Preventing money laundering: a test of situational crime prevention theory
| Pages | 376-396 |
| Date | 03 October 2016 |
| Published date | 03 October 2016 |
| DOI | https://doi.org/10.1108/JMLC-10-2015-0045 |
| Author | Nicholas Gilmour |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
Preventing money laundering:
a test of situational crime
prevention theory
Nicholas Gilmour
Centre for Defence and Security Studies, Massey University,
Wellington, New Zealand
Abstract
Purpose – This paper aims to discuss the ndings of a UK-based research study that sought to explore
the applicability of situational crime prevention towards money laundering undertaken through the
purchasing of high-value portable commodities.
Design/methodology/approach – This paper presents exploratory ndings from research
conducted between 2011 and 2013 in the UK. The research sought to identify the process, steps and
vulnerabilities behind money laundering through the purchasing of high-value portable commodities
and whether the introduction of situational crime prevention techniques could reduce vulnerabilities in
the existing environment.
Findings – Despite signicant research into money laundering typologies, the use of high-value
portable commodities has remained largely untouched, regardless of the increased implementation of
anti-money laundering policies and procedures. This paper demonstrates how the purchasing of
high-value portable commodities is extremely vulnerable to money laundering – while identifying how
the successful application of situational crime prevention is possible – but inherently it depends on
various characteristics directly and indirectly facilitating each stage of the money laundering process.
Research limitations/implications – This paper is of value to government policymakers,
regulators and nancial institutions considering future preventative measures. It is also of value to
nancial investigators and law enforcement agencies intent on investigating money laundering. While
the paper relies on data from the UK, the overall ndings are such that wherever cash-intensive
businesses exist, so too does the opportunity for money laundering through the nancial arrangement
retained by such businesses.
Originality/value – This paper presents new research on the direct link existing between high-value
portable commodities and money laundering in the UK and the viability of techniques for situational
crime prevention despite signicant research having previously taken place to identify and develop
money laundering typologies.
Keywords Organized crime, Money laundering, Crime script analysis, Rational choice theory,
Routine activity theory, Situational crime prevention
Paper type Research paper
Background
Money laundering
The overall reported scale of money laundering symbolises the power retained and the
wealth generated by criminal activity. By providing legitimacy surrounding illicitly
gained funds, Wright (2005, p. 68) suggests money laundering is “bad for domestic and
international trade, bad for reputation of the international banking system and bad for
effective governments”. Likewise, social consequences of money laundering
The current issue and full text archive of this journal is available on Emerald Insight at:
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JMLC
19,4
376
Journalof Money Laundering
Control
Vol.19 No. 4, 2016
pp.376-396
©Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-10-2015-0045
(AUSTRAC, 2008) are considered to have the capacity to increase the levels of crime and
corruption, and undermine the overall rule of law. As a phenomenon in which certain
aspects frequently go unnoticed, research associated with money laundering remains
ineptly constrained, owing in most part to the well-versed connection between money
laundering and the underlying clandestine nature of illicit acts carried out by organised
and transnational criminal groups.
Characterised frequently as a secondary offence successive to the predicate act,
money laundering offers a exible and dynamic process whereby those having
responsibility for money laundering actively adapt to changing situational conditions.
More often than not, money laundering will involve the exploitation of products and
services, making it difcult to dene and prosecute. As the demand for money
laundering persists, criminal groups remain intent on identifying locations where the
risks of detection are low. Accordingly, criminals are frequently inclined to favour
regions and countries weak or ineffective at implementing and adopting universally
compliant anti-money laundering legislation and regulations. In the past, global
estimates have indicated money laundering represents the third biggest global industry,
with only oil and agriculture generating higher incomes (Baity, 2000). Figures that are
more recent suggest money laundering is quantiable, with indications it now equates
to US$1.6 trillion (UNODC, 2011) or 2.7 per cent of the global annual GDP. Nevertheless,
accurate quantication of money laundering still faces many challenges, dominated for
the most part by inappropriate statistical techniques never formally designed to gather
details associated with money laundering or illicit markets.
Today, various processes exist through which to facilitate the laundering of illicit
funds. In many instances, deviations from existing – more formally – documented
methods are inhibited only by the imagination of those tasked with the responsibility of
nalising the criminal process. More formally acceptable and widely publicised
processes include trade-based money laundering (FATF, 2012) and the abuse of
independent sectors or nancial institutions such as casinos (Gambling Commission,
2013). Furthermore, recent advances in technology have persuaded the commission of
these and many other once-formal money laundering processes to change. The
introduction of convenient alternative practices capable of directly supporting the
clandestine nature, as well as expanding the scope and availability of facilitators such as
banking facilities, have increased the scope and susceptibility of previously secure
business sectors and practices. At the same time, encryption has subtly reinforced the
clandestine nature of money laundering practices by protecting data in transit. Newly
formed approaches to money laundering that now include Bitcoin and online gaming
have deepened the money laundering process and the difculties associated with
detecting such practices by adding more comprehensive clandestine variables, thanks
to the increased association with technology. Though technology has inuenced change
across many methods of money laundering – making detection signicantly more
difcult – the primary obligation to deposit illicit funds into the regulated nancial
system has remained consistent. Accordingly, internationally agreed representations of
money laundering depict how the placement stage (the moment when illicit funds rst
meet the legitimate nancial system) forms the point in the money laundering process in
which those facilitating the money laundering process are at their most vulnerable to
detection.
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Preventing
money
laundering
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