Professional Money Launderers (PMLs) specialize in avoiding safeguards laid down by governments to prevent money laundering and terrorism financing. They use their knowledge and expertise to exploit legal loopholes and help criminals convert illegitimate funds into legitimate flows, in exchange for a fee. A PML is concerned with the destination of the money and the process by which it is moved. It is important to note that the PML may not possess any criminal background which makes it difficult to catch them in the investigation web.
PMLs include Organised crime groups (OCGs) as well as Complicit actors, involving lawyers, accountants, bankers, brokers, tax advisors, dealers in precious metals, cryptocurrency exchange dealers and others.
Services performed by a PML may include fake documentation, creating and registering shell companies, co-mingling legal and illegal proceeds, moving illicit cash, purchasing properties and assets on behalf of the client, recruiting and managing money mules and others.
The Financial Action Task Force published a report on Professional Money Laundering in July 2018. The following article provides a summary of the key takeaways from the report
Fees or commissions paid to the PML depend upon factors like:
- Complexity of the task involved.
- Quantum of funds involved and duration of time within which the funds have to be legitimized or laundered.
- Denomination of the banknotes (for cash embezzlement).
- Reputation of the PML.
- Extent of involvement of PML (sometimes the criminal group may use its own inhouse resources to launder the funds and only some activities in the laundering chain may be undertaken by the PML).
PMLs maintain a shadow accounting system wherein every transaction undertaken by them is recorded with all its relevant details, using code names for the client. This could be stored in virtual forms using passwords, or on paper and proves as a valuable source of information for investigators.
Categories of PMLs:
- Individual PML – They possess specialized skills and may offer ML services while being part of a legitimate profession – such as accountants, legal advisors, financial advisors or specialists in company formation.
- Professional Money Laundering Organisation (PMLO): – A group of two or more who come together to provide money laundering advice services. Each member is specialized in his subject. Money laundering may be one arm of this group’s otherwise legitimate business.
- Professional Money Laundering Network (PMLN): – It is a network of individual PML/s and/or one or more PMLOs. This network is quite extensive, informal, diversified, highly skilled and caters to multiple OCGs or criminal affiliates including terrorist organizations.
Role and Function of PML:
- Providing full leadership and control over ML activities including deciding fees and commissions.
- Bringing clients to the PMLs, establishing contact and relationship with PMLs in other jurisdictions, accessing the network of existing PMLOs, etc.
- Maintaining infrastructure or tools that enable setting up of shell companies, open fake bank accounts and credit cards. For this, a PML may have to maintain a network or connection with the Registrar who can register dummy companies. They also need to recruit money mule herders or cash hoarders and such other resources.
- Generation and management of fraudulent documents like duplicate identification papers, fake company formation papers, bank statements, invoices, customs documents, resumes etc.
- Receiving and managing transport of goods locally or internationally, getting documentation cleared at customs in liaison with customs officials.
- Investing and purchasing assets like high-end luxury goods or assets like real estate. These assets form a store of value for later sale.
- Collecting illicit funds for laundering purposes, which can be co-mingled with legitimate funds using cash intensive businesses, leaving hardly any paper trail.
- Assisting with fund movement, performing cash withdrawals and currency exchange services.
Different Types of ML Organisations and Network:
- Money transport and Cash Controller Network: Used to transmit vast sums of money. They have a strong network and mostly operate globally. They are responsible for controlling, co-ordinating, collecting and transmitting of funds. They use the account settlement system – illicit funds are substituted for legitimate funds. Unwitting customer accounts are used for this purpose. Fake or over invoicing is used to balance the system when funds are moved between jurisdictions. Cash transportation network is used frequently to physically move bulk currencies.
- Money Mule Network: Money mules, also known as transaction managers physically transport stolen goods or merchandise or launder the money. Mostly young unwitting youth are incentivized by free travel and easy money to undertake this task. They are used to cash counterfeit cheques or purchase goods using stolen credit card numbers, opening bank accounts for fake online shopping sites and cybercrimes. The mule under consideration may or may not be aware that the source of funds that he is moving is not legitimate.
- Digital money and virtual currency network: PMLs arrange for transfer of funds or virtual currencies to e-wallets. A complex web of e-wallet transactions is used to obscure the source of funds. The funds are finally sent to the e-wallet of the client which are then transferred to the client’s bank cards and can eventually be withdrawn in cash.
- Proxy network: Proxy network are PMLs who provide the services of banking transfers, particularly multi layered transfers, via bank accounts. The most important characteristic of this network is its global operation, i.e. it connects with PML in other countries to enable movement of funds outside of the country of origin of the laundered funds. The challenge of the proxy network is to move the funds to the pre-determined account and obscure the trail of transfers done till the funds reach its final destination. Where multiple bank accounts are used to move funds, several shell companies are also involved.
Tools / Mechanisms Used by PML:
Trade based money laundering: Modus operandi may involve purchase of high value goods, shipping them overseas, selling and transmitting the proceeds back into the clients’ account as legitimate sale proceeds, phantom shipments, over or under-invoicing of goods being shipped, using illegitimate funds to purchase goods for legal re-sale with payment being routed directly to the clients (mostly drug dealers) or the use of money brokers to dispose of drug proceeds under direction from the PML.
Account Settlement Mechanisms:
The modus operandi is such that the PML acts as a middleman between two OCGs that have opposite financial needs. On the one hand there is an OCG who has funds in his bank account but needs cash. On the other side there is an OCG who has cash but needs to remit funds to bank accounts in other countries. Here is where the PML steps in to meet the needs of both these clients through account settlement mechanism.
Underground banking and alternative banking platforms:
Used by PMLNs to bypass the regulated financial sector and create a parallel system of moving funds and keeping records of these transactions. Alternative banking platform (ABP) is a banking system which operates outside of the regulatory jurisdiction almost equivalent to the shadow banking system. It uses an online financial software (based on random data generator principal) to manipulate funds across bank accounts.
The full report can be downloaded at: