Over the past decade, several powerful frameworks have been implemented to combat money laundering, both in Sweden and internationally. The article below describes these frameworks, as well as the most common money laundering methods we encounter in our work.
What is dirty money?
Money laundering is an activity whose purpose is to convert so-called dirty money into clean money. Dirty money is labelled as dirty for two reasons:
- The money has been acquired through criminal activity.
- The money has been earned in a seemingly traditional way but has been withheld from taxation.
According to the Swedish Financials Supervisory Authority, an estimated SEK 130 billion is laundered through the Swedish banking system every year. This is only a drop in the ocean compared to the 715 billion to 1.87 trillion estimated by the United Nations Office on Drug Control and Crime Prevention (UNODC) that global money laundering amounts to each year.
In recent years, we have seen a greater understanding and awareness of the money laundering problem. Since the introduction of a new law on penalties for money laundering offences in 2014, the number of reported money laundering offences in Sweden has increased significantly, from 200 crimes in 2015 to around 1,000 violations in 2018. Internationally, the European Union has also played a leading role in strengthening the international anti-money laundering framework, through the introduction of the Fourth and Fifth Anti-Money Laundering Directives (2015 and 2018). Swedish banks and companies with a global reach are also affected by US and UK anti-corruption and bribery legislations. Scrutiny of banks and financial institutions has increased globally, with a total of $36 billion in fines over the past decade.
How is money laundering carried out?
Money laundering is usually carried out in three stages:
- An injection of dirty money into the financial system, for example, through a less prudent banking partner.
- Integrating the dirty money with legitimate means (also known as layering), through, for example, a complex chain of transactions or investments.
- Withdrawal of the funds now laundered as per above through, for example, dividends, bank withdrawals, or sales (also known as integration).
There are many different approaches to money laundering, as new ways of converting criminally acquired property are continuously invented. Below we list the most common ways to launder money that SRS encounters in our work.
Money laundering through transfer to multiple bank accounts
Putting small amounts of money into several bank accounts, also known as smurfing, and then transferring the money again to accounts at foreign banks is a proven method of money laundering. The technique has been further developed in recent years when an explosion of solutions for mobile transactions has made it extremely difficult to get a good overview of the gigantic money flows.
Money laundering by turnover in gambling activities
Horse racing and casinos. The sector has historically been very vulnerable to money laundering, and is, by all accounts, even today. Money is deposited into gambling accounts and withdrawn as laundered money. The expansion of the sector, with a host of new online options, is being widely exploited by criminal actors who often have a good understanding of how to avoid being detected by internal systems.
Money laundering in real estate investments
The real estate market has long been an important engine of global money laundering. Although the Swedish real estate industry is carefully regulated, criminal operators can invest in foreign markets. The method stands out because it requires relatively little experience and knowledge while providing the opportunity for good returns.
Money laundering via foreign banks
Transfers of large sums of money through complex chains of transactions into accounts in offshore economies are perhaps the best-known mean of money laundering and tax evasion. However, this type of money laundering usually means that bank cards from foreign banks are used for purchases. If ’s used too often, it can quickly arouse suspicion from Swedish authorities
How SRS works with money laundering investigations
The security company SRS helps banks and companies to identify and investigate potential money laundering and privacy issues through our Enhanced Due Diligence (EDD) and Integrity Due Diligence (IDD) services. Our customers generally have robust internal systems in place, but often need help answering specific questions that cannot be addressed through the traditional Know Your Customer process. This could include questions about the authenticity of a Source of Wealth document, a contradictory income narrative, or contextual understanding of corruption issues in a particular sector or jurisdiction. SRS has a broad network and experience in performing various security services both in the Nordic region and the rest of Europe, as well as in Asia, Africa and the Middle East. Please contact us to find out how you can strengthen your anti-money laundering framework through SRS investigative services.
