Undercover Sting Operations in Money‐Laundering Cases
| Published date | 01 February 2001 |
| Pages | 333-343 |
| DOI | https://doi.org/10.1108/eb027283 |
| Date | 01 February 2001 |
| Author | R.E. Bell |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control — Vol. 4 No. 4
Undercover Sting Operations in Money-Laundering
Cases
R. E. Bell
INTRODUCTION
It is now generally accepted that, since organised
crime has become increasingly sophisticated, globa-
lised and well resourced, law enforcement must
consequently shift from its traditionally reactive
approach to investigating crime to a more proactive
one.1 While this has happened in a range of fields,
particularly drug trafficking, it does not appear that
money-laundering investigations have developed in
accordance with this trend, with the exception of
in the USA. This paper examines the features of
money-laundering sting operations carried out in
the USA, the jurisdiction with the greatest experience
in conducting this type of operation, and considers
the current potential for money-laundering stings in
the UK.
The word 'sting' derives its origin from American
slang of the 1930s, meaning an act of theft or fraud,
especially one that was carefully planned in advance
and swiftly executed. In this sense, the term is best
known as the title of a Hollywood film.2 The term
then evolved in American usage in the 1970s to
mean a police undercover operation designed to
ensnare
criminals.3
In this latter sense, 'sting' is there-
fore a synonym for the expression 'to set a trap to
catch a crook', and it is in this sense that the term
will be used in the present paper.
The justification for undercover operations
generally has been expressed as follows:
'Covert investigative techniques are often the most
efficient, effective and, in the case of the most
virulent strains of criminality, such as organised
and major drug related crime, the only practical
way of obtaining evidence for the purposes of
prosecuting and convicting those
responsible.'4
The particular justification for sting operations in
money laundering cases was explained in United
States v Foster5 where the court observed that:
'Money laundering is a crime of subterfuge and
concealment. Bank records alone reveal little, if
any, information, if the alleged laundering is as
sophisticated as is alleged in this case. Undercover
operations therefore can be an essential tool in
tying seemingly innocuous bank entries to
criminal activity.'
Essentially there are two types of money-laundering
sting, namely 'stinging the launderer' and 'stinging
the criminal entrepreneur'. In the first type of opera-
tion, police pretend to be criminals and ask for their
'proceeds of crime' to be laundered. In this type of
operation, the funds involved are not usually genuine
proceeds of crime but rather 'dummy' proceeds. In
the second type of sting, sometimes referred to as a
'reverse sting', undercover police pretend to be laun-
derers and invite criminals to use their 'laundering
service'. In such an operation, the funds that are laun-
dered are genuine proceeds of crime. While reverse
stings can be resource intensive, they allow police
to identify particular criminals and the sources of
their funds and to identify and trace assets that have
been obtained from crime. In the Canadian case of
R v Matthiessen,6 the police offered the services of
Aroga Financial, a fictitious company created for
the purpose of acting as a laundering vehicle. Aroga
charged high commission and servicing rates, which
had the effect of not being attractive to legitimate
customers, but only to those wishing to launder the
proceeds of crime and willing to pay higher rates
for that service.
The use of money-laundering stings may accom-
plish three objectives. First, they may gather sufficient
evidence to put launderers7 out of business through
prosecution and conviction. Second, they may deter
the potentially dishonest citizen from engaging in
transactions with suspicious money, fearing that it
might be a sting operation. For instance, it has been
suggested that one effect of the threat of a money-
laundering sting operation in the USA may be that
lawyers who might otherwise have acted illegally
have been 'scared into legitimacy'.8 Third, they
may make organised crime groups more reluctant
to avail themselves of laundering services, thus
making them depend more on transporting bulk
amounts of cash which are more liable to detection
by law enforcement
authorities.9
Journal of Money Laundering Control
Vol.
4, No.
4,
2001, pp. 333-343
© Henry Stewart Publications
ISSN 1368-5201
Page 333
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