Thu. Oct 17th, 2019

Planet Compliance

Innovation & Regulation in Finance

AML Insight: Money Laundering through the physical transportation of cash

4 min read

In times where we can almost exclusively use credit cards instead of cash and mobile payment seems to increase its market share, so that is seems that it is only a question of time when cryptocurrencies and paying with your mobile phone become mainstream, it may seem odd to look into the role of cash in the world of money laundering. However, over 50% of all transactions worldwide (and depending on whose numbers you believe even up to more than 80%) are done in cash.

So it is no surprise that cash is king in the criminal economy. The physical transportation of cash across country borders is one of the oldest and most basic forms of money laundering and terrorist financing, but doesn’t seem to have lost any of its charm for these purposes.

For starters, cash has the advantage of being less traceable and can be easily used to break an audit trail: Take something out of one account, pay it into another. Although it is difficult to estimate, it is safe to assume that the amount of money that is laundered in this way across international borders lies north of hundreds of million dollars per year.

And there isn’t even a specific field of crime that uses cash as a means of money laundering across borders. Drug trafficking organisations use it as do illegal traffickers of alcohol and tobacco or weapons and arms as well as for the purpose of human trafficking and terrorist financing since cash is easily exchangeable and is less likely to leave a trace once it has changed hands. Having said that though, the amount of cash smuggled as part of cargo naturally exceeds by large amounts what can be carried by a natural person in a briefcase or in your underwear.

So it depends rather on the decision making process and the resources available to criminals whether cash is physically transported as a mean to launder money. For example, if the access to electronic money is very onerous depending on the geographical location or precious stones cannot be used instead of notes of high denomination of similar value (small notes may be less suspicious but obviously increase significantly bulk and weight of what needs to be transported), cash becomes the weapon of choice for money launderers.

As for the currencies most used, those that are less prone to volatility and widely traded like the US dollar, the British pound or the Swiss franc are the most prominent.

Since cash is moved daily in huge quantities legitimately, criminal continue to increase their efforts to infiltrate large amounts of cash into the systems to transport cash traded between themselves and hiding it in plain sight

Though technology has become more and more important in everyday controls to spot money laundering through the physical transport of cash, the sharing of information between countries is one of the most powerful tools to fight it. This is in line with the recommendation of the recent report of the Financial Action Task Force, which provides more detail on the aspects highlighted in this article and more. The full FATF report can be found here: FATF report

 

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