An analysis of money laundering and terrorism financing typologies
| Date | 30 December 2011 |
| DOI | https://doi.org/10.1108/13685201211194745 |
| Pages | 85-111 |
| Published date | 30 December 2011 |
| Author | Angela Samantha Maitland Irwin,Kim‐Kwang Raymond Choo,Lin Liu |
| Subject Matter | Accounting & finance |
An analysis of money laundering
and terrorism financing
typologies
Angela Samantha Maitland Irwin and Kim-Kwang Raymond Choo
Information Assurance Group & Forensic Computing Lab,
University of South Australia, Mawson Lakes, Australia, and
Lin Liu
School of Computer and Information Science, University of South Australia,
Mawson Lakes, Australia
Abstract
Purpose – The purpose of this paper is to measure the size of the money laundering and terrorism
financing problem, identify threats and trends, the techniques employed and the amount of funds
involved to determine whether the information obtained about money laundering and terrorism
financing in real-world environments can be transferred to virtual environments such as Second Life
and World of Warcraft.
Design/methodology/approach – Analysis of 184 Typologies obtained from a number of
anti-money laundering and counter-terrorism financing (AML/CTF) bodies to: determine whether
trends and/or patterns can be identified in the different phases of money laundering or
terrorism financing, namely, the placement, layering and integration phases; and to establish
whether trends and/or behaviours are ubiquitous to a particular money laundering or terrorism
financing Type.
Findings – Money launderers and terrorism financers appeared to have slightly different preferences
for the placement, layering and integration techniques. The more techniques that are used, the more
cash can be successfully laundered or concealed. Although terrorism financers use similar channels to
money launderers, they do not utilise as many of the placement, layering and integration techniques.
Rather, they prefer to use a few techniques which maintain high levels of anonymity and appear
innocuous. The sums of monies involved in money laundering and terrorism financing vary
significantly. For example, the average maximum sum involved in money laundering cases was AUD
68.5M, as compared to AUD 4.8 for terrorism financing cases.
Originality/value – This paper provides some insight into the relationship between predicate
offence, the predominant techniques utilised in carrying out that offence and the sums of money
involved.
Keywords Money laundering,Terrorism, Financing, Typologies,
Anti-money laundering/counter terrorismfinancing, Virtual environments
Paper type Research paper
1. Introduction
Considerable progress has been made in fighting money laundering and terrorism
financing in real-world financial environments, particularly with the introduction of
stronger anti-money laundering/counter-terrorism financing (AML/CTF) regimes and
increased levels of inter-agency co-operation and support. However, money laundering
and terrorism financing in virtual environments is an area that is currently under
researched and not as well understood as its real-world counterpart.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
An analysis
of typologies
85
Journal of Money Laundering Control
Vol. 15 No. 1, 2012
pp. 85-111
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685201211194745
In recent years there has been much debate about the risks posed by virtual
environments. Concern is growing about the ease in which massively multiplayer online
games (MMOGs) such as Second Life and World of Warcraft can be used for economic
crimes such as money laundering, fraud and terrorism financing (Tefft, 2007; Rijock,
2007; Sullivan, 2008; Sanders, 2009) and the potential and opportunity they offer for
allowing large sums of money to be moved across national borders without restriction
and with little risk of being detected (Lee, 2005; Leapman, 2007; BBC, 2008; Heeks, 2008).
The overall aim of our three-year research project is to determine whether money
laundering and/or terrorism financing can be carried out inside virtual environments
such as Second Life and World of Warcraft and, if so, how can it be done? However, to
answer these fundamental questions, one must know what money laundering and
terrorism financing might look like inside these environments. Since this information
does not currently exist, we must look to existing sources of data to inform our research,
namely real-world money laundering and terrorism financing data. It is believed that
knowledge gained from real-world environments will provide valuable insight into
how money may be laundered and funds may be raised in virtual environments to assist
criminals to produce clean funds and f urther the political cause of terrori st
organisations. Therefore, this paper focuses on the first phase of our research which
attempts to measure the size of the real-world money laundering and terrorism financing
problem, identify potential threats and trends, the techniques employed and the amount
of funds involved.
Over the years, a number of attempts have been made to determine the magnitude
and scope of the money laundering and terrorism financing problem (Schott, 2006;
Biagioli, 2008; Zdanowicz, 2009; Walker and Unger, 2009) and investigate how money is
being laundered (Unger et al., 2006; Unger, 2007) and terrorism is being financed
(Roth et al., 2004). However, the inherently secretive nature of money laundering and
terrorism financing make these very difficult tasks to achieve. Many of the attempts to
measure the size of the problem have produced a number of largely varied estimates,
none of which can be irrefutably proven (Biagioli, 2008). Attempts to define how money
laundering and terrorism financing can be carried out have been low level and
superficial and generally do not discuss in detail the actors, financial flows and
behaviours involved in carrying out these activities.
On the other hand, various international organisations produce excellent reference
works on money laundering methods and techniques in the form of annual reports and
annual typology reports. These reports, which contain details of sanitised, successfully
detected money laundering and terrorism financing cases, provide a wealth of
information on current threats and trends, techniques employed and, in many cases,
the amount of funds involved.
By mining annual and typology reports published by international intelligence units
and AML/CTF organisations, this research aims to determine whether trends and/or
patterns can be identified in the different phases of money laundering or terrorism
financing, namely, the placement, layering and integration phases[1] and establish
whether trends and/or behaviours are ubiquitous to a particular money laundering or
terrorism financing type.
This paper provides some insight into the relationship between predicate offence,
the predominant techniques utilised in carrying out that offence and the sums of
money involved.
JMLC
15,1
86
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