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Money Laundering Methods Evolve to Exploit Electronic Funds Transfer Systems

A recent report has highlighted the increasing vulnerability of electronic funds transfer systems (EFTS) to money laundering schemes. Criminal organizations are using EFTS to rapidly switch cash deposits between accounts in different names and jurisdictions, making it easier to conceal illegal activities.

Financial Institutions at Risk

The report also warned that financial institutions offering international trade services are at risk of being exploited by sophisticated criminal groups using false invoices and letters of credit to mask their illegal transactions.

Financial Action Task Force Sets Global Standards

The Financial Action Task Force (FATF), an international standard setter for anti-money laundering efforts, has issued 40 recommendations to strengthen global safeguards against money laundering. The FATF standards have been revised twice since 1990 to address changes in money laundering methods and trends.

Combatting Terrorist Financing

The report also emphasized the importance of combating terrorist financing, which requires financial institutions to enhance their due diligence requirements and detect transactions involving terrorist funds. Terrorist groups require financial support to achieve their goals, and financial institutions must protect themselves from being used as conduits for such activities.

Sources of Terrorist Funds

• Financial support provided by states or organizations with large infrastructures
• Income derived directly from various “revenue-generating” activities such as:
  • Crime
  • Smuggling
  • Fraud
  • Theft
  • Narcotics trafficking

Financial institutions are urged to review their practices in this area as part of their general internal and external audit processes. The FATF’s latest standards, issued in 2012, can be accessed on its website.

Enhancing Due Diligence Requirements

The report emphasized the need for financial institutions to enhance their existing due diligence requirements to detect transactions involving terrorist funds. This includes:

• Reviewing policies and procedures on money laundering
• Using existing internal and external audit processes to identify potential suspicious activities

By staying vigilant and adapting to evolving methods of money laundering and terrorist financing, financial institutions can play a crucial role in preventing these crimes and protecting the integrity of the global financial system.