Role Of Technology: 5 Common Strategies Money Launderers Use to Avoid Detection

Money laundering is a serious crime that all financial institutions have to contend with. It is often defined as a process that criminals use to make their ill-gotten wealth seem legitimate. As the banking industry evolves, so, too, do money launderers continue to change and adapt their methods to keep from getting caught.

That being said, it is extremely important to keep yourself and your team abreast of the different ways that money launderers avoid detection. Knowing these methods can give you the information you need to re-evaluate your AML reporting processes and recognize if there are improvements that need to be made. To help your company fight back against financial crime, read on to learn some of the most common strategies that money launderers rely on to conduct illegal activities.

Anonymous Shell Companies

This is one of the most common methods that malicious individuals use to move and hide their money. Simply put, a “shell company” is a business that exists on paper but does not have any documentation of its activities. The lack of authentication means that the owners can hide their identities or present false data as facts, and they can get away with it because anonymity is valued and upheld as a civil right in all 50 states across the United States.

This creates a loophole for any US-based money launderer to register their shell company under a fake name or in complete anonymity. Most of the time, criminals use a combination of real and fabricated information for this company, making it harder to trace their transactions. Unfortunately, some financial institutions don’t conduct rigorous checks to verify a user’s identity, making it easy for them to slip through the cracks under the guise of a supposedly real business.

Business Email Compromise Attacks

While this is a rather common scam to defraud a business, it can also be used to launder money. Criminals use a combination of social engineering and other computer hacking techniques to compromise email accounts that may contain valuable information. Usually, businesses that transact regularly with foreign suppliers are the main targets of this method. Once the criminal has access to these accounts, they manipulate the emails to layer and launder money without getting caught. 

Online Banking Loopholes

Even if the world is slowly digitizing almost everything, it is still a relatively new process for many industries, and the financial industry is no exception. Expending the effort and resources necessary to combat money laundering is a standard practice in traditional banking, but not so much in digital banking. As some banks are slower to make the transition compared to others, money launderers jump at the opportunity to abuse the system by sticking to online transactions. 

In a way, an online bank is like a digital playground for criminals. This is because the nature of the internet enables them to hide their identities. They may also have more sophisticated or automated tools that can allow them to phish for private data and hack into other people’s accounts. To launder money, a large transfer can be made to a victim’s account, and the owner can be tricked into revealing their sensitive information to “correct the mistake.” The criminal then proceeds to use the account to make unauthorized payments and proceeds to disappear before they can be traced.


Because of the high security and anonymity provided by digital currencies, they have become a convenient way for cybercriminals to launder money online. To make matters worse, criminals can convert these virtual currencies into cash through traditional banks, leaving said financial institutions none the wiser.

Additionally, many platforms for digital currencies do not require people to give out their personal information to carry out most types of transactions. Since cryptocurrency only requires a private key and lacks a clear connection to any specific individual’s identity, it is extremely difficult to trace transactions back to a single person or company. Even the regulators of cryptocurrencies have a hard time keeping track of everything due to the lack of centralized record-keeping.

Online Payment Services

While debit or credit card applications require thorough application processes, the same cannot be said of prepaid gift cards, debit cards, or credit card purchases. The latter types of cards, in particular, can be bought by individuals providing false personal information. In the worst of cases, they can even be obtained completely anonymously.

Additionally, redeeming the cash value of these cards rarely ever requires someone to provide any identification. Instead, they only need to input the card number to use them for payments. Because of this, it possible for anyone to use them anonymously in place of cash when making purchases online.

Technology has an important role to play when it comes to detecting and preventing money laundering from happening to any financial institution. With this in mind, digitizing your bank processes can expedite simple tasks while increasing security for online banking customers efficiently and cost-effectively. If your team needs regulatory tech solutions and assistance for your bank’s anti-money laundering strategy, get in touch with a reputable provider of AML software today.

Subith Kumar is an online gaming and futuristic tech editor with a decade of experience. He holds a B.A. in Computer Science and is known for his deep insights into virtual reality and AI in gaming. When offline, he's a drone racing enthusiast and a creative photographer.


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