7 Questions about Threat Organizations, Fraud & Money Laundering

Topics: ACAMS, Financial Crime, Financial Fraud & Anti-Money Laundering, Government, Risk Management


The odd thing about money laundering is that it requires that you have money in the first place. Often, these laundered funds come from illicit behaviors; and examining those illicit behaviors and the criminal groups who engage in those activities may help financial institutions follow the money more effectively.

Indeed, most money laundering is conducted on behalf of threat organizations — Hezbollah being one of the most organized and sophisticated among them — rather than individuals.

Debra Geister, CEO of Section 2 Financial Intelligence Solutions, recently sat down with me for an Association of Certified Fraud Examiners (ACFE) webinar titled, The Predicate Cause of Money Laundering: How Fraud and Money Laundering Work in ConcertGeister emphasized that detecting the actual threat reduces regulatory risk, false positives, and compliance costs. Yet, we need to better understand the interconnectedness of corruption, transnational criminal organizations, sanctions evasion, and terrorism in order to be better at capturing the crooks.

At the end, the enthusiastic audience had more than 50 questions for Geister. Here are several audience questions and Geister’s responses.

1. What are the best resources to use to pull together the analysis of the threat organization?

Geister: The first thing to do would be to make sure you are educated in global affairs. Understanding political landscapes, differing regimes, and even simple things like cultural attitudes and conventions can help inform your program.

If you want to look at a specific threat group, there are publicly available resources available through our government partners.

2. Your presentation focused on transnational criminal organizations and terrorist groups like Hezbollah. Why is that? Aren’t there other groups just as prevalent as Hezbollah?

Geister: Hezbollah is the example I used because they are the most proficient and skilled organization in the world at raising and laundering funds. No one does it better. Corruption is also involved in terrorist activity, and Hostile nation states like North Korea, China, and Russia are very much a part of the network of Hezbollah.

financial crime

Debra Geister

These threat networks are interconnected, and global in nature. Hezbollah has perfected their craft, which is the only reason I use them, no other.

3. Would you categorize the recent Russian Laundromat scheme, as a hybrid operation or just simply corruption?

Geister: The Troika Laundromat case is a global case and very connected to corruption. Troika Dialog used many offshore accounts and shell companies to facilitate their laundering. Typically, the Russians work with many threat groups to accomplish their goals. The “hybrid threat” is the notion of the interconnected nature of these groups to accomplish the task of producing and laundering funds.

4. Going back to basics, what happens after possible money laundering information is collected by a financial institution? Does it get reported to law enforcement or is it mostly used for prevention?

Geister: Once a laundering case is identified in financial services, we file a Suspicious Activity Report in the US, and Suspicious Transaction Reports in many other jurisdictions. These reports are then reviewed by law enforcement and passed on to other agencies for further review. They are also available for searches by law enforcement to support current case files. 

5. I work in a manufacturing environment. Are there things related to money laundering and fraud to which I should be aware of or monitoring?

Geister: Some of the things you should watch for in a manufacturing environment would be unusual orders that are illogical. For example, large orders for gas-powered automobiles in a country where carbon fuels are outlawed (extreme example, I know), cash purchases, round dollar amount transactions, and a large number of pass-through costs. Also watch for transactions from high-risk jurisdictions that may be sanctioned.

6. How do companies not in the financial services industry help and perform due diligence in fighting money laundering?

Geister: The best thing that we can do is understand who we are doing business with. For private business is not bound by anti-money laundering laws however, the best question you can ask is, does this make sense? Is it reasonable and normal?

There are many groups that look to exploit normal businesses and offer what may look like grand business opportunities. Doing business with shell and shelf companies is a high-risk situation that businesses should try to avoid. Otherwise sales proceeds can end up in asset forfeiture actions if we are not aware of with whom we are working or if the transactions don’t make sound business sense.

7. How often do individuals or street gangs realize that they are part of a tactical cell that feeds back into the larger criminal organization?

Geister: The tactical cells are typically unaware they are a mechanism of a larger network. Obviously the larger networks don’t necessarily want them to know the bigger picture.

For the tactical cells it’s all about the money — they obviously know that they are distributing drugs or facilitating human trafficking, but they may not know who the ultimate beneficiary is.

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