Detecting financial crime and money laundering

What is financial crime?

Experts estimate that worldwide about 2,400 billion euros are used in criminal transactions every year. Money obtained from drug trafficking and other criminal activities is often laundered. But dirty money is also used to finance illicit activities such as terrorism, human trafficking and the illegal trade in animals.

What is money laundering?

Money laundering is the process of conducting financial transactions to conceal the illegal origins of funds. A criminal who has earned a million euros from drug trafficking can buy his daily groceries in the supermarket, of course, but it won’t be possible for him to freely spend his money. Paying for his dream house with 50 or 100-euro bills will speed up the process, but no buyer will accept this, and they’ll probably report it to the police. If a criminal wants to live off illegally obtained money, he will need to funnel it into the formal economy. By laundering the money, it will enter the financial system, concealing its illegal origins.

How do criminals launder their money?

In the case of some crimes, such as fraud and corruption, criminals receive their proceeds through cashless transfers and criminal funds end up directly in the financial system. Usually, however, they get their proceeds in cash, which they might bring to countries that are less regulated and controlled, and pay the money into a bank account. Alternatively, they might change the money into other currencies or lower-denomination bank notes and deposit smaller amounts into a bank account. Once cash has been paid into a bank accounts, criminals will try to conceal the origin and ownership of the funds during the ‘cover-up phase’. They may do this by splitting the funds into smaller chunks and making multiple transfers between various bank accounts, to other countries, between people and companies. And they can withdraw money from a bank account and then deposit it into another. After this cover-up it becomes almost impossible to trace the origin of the funds, which are then almost ready to be spent. In the last phase, the integration phase, criminals have to give what appears to be a legal source to the illegally obtained money by channelling the funds back into the formal economy. They can do so by investing in a legal business or real estate, for example.

How does ABN AMRO detect criminal transactions?

Only a small proportion of the 6.6 billion transactions processed by Dutch banks each year are criminal transactions. ABN AMRO is putting in a great effort to detect these transactions – that’s part of our role as a gatekeeper. We want our financial infrastructure to stay safe and reliable for our bona fide clients. And we don’t want to facilitate criminals, of course. If at all possible, we’d like to have them arrested. Every day, over 3800 ABN AMRO employees screen new and existing clients (client due diligence) and/or monitor unusual transactions.

Collaboration with police, the law and other banks

Whenever we turn down a client or discontinue our relationship with them, they can go to another bank and try there. This new bank will start up their own detection process and, who knows, the client may slip through the cracks. Which is why we are teaming up with the country’s other big banks, the Public Prosecutor’s Office, the police, our own FIU, the FIOD anti-fraud agency and De Nederlandsche Bank to find more targeted ways of working together. This public- private partnership is reviewing initiatives in areas such as client investigations, transaction analysis and raising awareness. By sharing information and looking for a joint approach or solutions, we will all gain more insight into the various themes that come into play. This way, we share our findings and insights from a range of expert fields to better detect dirty money and apprehend criminals, and so to make the world a safer, more honest and pleasant place.

What’s the legal situation on money laundering and terrorist financing?

In the Netherlands, the Act on the prevention of money laundering and financing of terrorism (Wwft) is in force. The Dutch central bank (DNB) supervises banks and assesses whether they are compliant with the Wwft. The Wwft implements European anti-money laundering regulations, which are based on international guidelines issued by key organisations such as the Financial Action Task Force (FATF) and the Basel Committee on Banking Supervision (BCBS).

Where does the term money laundering come from?

Money laundering is derived from washing clothes. In the 1920s, the American mafia boss Al Capone was looking for a way to legitimise the proceeds from his illegal activities, such as selling alcohol (it was the time of the Prohibition in the United States). So, he bought several launderettes. As customers paid with coins to switch on the machines, launderettes were a cash-intensive business and therefore an attractive way to launder money. This made it difficult for crime investigators to determine exactly how much was being earned. Al Capone’s launderettes reputedly earned huge profits, while in fact the proceeds came from his illegal alcohol business.