Earlier this year, the UK’s National Crime Agency (NCA) ordered the freezing of over 100 bank accounts across the country, mainly held by overseas students from China for suspicions of money laundering.
The estimated value of the freezing order is approximated to be £3.5 million in suspicious funds; however, it is predicted that a far greater amount has already passed through the accounts. This is a commonly used Money Laundering method, whereby multiple person’s bank accounts are used to make small cash deposits or utilising existing financial products, all under the usual £10,000 threshold set by most banks. These funds are then either transferred to alternative accounts or used to purchase goods and services. This method of money laundering is referred to as ‘Smurfing’ and is used to obtain high value goods that can be sent back to the country where the ‘dirty’ money originated or to any other jurisdiction as ‘clean’ assets.
The agency’s National Economic Crime Centre (NECC) said in a statement early this year, “officers from the NECC assess that the students are likely to have been targeted by organised crime groups, specifically to launder the proceeds of crime… The accounts are held mainly by overseas students studying in the UK who may be unaware that operating a bank account in this manner is potentially illegal,” also adding that the accounts were identified as part of Barclay’s own Anti-Money Laundering frameworks.
The account holders which are primarily Chinese nationals studying throughout the UK cannot be identified for legal reasons, none of which have been accused of any crime. The authorities believe that in many cases the individuals involved "may not have full knowledge of the scale and seriousness" of the alleged crimes committed, according to the NCA.
Majority of the cash deposits were being made in a single day in a single town or city, where the students involved were studying in another part of the country, some a couple of hundred miles away. Once Barclay's were made aware of the activity via there Transaction Monitoring regime, they notified the NCA immediately.
In a one case in particular, authorities were seeking the blocking of an account which contained £25,000, although the authorities stated the amount which passed through the account exceeded £150,000 in a 14 month period up until the end of 2018. The bulk of payments originated from a single day of nine cash deposits, via automated paying in services and cash machines.
The individual/groups/organisation behind the suspected money laundering is unclear at this time, and neither is the source of funds. Nevertheless, more attention is turning towards the use of informal money transfer remitters often utilised by organised crime syndicates, as a means to transfer illicit funds from the host jurisdiction to the UK.
The powers which were granted to the NCA and other authorities up and down the country were introduced just over a year ago, along with unexplained wealth orders as per the Criminal Finances Act. This allows greater power for authorities to freeze assets, bank and building society accounts until source of funds can be verified and established.
“Criminals are versatile and will use any opportunity to exploit potential weaknesses to secure criminal profit,” said Matthew Bradford, head of operations for the NECC.
How to protect against money mules & smurfing:
Money mules and smurfing is difficult to identify but the following will help to identify and protect against this method of money laundering:
· Commissioning an independent review on transaction monitoring controls;
· Assess the AML risk framework and identify areas to enhance the controls against smurfing;
· Review the risk rating methodology against the profile of typical money mules;
· Ensure all staff are trained and aware of the methods used my money launders, the concept of smurfing, typical patterns of smurfing and ways to identify and report instances of smurfing.
If you would like more information please contract firstname.lastname@example.org.
By Vishal Garara, Consultant at Lysis Group