These days, people are spending more and more time on social media. As a result, financial crimes using social media are on the rise. Money launderers create fake money-making schemes and identities on social media and lure people into them.
Fraudsters deceive individuals they attract into their network and exploit them to fraudulently withdraw money from their accounts. In other words, financial criminals use them as money couriers, and criminals tend to target young people.
Criminals tend to prefer money carriers without criminal records when selecting accounts, as this reduces the risk of detection and apprehension. Funds targeted for money laundering are transferred from the courier’s performance to a third party’s bank account via wire transfer, and the funds received are cashed out.
The funds are converted into virtual currency, like Bitcoin, as part of a money laundering process that is difficult to identify due to the complexity of the transactions. To address fraudulent activities, including money laundering, the AML foundation is specifically created.
ML Crimes Through Social Media
Money laundering and fraud schemes flourish on many social media platforms. For example, the interactive streaming platform Twitch allows people to create content for viewers, and in return, they can donate to the streamer using Twitch bits, a virtual currency. Twitch bits are a traditional currency.
They can also be purchased with regular money. Due to its user-friendly nature, this payment gateway is particularly vulnerable and prone to misuse for money laundering purposes.
This is also true for other social media platforms like Instagram and Snapchat. The unawareness of users and the desire of some to become the next top model or the following social media influencer leads to them becoming victims of money laundering.
When aiming to create a lasting impact or gain widespread attention, it’s crucial to do so for legitimate purposes rather than engaging in money laundering activities.
With most social media users being teenagers and young adults in their late teens and early twenties, it is becoming increasingly easy for criminals to lure people into social media and platforms.
How Traditional Money Laundering Methods Work?
- Structuring involves the practice of dividing large sums of money into smaller amounts and strategically distributing them across multiple accounts for various purposes, such as financial management and risk mitigation. It is done to avoid reporting requirements to banks, which generally apply to transactions above a certain amount.
- Cash smuggling involves physically transporting large amounts of cash across national borders. Criminals use couriers or hide some money in vehicles, luggage, etc. Once the cash arrives in the new jurisdiction, it is either deposited into bank accounts for safekeeping or utilized to acquire assets, such as properties or investments.
- Trade-based money laundering is a method that utilises legitimate international trade transactions to hide the movement of illicit funds, enabling a covert means of money transfer. For example, criminals over- or under-price goods to move funds across borders.
- Shell companies exist only on paper and have no actual business activities. They allow criminals to move funds between multiple accounts and jurisdictions without attracting attention. Additionally, shell companies are often utilized to acquire assets or partake in investments within legitimate businesses.
- Real estate is frequently utilized as a popular asset for money laundering due to its ease of cash purchase and the inherent challenges in tracing its ownership. Criminals may use paper companies or third-party buyers to conceal real estate ownership.
Although traditional money laundering methods are still prevalent, the emergence of digital currencies and blockchain technology has presented criminals with new challenges and opportunities, necessitating heightened awareness and vigilance.
This advancement in social media and technologies, in general, has led to the development of money laundering activities and better measures against these crimes. Digital solutions to ML are now available. With AML solutions designed by artificial intelligence, organisations can prevent money laundering activities and avoid legal penalties.