TYPOLOGIES refers to the common methods used to commit acts of money laundering or terrorism financing.

When carrying out a risk assessment, managers should be familiar with these trends and emerging trends.

Further information can be obtained from the Asia Pacific Group on Money Laundering (www.apgml.org) and the Financial Action Task Force (www.fatf-gafi.org).

Used to assist with smuggling to another jurisdiction or to exploit low reporting requirements on currency exchange houses to minimise risk of detection - eg purchasing of travellers cheques to transport value to another jurisdiction.

Concealed movement of currency from one jurisdiction to another to avoid transaction / cash reporting measures.  Concealing can be through using people, luggage, mail or any other mode of shipment, without declaration.

Red flag indicators -

• Transactions involving locations with poor AML/CFT regimes or high exposure to corruption
• Customers originating from locations with poor AML/CFT regimes/high exposure to corruption
• Significant and/or frequent cash deposits made over a short period of time
• Significant and/or frequent currency exchanges made over a short period of time

A method involving numerous transactions (deposits, withdrawals, transfers), often various people, high volumes of small transactions and sometimes numerous accounts to avoid detection threshold reporting obligations.

Red flag indicators include many transactions conducted at various financial institutions and/or branches, in one day.

Used as instruments to access funds held in a financial institution, often in another jurisdiction.

Red flag indicators -

• Frequent cheque deposits in contrast to known or expected business activity
• Multiple cash advances on credit card facilities
• Credit cards with large credit balances
• Transactions inconsistent with intended purpose of facility

Purchase of portable valuable commodities (gems, precious metals etc): A technique to purchase instruments to conceal ownership or move value without detection and avoid financial sector AML/CFT  measures – eg movement of diamonds to another jurisdiction.

Red flag indicators for using valuable commodities to launder proceeds of crime -

• Customers requiring safe custody arrangements with financial institution
• Significant and/or frequent cash purchases of valuable commodities
• Regular buying and selling of valuable commodities which does not make economic sense

Avoiding the use of money or financial instruments in value transactions to avoid financial sector AML/CFT measures  - eg a direct exchange of heroin for gold bullion.

Includes real estate, race horses, vehicles, etc. Criminal proceeds are invested in high-value negotiable goods to take advantage of reduced reporting requirements and obscure the source of proceeds of crime.

Red flag indicators for use of valuable assets to disguise money laundering -

• Purchase/sale of real estate above/below market value irrespective of economic disadvantage
• Cash purchases of valuable assets with cash and/or cash deposits for valuable assets
• Low value property purchased with improvements paid for in cash before reselling
• Rapid repayment of loans/mortgages with cash or funds from an unlikely source

Electronically transferring funds between financial institutions and often to another jurisdiction to avoid detection and confiscation.

Red flag indicators -

• Significant and/or frequent cash payments for transfers
• Transfers to or from locations that have poor AML/CFT regimes or high exposure to corruption
• Transfers to high-risk countries or known tax havens
• Transfers to numerous offshore jurisdictions with no business rationale
• Multiple transfers sent to same person overseas by different people
• Same home address provided by multiple remitters
• Departure from New Zealand shortly after transferring funds
• Reluctant to provide retailer with identification details

Alternative remittance services (hawala / hundi etc): Informal mechanisms based on networks of trust used to remit monies. Often work in parallel with the traditional banking sector and may be outlawed (underground) in some jurisdictions. Exploited by money launderers and terrorist financiers to move value without detection and to obscure the identity of those controlling funds.

Red flag alerts -

• Significant and/or frequent cash payments for transfers
• Cash volumes and transfers in excess of average income of migrant account holders
• Transfers to or from locations that have poor AML/CFT regimes or high exposure to corruption
• Transfers involving accounts located in high-risk countries or known tax havens
• Transfers to countries that are not destination countries or usual remittance corridors
• Large transfers from accounts to potential cash pooling accounts
• Significant and/or frequent transfers recorded informally using unconventional book-keeping
• Significant and/or frequent transfers requested by unknown or intermittent customers
• Numerous deposits to one account followed by numerous payments made to various people

collusion, coercion or bribery of financial institution staff by customers, particularly high-profile individuals, for instance, government officials, business executives, celebrities or individuals known or suspected of being involved in serious crime.

Red flag indicators -

• Customers regularly targeting the same employees
• Employees relaxing standard AML/CFT procedures to facilitate transactions
• Employees exhibiting sudden wealth and/or assets in contrast to remuneration
• Employees avoiding taking annual leave
• Sudden improvement in employee's sales performance
• Employees adopting undue levels of secrecy with transactions
• Customers regularly targeting young and/or inexperienced employees

Includes casinos, horse racing, internet gambling etc. Used to obscure the source of funds – eg buying winning tickets from legitimate players; using casino chips as currency for criminal transactions; using online gambling to obscure the source of criminal proceeds.

May be used to raise terrorist funds, obscure the source and nature of funds and to distribute terrorist finances.

Red flag indicators -

• Known or suspected criminal entities establishing trust or bank accounts under charity names
• Transfers to or from locations that have poor AML/CFT regimes or high exposure to corruption
• Transfers involving accounts located in high-risk countries or known tax havens
• Transfers to numerous offshore jurisdictions with no business rationale
• Entities that use third parties to distribute funds or have weak financial governance mechanisms

Used to obscure the source of proceeds of crime to purchase negotiable instruments, often exploiting relatively low reporting requirements.

Red flag alerts include -

• Securities accounts opened to trade in shares of only one listed company
• Transaction patterns resemble a form of market manipulation, for example, insider trading
• Unusual settlements, for example, cheques requested for no apparent reason, to third parties
• Funds deposited into stockbroker's account followed immediately by requests for repayment
• Limited or no securities transactions recorded before settlement requested

A key step in money laundering involves combining proceeds of crime with legitimate business monies to obscure the source of funds.

Red flag indicators -

• Significant and/or frequent cash deposits when business has EFTPOS facilities
• Large number of accounts held by a customer with the same financial institution
• Accounts operated by someone other than the account holder
• Merging businesses to create layers
• Complex ownership structures
• Regular use of third party accounts

A 'shell' company or bank refers to the existence of an entity by name and without proper business operations. Shell entities can be used as a front and as a technique to obscure the identity of persons controlling funds.

Red flag indicators for companies and or other entities used as shell organisations -

• Large numbers of companies registered with the same office address
• Address supplied is a "virtual office"
• Accounts/facilities opened/operated by company formation agents
• Lack of information regarding overseas directors/beneficiaries
• Complex ownership structures
• Structures where there is no apparent legitimate economic or other rational purpose

Use of offshore banks/businesses, including trust company service providers: to obscure the identity of persons controlling funds and to move monies away from domestic authorities.

Red flag indicators -

• Transfers to or from locations that have poor AML/CFT regimes or high exposure to corruption
• Transfers involving accounts located in high-risk countries or known tax havens
• Transfers to offshore jurisdictions with no business rationale
• Multiple transfers sent to same person overseas by different people
• Departure from New Zealand shortly after transferring funds
• Transfers of funds between various accounts that show no economic sense (i.e. multiple transfers incurring bank fees where one single transfer would have been sufficient)

Use of nominees, trusts, family members or third parties etc:  to obscure the identity of persons controlling illicit funds.

Red flag alerts for use of trusts, nominees or other third parties to facilitate money laundering or terrorism financing -

• Customers using family members or third parties, including the use of children's accounts
• Transactions where third parties seem to be retaining a portion of funds, for example, "mules"
• Accounts operated by someone other than the account holder
• Many transactions conducted at various financial institutions and/or branches, in one day
• Significant and/or frequent transactions made over a short period of time

Used to move funds away from domestic authorities and obscure the identity of persons controlling illicit funds.

Laundering proceeds of crime by overpaying, then requesting refund cheques for the balance.

Red flags to indicate use of this typology -

• Casino gaming machines loaded with cash, credits cancelled and a refund cheque requested
• Casino chips purchased, followed by limited or no gambling, then a refund cheque requested
• Frequent cheque deposits issued by casinos
• Significant and/or frequent payments to utility companies, for example, electricity providers
• Frequent cheque deposits issued by utility companies, for example, electricity providers
• Significant and/or frequent payments for purchases from online auction sites
• Frequent personal cheque deposits issued by third parties

Used to obscure identification of those involved in many methods of money laundering and terrorist financing.

Use of 'gatekeepers' refers to professional services such as company service providers, lawyers, accountants, brokers etc. Gatekeepers are used to obscure identity of beneficiaries and the source of illicit funds. They may also include corrupt professionals who offer ‘specialist’ money laundering services to criminals.

Red flag indicators -

• Accounts and/or facilities opened and/or operated by company formation agents
• Gatekeepers that appear to have full control
• Known or suspected corrupt professionals offering services to criminal entities
• Accounts operated by someone other than the account holder

Use of emerging payment technologies for money laundering and terrorist financing. Examples include cell phone-based remittance and payment systems.

Red flag indicators -

• Excessive use of stored value cards
• Significant and/or frequent transactions using mobile telephone services

Trade-based money laundering and terrorist financing usually involves invoice manipulation and uses trade finance routes and commodities to avoid  financial transparency laws and regulations.

Red flag indicators that trade based money laundering may be taking place includes -

• Significant discrepancies appear between the description of the commodity on the bill of lading and the invoice;
• Significant discrepancies appear between the value of the commodity reported on the invoice and the commodity’s fair market value;
• The size of the shipment appears inconsistent with the scale of the exporter or importer’s regular business activities;
• The type of commodity being shipped is designated as “high risk” for money laundering activities;
• The type of commodity being shipped appears inconsistent with the exporter or importer’s regular business activities;
• The shipment does not make economic sense;
• The commodity is shipped to (or from) a jurisdiction designated as “high risk” for money laundering activities;
• The commodity is transhipped through one or more jurisdictions for no apparent economic reason;
• The method of payment appears inconsistent with the risk characteristics of the transaction;
• The transaction involves the receipt of cash (or other payments) from third party entities that have no apparent connection with the transaction;
• The transaction involves the use of repeatedly amended or frequently extended letters of credit;
• The transaction involves the use of front (or shell) companies.