The rapid improvements in the payments industry over the past decade have had the unfortunate side effect of making money laundering more of a challenge for institutions to detect and deter. With a greater number of methods for exchanging money and with most transactions happening digitally, it has become harder to chase after money launderers’ latest tactics. According to the UN’s Office on Drugs and Crime, more than $1 trillion is now laundered worldwide.

During a recent PaymentsJournal podcast, Amber Goodrich, Compliance Analyst at CSI,  a leader in the fintech, regtech, and cybersecurity solutions space, sat down with Kevin Libby, Fraud & Security Analyst at Javelin Strategy & Research, to discuss how money laundering has changed in recent years and what companies should be doing to deter it.

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An Ever-Changing Backdrop

The world of exchanging assets has changed dramatically since the initial rules and regulations aimed at money laundering were put into place years ago. “You don’t know who you’re doing business with,” Goodrich said. “And we’re seeing many different types of currency coming into play.”

For one thing, the Anti-Money Laundering Act of 2020 has yet to be finalized, with new regulations still being proposed. New rules are being rolled out to increase penalties, and discussions are centering on imposing multipliers on individuals found to have committed repeat offenses. The subsequent uncertainty has made it harder for institutions to find their footing.

“The thing that we’ve seen the most guidance on is the beneficial ownership piece that’s set to go into effect early next year,” Goodrich said. “But even with that, there’s still a lot that hasn’t been defined yet.” 

Criminals are using social media to contact and enlist recruits, making it harder to detect laundering efforts. “Criminals are using money mules who have never been involved in the practice, so there’s no prior data to use to identify them as potential money laundering parties,” Libby said. “All of those things make it harder for financial institutions to meet those regulations at all, let alone not have repeat problems if they’re getting behind on alerts or having trouble making those connections.” 

One of the most frightening developments is that professional groups are being established specifically to launder money, which presents a distinct problem for financial institutions. It can be very difficult to identify connections between parties tha...