currencies (cash) in a state-run casino.

Z. was arrested in the Netherlands in June 2000 and convicted in October 2003. She was sentenced to three years and six months imprisonment. In January 2004, a Dutch court made a confiscation order for 8.7 million euros, representing unlawful gains. Overseas police agencies also arrested several persons abroad and seized assets, including real estate and accounts situated in foreign countries.

Case Examples: 2005-2006

The two cases mentioned below provide a good example of successful cooperation between regulatory and law enforcement agencies:

• The Dutch Central Bank discovered counterfeiting of identity papers and transaction reports at two money transaction offices (who were competitors) and filed police reports, which led to further investigations by law enforcement agencies. In the end, both money transaction offices were struck from the register. The outcome of these investigations by the law enforcement agencies is not yet known.
• In another case, the police listened in on a money transaction office (in connection with an investigation of drug trafficking) while the Dutch Central Bank visited the money transaction office for an AML-CFT investigation. The police overheard the suspect’s conversations and obtained information about their intentions and actions. The managers and employees of the money transaction office involved were arrested and the money transaction office was struck from the register. Prosecution is pending.

Case Example: Internet Fraud and Money Mules

Russian and Ukrainian criminal organizations retrieved data from Internet bank account holders. These organizations used “money mules” in order to obtain money from these account holders. A money mule is a person who makes his bank account available to a criminal or criminal organization for remuneration. A money mule is often persuaded via a spam e-mail to withdraw money—which he receives from victims of a criminal or criminal organization—from his account and forwards the money to the account of another person (whose personal details the money mule also received via e-mail from the criminal organization). The money mule can retain a part of the money for the services rendered to the criminal or criminal organization.

When Dutch investigators replied to such a spam e-mail, they obtained the personal details of several persons in Russia and the Ukraine who were to receive money on behalf of the criminal organization. The FIU NL could even retrieve the personal details of other persons involved in this fraud scheme. Several money mules were arrested in the Netherlands and money and accounts were seized. The Russian law enforcement agencies were asked to arrest several “beneficiaries” of this fraud scheme.

The Dutch authorities handed over all relevant information to their Russian and Ukrainian counterparts so that they could start prosecutions in their jurisdictions.

In the Netherlands the increase of the use of money transfers can easily be explained by the fact that immigration figures have increased. As is shown in the table on the previous page, only part of the reports that are filed to the FIU NL can be considered as suspicious transactions. As mentioned earlier, a unique point of the legislation of the Netherlands is that every money transfer of 2,000 euros and more has to be reported. This enables the FIU NL to analyze and match more information. Combining the information is the key to the increase of suspicious transactions.

The Dutch FIU passes the valuable information on to law enforcement, which results in more investigations being conducted. It can be concluded from the law enforcement investigations that criminal organizations’ use of money transfers as a technique to quickly relocate illicit proceeds to other parts of their network is occurring. Money transfers can be used in all types of predicate offenses, like drugs, human trafficking and illegal prostitution. A well-known phenomenon in the Netherlands is the advanced fee fraud by West African criminal networks. A more recent trend in that respect is relocating the profits from retail fraud via the Internet (such as eBay fraud). To successfully complete these schemes, the use of false identification documents is a key element.

The following are examples of current money laundering and terrorist financing typologies:

• use of intermediaries (straw men of second person);
• cash couriers;
• use of “money mules,” “smurfing”;
• atypical money transfers; and/or
• use of businesses (travel agencies).