FATF: Illicit Financial Flows from Cyber-Enabled Fraud

Cyber-enabled fraud (CEF) is an emerging global organized crime. CEF crime syndicates are frequently well organized into distinct sub-groups with specific criminal expertise, including money laundering. These subgroups may also be loosely organized and decentralized between jurisdictions, complicating investigations into CEF behavior. CEF syndicates have also been linked to various sorts of criminality, including human trafficking and forced labor at CEF call centers, as well as proliferation financing for illicit cyber activities by the Democratic People’s Republic of Korea (DPRK).

The CEF-ML method involves money laundering groups and professional facilitators. Money mules are common in the ML network of accounts, although shell firms and legitimate enterprises can also be found there. ML networks also include a variety of financial institutions (FIs), including banks, payment and remittance providers, and virtual asset service providers (VASPs). Criminals utilize a variety of ML strategies to obscure the financial trail of their ill-gotten earnings, including cash, trade-based money laundering (TBML), and unlicensed services.

Technology, aided by digitization, has enabled CEF criminals to expand and speed up their nefarious activities. They employ a variety of tactics and techniques to fool victims or exploit their psychological states and emotions in order to extract as much money as possible. CEF syndicates are using technological advancements to make it easier and faster to launder money for their criminal activities. Virtual services, such as remote online account opening, make it simple for criminals to open international accounts and launder money abroad, with financial transactions completed very instantly. Criminals use social media and messaging services to recruit money mules across borders on a large scale. Criminals are also quick to exploit vulnerabilities that emerge in new digital financial institutions and products, as well as non-traditional industries like e-commerce, social media, and streaming platforms.

Jurisdictions need to respond more effectively. They need to:

  • Employ initiatives to increase victim reporting and enhance suspicious transaction reporting;
  • Effectively analyse voluminous information inflows to tackle CEF; and
  • Given the cross-cutting nature of CEF, strong domestic coordination mechanisms are required to holistically combat and prevent CEF and related ML.

CEF predicate offenses are typically committed in locations other than those used for the ML process. Proceeds can be easily laundered through a network of accounts that frequently traverse many jurisdictions and financial institutions. Jurisdictions must work together multilaterally to effectively and quickly intercept CEF proceeds that are laundered across borders. To tackle CEF more effectively, jurisdictions should use and support existing (and upcoming) multilateral systems (like as INTERPOL’s IGRIP and the Egmont Group BEC Project) that allow for quick international cooperation and information exchange.

View FATF: Illicit Financial Flows from Cyber-Enabled Fraud

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