Abstract
Money laundering is definitely a global phenomenon that criminals undermine the countries’ economic and credibility. Even worst when advance computer user use Internet to perform money laundering, and we call it Cyber-laundering. In this research, we are going to have an overview on the history, process and common technique methods of Cyber-laundering. Nevertheless, the impacts of Cyber-laundering to our society are also the significant focus of this research. Lastly, the paper research on the current framework of Anti-Cyberlaundering regime and hopefully come out a possible solution to establish an ACL legal regime.
Introduction
The abuse of the Internet by money launderers is potentially a significant threat (Solicitor General Canada, 1998; Veng Mei Leong, 2007). This was the dilemma of the usage of Internet from a decade ago. Unfortunately, this potential concern has came true now. One of major concern of money laundering is that money laundering strongly links to organized crime and terrorism. However, with cyberlaundering, the internet became the powerful tool to ‘wash’ the proceeds of organized crime and to fund terrorist activities, and this link is only fortified further. In addition, cyberlaundering as an efficient path to money laundering, cyber crime, fraud and corruption, it undoubtedly signs a formidable legal question to us, which law enforcement agencies are yet sufficiently embed to the phenomenon of internet criminality. Cyberlaundering also severely aggravated the effect of money laundering to global economy. According to The World Bank’s research, the amount of money laundered annually is $ 2.85 trillion in 1998. However, this amount has increase to $ 4 trillion annually in recent years, and this is only a mere guesstimate(Leslie, D. A. (2014). Legal principles for combatting cyberlaundering. p4). This crazy growth obviously benefited by the hot upstart of the broader field of money laundering — Cyberlaundering. And the reason why cyberlaundering become so problematic is that the absence of an ACL legal regime. The significance of this research is that exploring the present existence of Cyberlaundering, the current dilemmas on regulating cyberlaundering, and search a possible solution to establish an ACL legal regime.
The “Root” of Cyberlaundering: Money laundering and Cyber crime
Everything has a process of evolving, so do cyberlaundering. Money laundering and cyber crime provided excellent fundamental basic for cyberlaundering. Money launders consistently evolve the concept of money laundering. As the popularization of Internet, money launders sniff the infinite possibility and functionality of Internet. The notion of cyber crime has been spread since late 1970s. Cyberlaundering facilitates the “rinse” process of legalization of cyber criminals’ illegal proceeds, and then “enlivens” the battle field of cyber crime.
An Overview on Money laundering
The concept of money laundering is constantly evolving over time. According to the the Financial Action Task Force’s (FATF) definition, “Money laundering is the processing of these criminal proceeds to disguise their illegal origin.” This is the definition that traditionally explain which criminals usually try to “hide the origins and ownerships of proceeds of their criminal activities”(Leslie, D. A. (2014). Legal principles for combatting cyberlaundering. p10). It is difficult to calculate actually how much money is laundered worldwide, but the United Nations Office on Drugs and Crime (UNODC) had researched and estimated the amount of illicit funds that being laundered, which generated by drug trafficking and organised crimes, is 1.6 trillion USD for the year of 2009(The Financial Action Task Force on money laundering(FATF)). In addition, the International Monetary Fund (IMF) also estimated that at least $600 billion being laundered since 2004(Hunt, J. (2011). The new frontier of money laundering: how terrorist organizations use cyberlaundering to fund their activities, and how governments are trying to stop them.)
In order to understand thoroughly the concept of money laundering, the need of knowing the process of money laundering is necessary. There are three stages in the process of money laundering — the placement, layering and integration stages.
Figure 1. A typical money laundering scheme
Source: UNODC (http://www.unodc.org/unodc/en/money-laundering/laundrycycle.html)
Figure 1 explains that the scheme of money laundering can be form from those three stages, but there stages are usually blurred in the real world for misleading, especially in cyber laundering. In placement stage, launders deposited their proceeds into the financial institutions. And the layering stage is the core of money laundering. “It refers to an attempt to forge the ultimate disguise of the illegal funds. The criminal uses various tactics to evade traceability” (Leslie, D. A. (2014). Legal principles for combatting cyber laundering. p16). Finally, the integration stage is the process of getting back the illegal proceeds with a legal title and set into the legal economy or the commercial world.
Introduction to Cyber Crime
As the introduction from the beginning, cyberlaundering growing based on two roots — one is money laundering, and another is cyber crime. As same as defining money laundering, cyber crime is the term that hard to sketch out. In Legal Principles for Combatting Cyberlaundering, cyber crime has defined as “any incident involving an intentional act where a victim suffered, or could have suffered a loss, and a perpetrator made a gain and is associated with computers” (Leslie, D. A. (2014). Legal principles for combatting cyberlaundering. p27). Although this definition is already not clear enough for the digital environment that we are experiencing now, the topic of cyber crime has became the nightmare of criminal investigators and prosecutors. Because of the incomplete international Anti-Cyber crime system, hackers and cyber launders are still under locally regulation. “The only true anti-cyber crime (ACC) law, which is comparable, is the Council of Europe Convention on Cyber crime(the Budapest Convention)” (Leslie, D. A. (2014). Legal principles for combatting cyberlaundering. p29). The point is that this convention is not international. In addition, the information and communications technology(ICT) has being abuse by criminals. The attributes of ICT, such as globally access, security, fast speed and easy to use, are thus to furtherance of offense. During the growth of cyber crime, illegal proceeds are also being produced. Cyberlaundering is the most efficient way to “title” the “black money”, meanwhile, cyber crime gains the living space from cyberlaundering. The relationship between cyber crime and cyberlaundering is correlative dependence and influence.
What and Why Cyberlaundering
Cyberlaundering connected two different fields of crime — cyber crime and money laundering, that cyberlaundering couldn’t just be consider as a subset of cyber crime simply. The money laundering part is the core of cyberlaundering. Similarly, cyberlaundering is the “v2.0 of money laundering.” Whether from anonymity, speed or scale, cyberlaundering are exceeded.
Defining Cyberlaundering
The convenience of ICT benefits the innovation and economic growth in past 10 years, however, money launders are also found out that “money laundering online with low risks, great speed and better anonymity”(Tropina, T. (2014). Fighting money laundering in the age of online banking, virtual currencies and internet gambling). As a definition from Legal principles for combatting cyberlaundering, “cyberlaundering is the use of a computer to form a transaction or a relationship involving property or benefit, whether tangible or intangible, which is derived from criminal activity. ” With the internet’s functionalities and infinite capacity, the possibilities of money laundering have significantly changed, either from the process or efficiency. Under the current framework of cyber laundering, there is no need to go through the placement stage, because that the money, such as digital currencies, is already exists online.
Anonymity
Better anonymity is one of weighty reason that launders prefer laundering money online. With multifarious online financial service, non face-to-face transaction became the possible method that launders can hide their identity or to stay anonymous, even to use different account at the same time, which are increasing the difficulty of inspection for investigators and prosecutors.
Speed of the transactions
Cyber laundering could be much cheaper and faster when compare to the traditional money laundering. New payment technologies permit to move funds more rapidly on long distances and make law enforcement work even more complicated(Filipkowski, W. (2008).Cyber Laundering: An Analysis of Typology and Techniques). Electronic payment systems (e-payment systems) allows launders move funds very quickly within a country, even world wide.
Cross border activity
Another reason why cyber laundering could rapidly seize the preference of launders is that the online service provider’s abode usually differs from the place where the servers are located in reality, from where these servers are administrated, or from where the client accesses the Internet. The new payment technologies let us conducting business between different countries, various legal systems(Filipkowski, W(2008).Cyber Laundering: An Analysis of Typology and Techniques). When an offense’s case involving several jurisdictions, the cooperation between law enforcement, revenue services and judiciary of each jurisdiction is necessary, and which is the most difficult task of the case. Doubtlessly, those inconvenient offers launders an opportunity to catch their breath and get away from the government agencies.
Analyzing techniques of Cyberlaundering
Online Banking
Online banking is one of well-knowing and common technique that cyber launders using. Online banking refers to the use of an internet-based bank to perform regular banking activities such as account inquiries, payment of bills and transfer of funds (Leslie, D. A. (2014). Legal principles for combatting cyberlaundering. p76). Online banking have a variety of advantages that increasing the difficulty of against cyber laundering: Some online banks that fall outside the ambit of current banking regulations have no obligation to file currency transaction reports (CTRs); Account opening at online bank is very easy and fast, however, as exchange, the unconfirmed information that being provided to open the account is the only proof for the user, whether the information is true or not; Another advantage of online banking for cyberlaundering is the fact that it perpetuates layering. In other word, criminals can easily layer their illicit proceeds into the other accounts with smurfs(Leslie, D. A. (2014). Legal principles for combatting cyberlaundering. p77). Those are just part of advantages of online banking, nevertheless, many other advantages are still being used by launders.
Online Auctioneering
Maybe not too many people know that online auctioneering is another weighty technique for cyber launders. Online auction website is a platform that allows people sale and bid for the items or articles on it. Those websites are also offers basic financial service too. When an auction ended, the buyer send money to the company’s bank account, and the seller sends the item to the buyer. If everything is fine when the buyer receive the item, the company will send the money to the seller. However, due to there is no limits on the price for bidding and the lack of user identification, cyber launders can play both seller and buyer, yet, the Smurf can bid higher and higher. In other words, the higher price that the item being bided, the more dirty money being laundered.
Online Gambling
Casinos have been the ideal battle field of money laundering for long time. Yet, in the digital age that we experiencing, online gambling are also being targeted by cyber launders. Internet gambling has been identified – by experts in the field of money laundering and tax evasion – as a potentially ideal web-based service to legitimize ill-gotten gains (Filipkowski, W(2008).Cyber Laundering: An Analysis of Typology and Techniques). As the meaning of gambling, online gambling majorly refers to two methods that cyber launders using: A criminal could either use an existing online gambling service, which might appear legitimate, or set up one for the sole purpose of cleaning his/her ‘dirty’ funds; On the other hand, for guarantees the totally control and a certain degree of anonymity, cyber launders tends to solely establish an online gambling site(Leslie, D. A. (2014). Legal principles for combatting cyberlaundering. p81).