Seminar 4 Financial operation of money laundering

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Seminar 4Financial operation of money laundering

• The problem of credit cards and electronic
  banking
• Judge . PhD
• Amjad AL-juhani

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• The banking and Financial business continues to
  evolve, both in terms of the worldwide electronic
  connection among banks, as well as the increasing
  sophistication of banking methods. This is likely
  to facilitate a number of matters, among which is
  money laundering operations via the international
  electronic networks. In addition, globalization
  facilitates the movement of goods and
  transpiration of passengers, resulting in cash
  amounts which cross the borders, including money
  emanating from crime. Although crimes, especially
  organized ones, that yield money to be laundered,
  are less frequent in the Jordan, due to strict
  laws and severe punishments imposed on
  smuggling, distribution and taking of drugs, in
  addition to the difficulties faced by criminals
  to enter the country due to entry visa
  requirements, the Central Bank, however, feels
  that it should extend a helping hand, within the
  legal constraints of the Jordan laws, to the
  international regulatory authorities that are in
  charge of combating money laundering.

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The Problem

• The use of credit cards as an alternative for
  dealing with paper money raised several problems,
  especially what concerns money laundering . It is
  not possible to track or detect the trace of
  financial dealing using these cards, which makes
  the prevalent principle in bank dealings Know
  Your Customer a difficultly applied principle .
• In addition to the fact that dealing with these
  cards takes place directly between two people,
  and does not require an intervention by the
  financial institution. Also, these dealings take
  place smoothly and rapidly, since they guaranty
  an immediate transfer of the money from and into
  any place in the world, and the principal is
  anonymous and without barriers or legal
  restrictions .

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• Credit cards have lately become vastly used in
  money laundering operations, due to the rapid
  development that occurs to facilitate payment and
  transfers, such as using the phone and the
  internet electronically in banking procedures,
  which enable the money launderers to use the
  credit card in transferring large sums of money
  without fear of having their identity revealed,
  especially that this card is easily carried
  across the countrys borders, and used
  internationally, and it is difficult to detect
  the source of the money through it .

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• One of the most famous of these cards is The
  Commemorative Card due to its ability to have
  million of dollars saved on its own CD, and the
  possibility of electronically transferring these
  monies to another card bia the phone especially
  prepared for this purpose, and without the
  intervention of any bank, i.e. away from any
  control or supervision which paves the way for
  money laundering in an accurate manner, and in a
  neat process that is not easily detected or
  tracked .

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In Terms of the Law

• Article Two of the Jordanian Bill on Anti-money
  laundering operations defined money as
  beingEvery in-kind object or right, whether
  physical or moral, movable or immovable, tangible
  or intangible, existing in the Kingdom of outside
  it, as well as any document or deed regardless of
  its form or nature, that ascertains the ownership
  of the in-kind object to a person or attributes
  the right to him. Based on this definition, we
  see that the Credit Card is covered by the
  definition of money under this Bill .

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• Article Three of the same Bill stipulates the
  following
• Money laundering is considered
• 1- Exchanging any illegitimate money or
  transferring it, or investing it for the purpose
  of concealing its source, or place, or movement
  or ownership .
• 2- Concealing or camouflaging the nature of
  any illegitimate money, source, place, movement
  or ownership or giving any misleading information
  on the matter .

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• The Guidelines of the new Anti-Money Laundering
  Jordanian Law, and the Instructions for Combating
  Money Laundering issued by the Jordanian Central
  Bank for the year 2006, a special item about
  electronic money laundering ways. However, they
  did not explicitly nor specifically stipulate the
  money laundering ways via credit cards and ways
  to combat them .

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• The UN Convention for combating the illicit drugs
  trading has included references to a group of
  concepts, terms and ways relevant to money
  laundering operations . Paragraph (R) of Article
  One hereof stipulates Collected monies mean
  any monies directly or indirectly obtained from
  committing one of the crimes stipulated in
  paragraph (A) of article three.Also, paragraph
  (T) of Article One specified what is meant by
  monies as beingmonies regardless of their
  kind, whether physical or non-physical, movable
  or immovable, tangible or intangible, and the
  legal documents and deeds that prove the
  ownership of the monies or any right relevant
  thereto .
• According to this specification, the credit card
  is considered part of these monies .

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Ways of Money Laundering Through Credit Cards

• First Way Using the card in ATM machines

• The client often applies for subsequent orders to
  the issuing bank, to have it issue for him credit
  cards for local and international use, and for
  his employees,assistants and members of his
  family, and for any other individuals that deal
  with him with the collateral of the cash or in
  kind deposits of the company.These cards are used
  in the field of money laundering operations,
  whereby incoming financial transfers are carried
  out electronically , and before they settle, they
  are withdrawn also electronically then collected,
  and the client transfers them in large sums
  abroad .

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• The client cashes the sums through the card from
  the ATM machine using his pin number, then the
  branch from where it was cashed or through its
  systems requests the transfer of the money to it
  from the branch issuing the card. The latter
  automatically transfers and deducts the value
  from its clients account who would have thus
  evaded the restrictions imposed on these
  transfers .
• And since the ATM cards enable their holders to
  withdraw funds locally and internationally
  throughout 53 countries in the world this
  facilitates for the money launderers the task of
  smuggling the suspicious funds .
• The American authorities have discovered through
  the reports that the monies deposited in some of
  the American banks are withdrawn via ATM machines
  in some drugs producing countries, and that these
  processes are recurrent .

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• Second Way Money Laundering via the Payment
  Systems .
• This process takes place on three stages
• Stage One Depositing or Replacing .
• Where the suspicious funds are deposited in a
  bank whether local or foreign, and credit cards
  are obtained with a ceiling equaling the
  deposited balance .
• Stage Two Fraud and Camouflage
• These cards are used later on in purchasing
  physical assets such as precious minerals and
  expensive art paintings . The purchasing process
  is usually direct or via others by handing him
  the credit card, or via the internet while
  resorting to using the protection and coding
  systems to guaranty the confidentiality of the
  operations that take place through it .
• Stage Three Incorporating and Declaring
• Where the physical assets are sold in cash or
  against a check or a financial remittance drawn
  on another bank .

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Third Way via the internet .

• The varied and developed use of that net provides
  several electronic banking activities such as
  hypothetical banks or internet banks that are not
  in reality banks of an ordinary kind, but a
  mediator for conducting some financial and
  selling operations . This way allows the money
  launderers to transfer or remit huge sums of
  monies rapidly and safely, since the dealers are
  anonymous. They are also not subject to laws nor
  control instructions, and they take place across
  international frontiers without control nor the
  possibility of tracking them . These transfers
  via the internet can be completed using the
  credit card, since the money launderers can in
  this way transfer their balances several times a
  day in more than a bank in the world.

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Money Laundering via Forged Credit Cards

• General Glimpse on Cards Forgery
• Forgery is considered in general a criminal way
  that was established since a long time and that
  is limited to a very limited number of people
  that have the necessary skills and efficiency to
  copy or extract original valuable documents .
• In our era, and with the technological
  development, the criminal does not only have the
  ability, but has also all the tools to produce
  copies with good specifications. Forgery has
  developed into a very organized trade of a wide
  scope, which revenues are estimated for billions
  of dollars for the criminal organizations .

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(Continuation)

• First The Falsified Card

• First way To falsify or re-carve the embossed
  details on the card or re-type the information on
  the magnetic tape on the back of the card .

• The Second Way TO retype the details of the new
  account on the magnetic tape .

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• ?Second The forged cards made by the criminals.
• The criminal needs to effect the forgery the
  information about the account, the thrown selling
  slips or the merchants copy thereof, or the
  typing of the information from the card or from
  the selling slip .However, with the use of
  anti-forgery measures on the magnetic tape, the
  use of information on the face of the card has
  become of less value currently, and it is
  restricted to the possibility of using the card
  in a fraudulent way .
• Nowadays, the valuable information of the account
  are obtained through a more complicated way
  called reproduction . Reproduction requires the
  typing of the magnetic tape and storing it on the
  computer, and then typing the information in
  embossed letters on a forged, missing or stolen
  card . This way, the original information are
  obtained including the security information, and
  this is how the original magnetic tape is
  reproduced . In spite of that, the information
  relevant to the account must be typed on the
  forged card , stolen or missing original card .

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Forms of Forged Cards

• The used V letter is not the V security letter

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The identification number printed above or under
the four digits of the account number is not
present .
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?Even though the spectrogram looks like a bird
flying, but it is not the picture of the dove
that Visa uses, it is flat and not of the same
color, and does not give the three dimensional
movement that appear in the original spectrogram .
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Typing around the visa logo is not the accurate
typing required according to the visa measures .
The thin line around the logo which needs a
magnifying glass to read it should show the first
four numbers of the account number, in addition
to other security information .
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Notice that the signature plate in both cards is
not in its right place, and this led to the
appearance of a white line on the lower part of
the plate on one of the two cards and to the
right of the other card .
On the signature plate, the word visa was placed
in the wrong place. It should be inclined with a
45 degrees angle, and should be repeated in
colors . Notice that on one of the signature
plates, the word visa was typed once in a
horizontal manner .
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Notice that the word bank that appears on the
card of the Hang Sing Bank Ltd. is wrongly
written as follows back .
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The picture of the spectroscopic dove was
replaced by the picture of a full face, and there
is no spectrogram at all . The thieves apparently
try to give an impression that this is an
original card, and exert pressure on the merchant
to accept it, as if it was presented by the
legitimate holder of the card.
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The Banks identification number is different
from the first four digits of the account number
that are printed in embossed letters. Even
though the spectrogram seems to be the picture of
a bird flying, but not like the dove that Visa
uses. It is flat and was printed on a metal or
golden chip to represent a spectrogram. The
criminals have used on some cards reflecting
metal chips on mosaic drawings in an attempt to
imitate the spectrogram .
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• The account number apparent on the invoice is
  different from the account number that is printed
  on the card, which indicates that the magnetic
  tape does not belong to this card .

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• This spectrogram shows the face and head of the
  Statute of Liberty on the forged card, in spite
  of the fact that the visa logo is a flying dove .

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?All these cards are forged and not issued by any
company .
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The most famous examples on money laundering
operations using credit cards

• 1- What happened in the US where the money
  launderers managed to install ATMs machines ,
  through which they could to detect and know the
  pin numbers of the clients using them, then they
  forged the cards and used them in the withdrawal
  and deposit operations, through real machines.
  Thus, large amounts of money were laundered in
  this manner until they were discovered .

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• 2- One of the drug dealers was discovered doing
  money laundering of his funds by opening accounts
  for cards in several banks, and depositing
  financial sums on installments until the
  remittances appear ordinary later on. Then, he
  travels to another country in which one of his
  partners that owns a jewelry shop uses it as a
  façade for misleading and fraudulent purposes. He
  pays him using the cards for purchasing jewelry
  with high prices . These are fictitious
  operations until his partner could collect these
  sums from the banks that issued the cards, so
  that they can be used later on for purchasing
  narcotics or paid against drugs that were
  actually delivered .

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• 3- In Britain, the British police managed in July
  1995 to capture the largest gang specialized in
  forging credit cards since the history of
  Britain. The police has found (80) thousand
  forged cards , and managed to arrest members of
  the gang that intended to withdraw one hundred
  million Sterling Pounds via this card from the
  account of actual clients of British Banks, as
  revealed by the investigations, and to remit
  these funds to other banks outside Britain to be
  able to give them a legitimate capacity and
  return these funds to the country another time in
  a different and legitimate way .

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• 4- Some illegitimate organizations use credit
  cards in illicit trade across the internet, and
  launder monies obtained from dealing in drugs,
  human organs, international prostitution and
  children selling, by depositing funds withdrawn
  in illegal ways in bank accounts, then they remit
  them among several branches until the connection
  with the illegal issuer is severed, and they use
  them after for settling payments and can withdraw
  from them using the card .

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Recommendations for combating money laundering
via credit cards

• Jordan considers it extremely important to
  ensure that monies earned through illegal
  activities abroad are not run through the
  financial system in the country for the benefit
  of those criminals, irrespective of where the
  crime was committed.
• For stopping Possible Money Laundering via
  Electronic Banking Services

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• -     The bank/financial institution, which
  provides to its customers electronic transfer
  systems, should connect a programme on such
  systems to flag/ highlight all unusual
  transactions, so as to enable the concerned
  financial institution to report such
  transactions.
• -      When an account receives numerous small
  fund transfers electronically, and then the
  account holder carries out large transfers in the
  same way to another country.
• -      Customers who make regular and large
  payments using different means, including
  electronic payments, that cannot be clearly
  identified as bonafide transactions, or receive
  regular and large payments from countries which
  are identified by the Central Bank as large drug
  markets.
• -     Transfers from abroad, which are received
  in the name of a customer of the bank of any
  financial institution electronically, and then
  are transferred abroad in the same way without
  passing through an account (i.e, they are not
  deposited then withdrawn from the account), are
  not allowed. That is, these should appear in the
  account statement.

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Thanks