European crime syndicates face only limited, short-term setbacks in moving cash across borders or laundering funds through restaurants and other cash-intensive businesses amid the COVID-19 pandemic, analysts told ACAMS moneylaundering.com.
Since the global health emergency struck Europe in earnest in March, trade and economic activity has slowed as governments have placed broad restrictions on travel and businesses deemed non-essential, including bars, casinos, restaurants, nail salons and other enterprises often used by criminals to place illicit banknotes into the financial system.
While the slowdown has reduced opportunities for mixing licit and illicit funds, compliance officers and former and current law enforcement sources said criminals may quickly find alternatives as lockdowns begin to ease.
“Organized crime groups can be patient,” a source familiar with Malta’s government and financial services industry, which faces exposure to the Sicilian Mafia, said on condition of anonymity. “It depends what market you’re in and whether you have good lines of credit, but you can always park lots of cash in a warehouse and wait for a good investment.”
Border closures and commercial restrictions have reportedly curtailed drug trafficking and cash smuggling.
Tony Saggers, former head of drugs threat and intelligence with the U.K. National Crime Agency, or NCA, said that criminals likely encountered difficulties in moving banknotes out of Britain if their usual logistical channels through ports and airports went offline as a result of the pandemic.
They may also struggle to convert British pounds sterling into euros and dollars, the two most commonly used currencies in global illicit commerce, prior to smuggling cash overseas, said Saggers, now an independent consultant and researcher based in London.
“A method used to achieve this in the U.K. is corrupted money service bureaus, where it is hidden within higher volumes of legitimate trading,” he said. “A reduction in such trading will make the illicit activity far more visible to audit or inspection.”
As a result, crime groups may seek to rely more heavily on informal value transfer systems, such as hawala, that do not always involve physically transporting cash.
“There is potential that some organized crime groups may have to hoard cash until they find a reliable alternative,” Saggers said. “But many established groups often have more than one option available to them.”
The NCA disclosed Friday that U.K. law enforcement agencies have seized 25 tons of cocaine, heroin and other illicit drugs and at least £15 million in suspected illicit cash since the lockdown began in Britain on March 23.
“Our assessment is that COVID-19 restrictions have made criminal groups take additional risks in moving cash around,” the NCA noted. “The closure of many cash-based businesses in recent weeks has robbed organized crime groups of an opportunity to stash or launder their cash, making it harder for criminals to conceal the proceeds of their crimes.”
Criminals who normally route their transactions through seemingly legitimate businesses that are currently not operating may even exploit government and private acquisitions of personal protective equipment, or PPE, and other medical goods as a smokescreen to move their funds.
The U.K. financial intelligence unit, or UKFIU, noted in a May 13 advisory that analysts had seen a spike in reports from financial institutions flagging large cash deposits, as well as wire transfers to overseas accounts that the senders characterized, truthfully or not, as payment for pandemic-related equipment.
“In many examples, the reporters state that they believe that the subjects are claiming involvement in PPE provision to obscure their involvement in money laundering, due to the current high demand for supplies,” UKFIU found.
U.K. officials have advised compliance professionals to closely scrutinize new companies involved in buying and selling PPE or other high-demand products, as well as for firms that inexplicably pivot from one sector or product to another despite their prior trading history.
Easing of COVID-19 restrictions could result in a sudden increase in customer transactions for some businesses, a spokesperson for HM Revenue & Customs, the U.K. tax authority, said.
“It is important that businesses are vigilant to prevent the flow of illicit funds if this occurs, as criminals could attempt to legitimize their criminal proceeds under the cover of efforts to reignite the economy,” the spokesperson said.
Restaurants, pubs and cafes that display normal volumes of business despite the lockdown may also raise questions.
But adapting transaction-screening thresholds to anticipate and flag suspicious transactions associated with an entirely novel economic landscape may draw unwanted regulatory scrutiny, a compliance officer with a U.K. lender said on condition of anonymity.
“There will need to be a greater focus on cash-intensive activity as a result of this [crisis],” the compliance officer said. “It’s something we’re looking at … but recalibrating your transaction-monitoring systems is quite difficult with such limited data because this thing has only been in place for a few weeks.”
Hennie Verbeek-Kusters, the head of FIU Nederland, the Dutch financial intelligence unit, told moneylaundering.com in a recent interview that banks, accountants and other firms should pay attention to large or frequent cash payments for goods in light of the possibility that criminals will target businesses struggling during the crisis.
Dutch authorities last year raided several agribusinesses and used car dealers for helping launder millions of euros through trade-based schemes. Small and medium-sized enterprises in other sectors could be tempted by similar injections of cash that in normal times they would have refused, she said.
Europol, the EU’s law enforcement agency, warned last month that economic hardship “lowers the barrier of some people to accept off-the-book transactions and other illegal conduct when criminal investors are the only accessible providers of capital.”
The severe economic downturn in Europe may crash prices in real estate and other sectors that criminals have used to launder, Europol warned.
Contact Koos Couvée at firstname.lastname@example.org
|Topics :||Anti-money laundering , Counterterrorist Financing|
|Document Date:||May 22, 2020|