Abstract
Money laundering is definitely a global phenomenon that criminals use to undermine the countries’ economic and credibilities. It is 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 concept, process and common technique methods of Cyber-laundering. Nevertheless, the impacts of Cyber-laundering on our society are also the significant focus of this research. Hopefully, the purpose of this research is to give the clear concept of Cyberlaundering and how it relates to human society.
An Overview on Cyberlaundering
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 the Internet from a decade ago. Unfortunately, this potential concern has came true now. One of the major concerns 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 is an efficient path to money laundering, cyber crime, fraud and corruption. It undoubtedly signs a formidable legal question to our society, which is that the law enforcement agencies are yet not sufficiently embedded into the phenomenon of internet criminality. Cyberlaundering also severely aggravated the effect of money laundering on global economy. According to The World Bank’s research, the amount of money laundered annually was $ 2.85 trillion in 1998. However, this amount has increased to $ 4 trillion annually in recent years, and this is only a mere guesstimate(Leslie, D. A. (2014). p4). Obviously, the reason of this crazy growth is that money launders are shifting from traditional field to cyber field, which called “Cyberlaundering”. And the reason why cyberlaundering become so problematic is the absence of an ACL legal regime. The significance of this research is exploring the present existence of Cyberlaundering, the current dilemmas on regulating cyberlaundering, and giving a clearly concept of Cyberlaundering.
The “Root” of Cyberlaundering: Money Laundering and Cyber Crime
Everything has a process of evolving, and so does cyberlaundering. Money laundering and cyber crime provided excellent fundamental basic for cyberlaundering. Criminals consistently evolve the concept of money laundering. With the popularization of Internet, money launders sniff the infinite possibilities and functionalities of the Internet. The notion of cyber crime has been spread since the 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). 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 laundered illicit funds, 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). )
In order to understand thoroughly the concept of money laundering, there is necessary to know the process of money laundering. 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 formed from those three stages, but the stages are usually blurred in the real world for misleading, especially in cyber laundering. In the 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 setting them 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. Similar to defining money laundering, cyber crime is the term that hard to sketch out. In Legal Principles for Combatting Cyberlaundering, cyber crime is 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). 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). p29). However, this convention is not international. In addition, the criminals are abusing the advantages of the information and communications technology(ICT). 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” while cyber crime gains the living space from cyberlaundering. The relationship between cyber crime and cyberlaundering depend and influence each other.
Why Cyberlaundering
Cyberlaundering connected two different fields of crime — cyber crime and money laundering, and cyberlaundering couldn’t just be simply considered as a subset of cyber crime. The money laundering part is the core of cyberlaundering. Similarly, cyberlaundering is the “v2.0 of money laundering.” Whether comparing from anonymity, speed or scale, cyberlaundering is exceeded money laundering.
Defining Cyberlaundering
The convenience of ICT benefits the innovation and economic growth in the past 10 years. However, money launders also noticed — “money laundering online with low risks, great speed and better anonymity”(Tropina, T. (2014). ). As a definition from Legal principles for combatting cyberlaundering said, “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. ”(Leslie, D. A. (2014). p1) 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 the money, such as digital currencies, is already exists online.
Anonymity
Better anonymity is one of the weighty reasons that launders prefer laundering money online. With multifarious online financial services, non face-to-face transactions became the possible method that launders can use to hide their identity or to stay anonymous, even to use different account at the same time, which is increasing the difficulties of inspections for investigators and prosecutors.
Speed of the transactions
Cyber laundering could be much cheaper and faster when compared to the traditional money laundering. New payment technologies permit launders to move funds more rapidly between long distances and make law enforcement work even more complicated(Filipkowski, W. (2008).). Electronic payment systems (e-payment systems) allow launders to 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 allow people to conducting business between different countries and various legal systems(Filipkowski, W(2008).). When an criminal’s case involves several jurisdictions, the cooperation between law enforcement, revenue services and judiciary of each jurisdiction is necessary. Sadly, those are the most difficult tasks of the case. Doubtlessly, those inconveniences offer 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 the well-known and common technique that cyber launders are 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). p76). Online banking has a variety of advantages that increase the difficulty 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 an online bank is very easy and fast, however, as exchange, the unconfirmed information that is 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 words, criminals can easily layer their illicit proceeds into the other accounts with smurfs(Leslie, D. A. (2014). p77). Those are just part of the 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. An 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 services 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 unlimited 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 is being laundered.
Online Gambling
Casinos have been the ideal battle field of money laundering for a long time. Yet, in the digital age that we are experiencing, online gambling is 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).). As the meaning of gambling, online gambling majorly refers to two methods that cyber launders are 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). p81).
Digital Currencies
Digital currencies, such as Bitcoin and Ethereum, is the fast growing area that cyber launders are interested in. Digital currencies derived because of the market demands of low-friction e-commerce and micro-payments. Digital currencies represent value exchange systems, which operate electronically and make transactions with the currencies that exist only online and are not issued by financial institutions and are thus exempted from regulation(Tropina, T. (2014). ). Which provides the gap that digital currencies possess the characteristics of easy accessibility, instantly transfer, low cost, great anonymity and are sometimes untraceable for cyber launders utilize.
Conclusion
The problem of cyberlaundering arises along with the rapid development of internet. The adolescent phase of this area of crime are already passed, but fortunately that it has not yet reach the peak of its development. Undoubtedly, the development of cyberlaundering is lined up with technological progress. Sadly, the future not only shines for ordinary people, technologically-savvy criminals are also gaining. This is a caveat that the prosecutors and law enforcement agencies needs to ensure that there are no loopholes which criminals can exploit to evade liability for money laundering(Leslie, D. A. (2014). p93).
In this research, the concept of cyberlaundering has clarified and discussed thoroughly that the aura of evasiveness around cyberlaundering is intelligible. However, the understanding of cyberlaundering is only the first step to solve the problem. The problem of cyberlaundering is a legal issue that has a far-reaching influence on social economics. The adverse impact on commerce is only one of its negative effects. People need to adequately identify those issues of cyberlaundering before establishing a complete and powerful Anti-Cyber laundering legal regime, or cyberlaundering will remain as abominable as it currently appears in the future.