From video games to chocolate – what’s the next target for money launderers!

06 October 2020
Knowledge Base

by Ahsan Habib

Criminals have long been coming up with creative and innovative ways to launder their illicit funds. When they started exploiting video games to satisfy their bad intentions, we the Risk Managers thought, maybe this is their last unconventional way of wrongdoing. But our thought has been proven wrong. In reality, bad actors did not stop their ‘winning race’. Yes, I am pointing at video games and the chocolate industry. Bad actors did not even spare these innocent products; rather to some extents they put question marks on the faces of online video games and chocolates.

Flashback: Online games

Criminals have been using online games as the unconventional way as they get an added advantage of using cryptocurrencies while purchasing in-game credits and transferring those credits around to wash money. Oftentimes they create spoofing accounts to steal other players’ credits. And undoubtedly these types of transactions do not have to face the same scrutiny by financial crime watchdogs as compared to predicated offences. Currently, video games do not have any governmental regulation when it comes to monitoring currency transactions. Instead, it is up to the company itself to regulate and monitor its own transactions and to punish individuals who act immorally in the game.

What the global standard setters say about ML in games

In 2019, the FATF added an interpretive note to Recommendation 15 in relation to virtual asset activities and service providers, particularly related to money laundering and terrorist financing. The note puts forth approaches to regulating and supervising virtual asset service providers (VASPs). A gaming company that sells virtual currencies may be considered a VASP.

The great ‘Godiva Chocolates’ purchase

Let’s refresh with the story of the £22 million worth of property belonging to the wife of an Azeri banker who was the former chair of the International Bank of Azerbaijan. He was jailed for 15 years for embezzlement and fraud, among other things. His wife racked up a bill at Harrods for over £16 million. The itemised details of that bill were also released. In among the Cartier and Boucheron was nearly £2,000 of charcuterie (in one day!) £30,000 ($54,000) on chocolate and more than £900 of coffee. All three London properties (worth £22 million) of the banker were held by offshore companies and ultimately, UWOs (Unexplained Wealth Order) were issued. Will the greatest chocolate lover on earth ever fork out 30,000 pounds on chocolates when millions around the world don’t have access to three basic meals a day and COVID-19 has been shaking the world for the past seven months (let alone its aftermaths)! I have been a banker for the last 15 years and I am a great Snickers chocolate bars lover ever since I was a child. Can my better half ever think of spending £30,000 on Snickers in one go? I don’t think so. The case of the Azerbaijan bank chair appears to be a case of Money Laundering. What was the Source of Fund used for this ‘great’ spending?

Chocolate shop owned by the Brazilian President’s son

The son (Brazilian senator) of the Brazilian President has allegedly laundered public funds, including via a chocolate shop he co-owns in Rio, Brazil. This shop was one of 24 properties raided by anti-corruption investigators in Brazil. An investigation into suspicious movements of money by the former driver of the  President son’s unravelled what’s behind the screen of the chocolate shop. The Brazilian government’s watchdog for financial transactions detected suspicious movements in the bank account of the former driver of the President’s son. Now, we can easily understand how pervasive and vital the concepts of ‘PEP Associate’ and ‘Risk-Based Approach’ can be.

What does the future hold for us?

Crime has no statutory or Christmas holidays nor any time off, but criminals can afford to take as much time off as they want – especially those involved in money-laundering. That’s how profitable and lucrative money laundering is, continuing to dodge lawmakers and legitimate institutions alike. Undeniably Transaction Laundering (or Electronic Money Laundering) will continue to thrive in the coming days. By the same token, we the financial crime fighters, need to remain alert about these unconventional ways of money laundering. Who knows what’s in the pipeline? At the time of writing this, I was having thoughts about what the future trends could be that would keep us on our toes. Let’s go back to the guiding principle of our job: ‘Think like a criminal, act like an investigator’.

Disclaimer: The views and opinions that have been expressed are explicitly of the author and are not necessarily reflective of his employer’s standing or corporate policy

The author Ahsan Habib is currently working at Scotiabank, Canada as an Analyst in AML Operations Governance. He is a seasoned banker from Bangladesh where he worked in Correspondent Banking and Trade Finance in top ranked banks. He is an established external author of the Risk & Compliance Platform Europe where he has written and published several articles. He has achieved the CAMS and FIS Designation and got the prestigious and distinctive recognition from ACAMS ‘AML Professional of the Month-August, 2020’. He has certification on Trade-Based Money Laundering from the Canadian Securities Institute (CSI), certification on various Sanction related courses and certification on ‘BSA/AML: An In-Depth Look’ from the Bank Administration Institute (BAI), USA.

  • Pieter-Jan Dessing

    Dear Ahsan,

    Thank you for this informative and eye-opening article.

    The main issue is ML-criminals are constantly looking for opportunities to launder their money, especially looking for branches and ways which are, until then, unconventional. You express this very well with the cases of the games-industrie and the chocolateshop.

    We as financial crime fighters must be aware of that fact. The problem for us banking professionals is that we are not the FBI/Interpol/etc. and I think the focus of banks is overall to comply with the (inter)national regulations to avoid penalties. Also the national laws and borders and the fact banking companies are prohibbited of working together in transaction monitoring, prohibit an effective fist against ML.

    I think the evolving ML- tricks makes our work dynamic and interesting, but sometimes a bit hopeless, so to say.

    Keep up the good work, I am enjoying your insights and articles on this matter!

  • Ahsan Habib

    Thanks Pieter, for your great inputs. I admit, we the financial crime fighters, working for banks/FIs, are not FBI/Interpol. We’re not Sherlock Holmes either. And undeniably, bad actors always find their own ways…like water. Here comes the need for effective Public-Private Partnership.

Leave a Reply

Your email address will not be published. Required fields are marked *