Projects and control

Money laundering poses challenges to the global financial system

Money laundering is a key engine of transnational crime, and combating it should be prioritised.

Source: Police 16.11.2018

Definition of money laundering

Money laundering is the act of obliterating the origin of assets or funds from criminal activities and making them look legitimate. It is an intentional criminal activity aimed at concealing assets acquired through crime and avoiding enforcement or other measures taken by the authorities. Money laundering is a key part of economic crime, organised crime and the shadow economy, which also makes it an integral part of transnational crime.

Acts of money laundering

Acts considered money laundering include the reception, use, conversion, change of ownership, transfer, transmission or possession of assets acquired through crime for the benefit of oneself or others, or for the purpose of concealing or obliterating the illegal origin of the assets. The key factor is being aware or suspecting that the source of the assets or funds is illegal and still taking the above actions.

Figure 1. Example money laundering process

Figure of Example money laundering process

  1. Proceeds of crime enter the financial circulation through opening a bank account or several accounts in the name of a private individual or a company. The sums deposited in the account(s) may be small, and transactions are frequent. The funds may also be invested in virtual currencies.
  2. The aim is to conceal the proceeds of crime by using many banks and wire transfers. The funds may pass through individuals and businesses. Some businesses are fronts, meaning that they are shell companies that only exist on paper. Such businesses are purposefully registered in many different countries. Virtual currencies and virtual wallets are also used.
  3. Finally, the funds are deposited back to an account and/or are converted into property such as a house, an apartment, a car, a company, valuables, gold, etc. – anything you can imagine! 

Do not become a money mule

Criminals have various ways of recruiting people to act as money mules. If you receive a job offer via email, for example, and the job description mainly involves the reception or transmission of assets or goods, you should proceed with caution. Your account may be used for money laundering purposes by criminals who want to cover their tracks. Acting as a money mule is a punishable offence!

  • The punishment for money laundering is a fine or up to two years in prison.
  • The punishment for aggravated money laundering is at least four months and up to six years in prison.

Money laundering predicate offences are often associated with economic crime

Figure 2. Background on predicate offences (source: Europol 2017)

Money laundering predicate offences are often related to frauds and tax frauds as well as drug trafficking and online frauds, of which the latter have been burgeoning recently. Corruption is also a significant global predicate offence underlying money laundering. 

The confiscation of criminal proceeds and tackling money laundering are the most effective means of preventing new offences

Supervisory authorities

The Finnish supervisory authorities are the Financial Supervisory Authority, the National Police Board, the Patent and Registration Office and the Regional State Administrative Agency for Southern Finland. Besides these supervisory authorities, the Energy Authority and the Finnish Bar Association must report information on suspicious transactions obtained in connection with any control activities directly to the Financial Intelligence Unit (FIU) of the National Bureau of Investigation (NBI), which is the competent authority for suspicious transaction reporting in Finland.

Parties subject to the reporting obligation 

Parties subject to the reporting obligation (“obliged entities”), i.e. corporations and entrepreneurs who can within their normal activities detect money laundering or who can be exploited for money laundering purposes, play a key role in combating money laundering. Obliged entities are, for example, operators in the investment, financial and insurance sectors as well as accountants, lawyers and real estate businesses. 

Duties of the parties subject to the reporting obligation

  • Obliged entities shall Identify their customers and verify their identity
  • Obtain information on their customers’ transactions, the nature and extent of the customers’ business and the grounds for the use of a service or product (duty to investigate and continuous monitoring)
  • Report any suspicious transactions. Reports must be filed electronically.

The Financial Intelligence Unit of the National Bureau of Investigation has the right to access, use and disclose information

The duties of the Financial Intelligence Unit (FIU) include preventing, exposing and detecting money laundering and terrorist financing and referring such matters to investigation. The FIU receives, processes and analyses reports and discloses relevant information to other authorities in Finland, such as the police, the Tax Administration, the Finnish Security Intelligence Service, Customs and the Border Guard. Finland also cooperates closely with other countries.

Statistics on the operations of the Financial Intelligence Unit

  • The total number of reports filed during the current year (2018) will be roughly 40,000.
  • The number of reports filed by banks is increasing rapidly and expected to exceed 8,000 this year. (The total number of reports filed by banks in 2017 was roughly 5,600)
  • The highest number of reports were filed by gaming communities, money services businesses (MSB) and banks.
  • During the current year, information contained in suspicious transaction reports was disclosed to other authorities over 2,200 times.
  • The most common reasons for filing a suspicious transaction report in 2017 were unusual wire transfers, unusual behaviour within a customer group and lack of information on the origin of funds.

By 31 October 2018, transaction cancellations (asset freezing) were targeted at EUR 4,751,056 of which EUR 1,936,995 remain confiscated by the police

Large amounts of assets were frozen on several occasions during 2018. As a whole, the amount of criminal assets confiscated by the authorities is higher compared to previous years. 

Table 1. Value of frozen and confiscated assets 2016–2018

Table from value of frozen and confiscated assets 2016–2018

Anti-money laundering challenges

  • Proving that the source of foreign funds is criminal activities is difficult. Is it tax avoidance or money laundering?
  • There are many methods to implement money laundering, and it can be small-scale or extensive. Criminals know how to utilise, for example, virtual currencies, and new money laundering methods are developed constantly.
  • Professional money laundering is disguised as legitimate business operations, often involving the use of tax havens.
  • Recovering the proceeds of criminal activities is hindered by skilfully hiding the funds in countries where there is no cross-border assistance between the authorities. The transnational nature of money laundering is challenging.

Read more about money laundering on the website of the Finnish police.