Identifying financial patterns of money laundering with social network analysis: a Brazilian case study
| DOI | https://doi.org/10.1108/JMLC-12-2020-0139 |
| Published date | 07 May 2021 |
| Date | 07 May 2021 |
| Pages | 118-134 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Rafael Sousa Lima,André Luiz Marques Serrano,Joshua Onome Imoniana,César Medeiros Cupertino |
Identifying financial patterns of
money laundering with social
network analysis: a Brazilian
case study
Rafael Sousa Lima and André Luiz Marques Serrano
Department of Accounting Science, University of Brasília, Brasilia, Brazil
Joshua Onome Imoniana
Department of Accounting Science, University of São Paulo, São Paulo, Brazil, and
César Medeiros Cupertino
Department of Accounting Science, University of Vale do Itajaí, Biguaçu, Brazil
Abstract
Purpose –This study aims to understand how forensic accountants can analyse bank transactions
suspectedof being involved with money laundering crimes in Brazil throughsocial network analysis (SNA).
Design/methodology/approach –The methodological approach taken in this study was exploratory.
This study cleaned and debugged bank statements from criminal investigations in Brazil using
computationalalgorithms. Then graphs were designed and matchedwith money laundering regulations.
Findings –The findings indicated thatgraph techniques contribute to a range of beneficial information to
help identifytypical banking transactions (pooling accounts,strawmen, smurfing) used to concealor disguise
the movementof illicitresources, enhancing visual aspects of financial analysis.
Research limitations/implications –Research found limitations in the data sets with reduced identification
of originators and beneficiaries, considered low compared to other investigations in Brazil. Furthermore, to preserve
restrict information and keep data confidential,data set s used in research were not made available.
Practical implications –Law enforcement agencies and financial intelligence units can apply graph-
based techniquecited in this research to strengthenanti-money laundering activities.The results, grounded in
analyticalapproaches, may offer a source of data to regulatorsand academia for future research.
Originality/value –This study created data sets using real-lifebank statements from two investigations
of competence by the Brazilian Federal Justice, including real-data perspectives in academic research. This
study uses SNA, whichis a popular approachin several areas of knowledge.
Keywords Money laundering, Crime, Social network analysis, Forensic accounting, Graph
Paper type Case study
1. Introduction
Forensic accountants seek to apply a multiplicity of knowledge and information sources in
solving crimes (Imoniana et al.,2013). The work includes financial investigations into the
illicit flow of money and assets, with the objective of disrupting the criminal networks and
their business models (Interpol, 2017).Despite banks having implemented a large variety of
The authors would like to acknowledge the technical support with JAVA applications (programming
language) provided by the Brazilian Fingerprint Expert Juliana Batista Costa.
JMLC
25,1
118
Journalof Money Laundering
Control
Vol.25 No. 1, 2022
pp. 118-134
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-12-2020-0139
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
complex compliance systems, money launderers continue to use them for illicit purposes
(Teichmann, 2020;Martínez-S
anches et al., 2020).
Regarding the analysis of bank statements, there is a need for forensic accountants to
process an increasing number of bank launches (sometimes tens of millions in just one
investigation). This type of analysis aims to understand the modus operandi of a criminal
organization, especially the illicit flow of financial resources, to identify major financial
movements and reveal the path of money, in a procedure known as “follow the money.”
Forensic investigationsoften uncover activities that reveal the practice of money laundering
crimes –that is, actions perpetrated to conceal or disguise the origin or movement of illicit
funds.
One of the possibilities availablethrough technology is the use of social network analysis
(SNA). SNA-based research has become a popular approach in several areas of knowledge
(Tabassum et al.,2018) with interdisciplinary aspects, enabling discussions with different
theoretical approaches (Millena, 2013). There is a strong tendency towards visual
communication practicesin the legal sphere (Brunschwig, 2014), and research regarding the
relationship between visual data and law enforcement is timely (Brayne et al., 2018). Visual
evidence (including graphs) is increasingly used in criminal trials (Feigenson, 2010),
although there are some limitations, such as harmonization between images and
jurisprudential texts and biases in the visual construction of reality (Feigenson, 2014).
Technologies for data interpretation and evidence production are central and integral to
modern forensic science.Forensic science will not be fit for justice unless scientific evidence
can be expressed and presented in forms readily comprehensible to non-expert jurors and
judges (Roberts,2017).
This study aims to comprehend how to analyse bank account movement suspected of
involvement in money laundering crime through SNA. Methodologically, the research can
be classified as exploratory research, as it aims to empirically investigate a problem to
increase the familiarity of the researchers with a given phenomenon. Databases were
constructed with real-life bank statements from criminalinvestigations in Brazil. Raw data
were cleaned and debugged. Graphs were designed, and the results indicated that SNA are
powerful tools in combatingfinancial crimes and money laundering.
2. Literature review
Before 1986, money laundering was not considered a criminal offense (Teichmann, 2020).
The first movement to coordinate enforcement and provide an international legal
framework for money launderingwas the United Nations Vienna Convention of 1988. Under
the sponsorship of the Organization for Economic Cooperation and Development, the
Financial Action Task Force (FATF) was created in 1989 by the seven richest countries in
the world. The aim was to examine, develop and promote policies for the war on money
laundering. The Organization of American States General Assembly of 1992, in the
Bahamas, passed and adopted model regulations for money laundering offenses related to
drug trafficking. The Terrorist Financing Convention of 1999, the Palermo Convention of
2000 (transnational organized crime) and the Mérida Convention of 2003 (corruption) were
also internationalefforts to combat money laundering and related crimes (Sanctis,2013).
In Brazil, money laundering was not typified in the main body of the Criminal Codeas it
was, for instance, in the USA (Sanctis,2013). According to Brazilian Law 12683/2012, which
amended Law 9613/1998, a person commits the crime of money laundering when they
conceal or disguise the nature, origin, location, disposition, movement or ownership of
goods, securities or money deriveddirectly or indirectly from a criminal offense. Likewise, a
person commits the same crime when, to conceal the use of goods, securities or money
Financial
patterns of
money
laundering
119
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