CYBER LAUNDERING: Converting Black Money to White

For many years laundering money was a physical effort. The art of concealing the existence, the illegal source, or illegal application of income, and then disguising that income to make it appear legitimate required that the launderer have the means to physically transport the hard cash. Basically the internet could be used by these launderers i.e. cyber criminals who try to legitimize their illicit money. This involves any type of property or benefit, whether it is tangible or intangible which is derived from a criminal activity. The phenomenon of cyber laundering was triggered to the fullest with the introduction of the internet which criminals have come to use to ply their trade of money laundering. Catalysts of cyber laundering is nothing more than basic features of technology like CPU and fast RAM without which the notion of money laundering will be non-existent. Another catalyst is access to the internet. The virtual world acts as a platform for cyber laundering. It caught momentum with globalization. Today as we say that the world is global village, anyone can access anywhere in this world just by a click.

Categorization of Cyber Laundering

Cyber laundering comes under two entirely different fields. First being cybercrime and the other being money laundering itself. Thus it is important to fit cyber laundering by right lenses to establish legal framework against the launderers. If cyber laundering comes under cyber crime it would mean that it falls squarely within the area of cyber crime without the element of money laundering. Although it is accepted that cyber laundering has roots in the cyber crime by it has to be dealt as per the subject demands its dealings. However it is important not to forget that it core is money laundering with a technological aspect because considering cyber laundering as the only technique of money laundering would be inappropriate.

Combating Cyber Laundering

According to the various estimates up to 40 percent of the world population use the Internet and this number keeps on growing. The internet gains popularity for obvious reasons that it is capable of storing tons of information, easy for communications and even easier to share information of bank and trade. It is clear that cyber laundering needs to be combated because more and more financial operations will use new channels and means of payment and easily escape the financial regulators. One approach in combating cyber laundering is using “4-I’ approach:



The 4-I approach stands for better

  1. IT knowledge

Urgently need to strengthen IT knowledge would help institutions to keep up pace with the criminals across the world. This training even includes hiring former hackers.

  1. ID checks online

Criminals often operate largely anonymously. A better ID card checks would help in reducing anonymity to certain levels.

  1. IP tracking

Cyber savvy users can relatively easily avoid the tracking of their online identity by using proxy servers and anonymization software. Although certain degree of online anonymity is acceptable but financial operations should never be done anonymously. Therefore the need is better IP tracking of payments to prevent criminals from hiding online identities.

  1. IC (International Cooperation)

Criminals can escape borders and exploit the international peace and cooperation. There is the need to strengthen national and international efforts and instruments aimed at combating online money laundering and terrorist financing.

In 1986, the Money Laundering Control Act was introduced with the purpose to minimize the structuring of the transactions so as to avoid the reporting requirements. It attempted to close the loop holes in the prior law that allowed for the structuring of transactions to flourish. In criminalizing the structuring of transactions to avoid reporting requirements, Congress attempted to “hit criminals right where they bruise, in the pocketbook”. Under the Act , the filing of a currency transaction report is required even if a bank employee ” has knowledge” of any attempted structuring. Thus , it appeared as if the ability to launder the profits from illegal activity would be severely hampered. As the original world of money laundering began to erode and get weak , the tendency to use electronic transfers to avoid detection gained a loyal following. Electronic transfers of funds are known as wire transfers. Wire transfer systems allow criminal organizations, legitimate businesses and individual banking customers to enjoy nearly risk free conduit for moving money between countries. Federal agencies estimate that much as $300 billion is laundered annually, worldwide. As a mountain of stored, computerized information regarding these transfers reached for the virtual stars above, the ability to successfully launder increases as workload of investigators increases.

The Budapest Convention 2001

The Budapest Convention 2001 serves as the foundation for the development of the national and global cybercrime legislation. The Budapest Convention requires the states:

– To criminalize attacks against computer data and systems (that is, illegal access, illegal interception, data interference, system interference and the misuse of devices) as well as offences committed by means of computer systems (including computer-related forgery and fraud), content-related offences (child pornography) and infringements of copyright and related rights;

– To put in place procedural law measures to enable their competent authorities to investigate cybercrime and secure volatile electronic evidence in an efficient manner, including expedited preservation of stored computer data, expedited preservation and partial disclosure of traffic data, search and seizure of stored computer data, real-time collection of traffic data, interception of content data;

– To cooperate efficiently with other parties to the Convention through general (such as extradition, mutual legal assistance and others) and specific provisions (expedited preservation and disclosure of stored traffic data, transborder access to stored computer data, establishing networks operation on the round-the-clock basis, etc.).

The Cybercrime Convention Committee (T-CY) has been established in order to allow the parties to the Convention to exchange information and consider possible amendments or protocols to the Convention. Besides that, the Council of Europe, in 2006, launched the Global Project on Cybercrime aimed at assisting countries in strengthening their legislation, training law enforcement prosecutors and judges, strengthening public-private cooperation, developing measures for the protection of personal data and protection of children against sexual exploitation and abuse.

The European Police Office (Europol) has developed its own cybercrime strategy. The European Cybercrime Center is currently providing operational and analytical support to sixteen investigations regarding payment fraud. In 2013, it supported investigations resulting in three different international networks of credit card fraudsters being dismantled. One operation led to the arrest of 29 suspects who had made a 9 million euro profit by compromising the payment credentials of 30,000 credit card holders. The second network that was tackled resulted in 59 arrests, two illegal workshops for producing devices and software to manipulate point-of-sales terminals dismantled and cloned cards and cash seized. This organized crime group had affected approximately 36 thousand bank/credit card holders in 16 European countries.


The spread of the computer and communication equipment based information technologies as well as optimization and computerization of processes in each and all areas of life have blurred the boundaries and interconnected national economies and infrastructure. Besides that these trends have led to the emergence of the integrated global information environment where everyone can access any information in any place around the world, remotely manage personal and corporate information without personal face to face contact.

Despite of the knowledge of the cybercrime, the lack of physical contact with the victim or financial institution employees coupled with anonymity, increases cybercrimes to next level. An effective anti-cyber crime strategy consists of a series of legal, technical, organizational and informational activities with the role of each of these activities being neither primary nor secondary. Thus it is important to to detect first then attack at these launderers which requires international cooperation as well as cooperation between public and private sectors.

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