Money Laundering Risks Arising from Migrant Smuggling

How do migrant smugglers operate?

Every year millions of migrants worldwide illegally cross the borders of a country in search of a better future. They often rely on people smugglers to enter their destination state. According to FATF’s report on ML-TF Risks Arising from Migrant Smuggling, the proceeds generated by this illegal activity are estimated to exceed USD10 billion per year. 

Migrant smugglers operate on different “business models”, ranging from a loosely connected smugglers that offer travel and related services, to more sophisticated and densely linked smuggling networks in areas with strict law-enforcement strategies. 

How do migrant smugglers launder their money?

Migrant smugglers are predominantly paid in cash. They avoid depositing their proceeds into a bank account and rely on cash to finance their living costs. 

In the instances where money needs to be transferred between jurisdictions, migrant smugglers usually use informal money transfer system, known as hawala. These transactions are entirely out of the radar. Whenever they make deposits into a legitimate bank account, they engage in an activity known as smurfing – they make a large number of small amounts of deposits to avoid suspicion. 

Migrant smugglers frequently engage in trade-based money laundering by using legal businesses such as retail, wholesale, financial intermediation services, food premises, travel agencies, transport companies and others. They often rely on professional laundering networks and outsource their money laundering activities. 

Lastly, migrant smugglers invest their profits in real estate, high value goods, and legal businesses. They often use a combination of the aforementioned money laundering methods.  

How to detect migrant smuggling financial flows?

The money handling methods used by migrant smugglers make it extremely difficult to detect financial flows. The reliance on cash and unofficial banking methods are a major obstacle when it comes to exposing their illegal activities. There are, however, several indictors highlighted by FATF that could suggest suspicious activity: 

Money Laundering 

• Multiple transactions with money transfer and online payment services companies, sometimes without logical reason; 
• Foreign/Migrants using the same IP or machine ID to conduct transactions; 
• Money transfer through third parties “money mules”; 
• Transfer to a different country of prior residence or citizenship; 
• Immediate liquidation of money; 
• Use of Hawala/Hundi transaction system; 
• Repeated fund transfers of relevant overall amount from/to several counterparties abroad; 
• Money flows of relevant amount within a short time period; 
• Usage of prepaid cards in areas far from the ordinary place of residence/domicile of their holders; 
• Recharging transactions between prepaid cards held by foreign nationals, living or operating in places close to reception centres for immigrants or to border crossing points; 
• Transactions involving people with criminal records for migrant smuggling and human trafficking; 
• Depositing money in foreign currency accounts; 
• Gambling activity mixed with remittance and deposit activity. 

Terrorist financing 

• Recently immigrated foreign nationals who live or work in places close to reception centres for immigrants, or logistic hubs along migration routes; work as MVTS Agents; hold different prepaid reloadable cards issued in different places; are registered by the Customs Agency for cross-border cash transfers;  
• Intertwisted MVTS transfers and/or cardreloading transactions of huge overall amounts, performed by the same unemployed individual in different geographical locations;  
• POS payments about purchase of travel tickets to and/or stays in Central-Northern European countries; 
• Links to individuals known to be close to terrorist organizations, military organizations in countries rated highrisk for terrorism or radical environments/groups.

Cash withdrawals at or outside of casinos 

• Use of front cash intensive legitimate businesses; 
• Abnormal payments to accommodation services in proximity to migrant smuggling routes; 
• Cash withdrawals and money transfers through payment institutions; 
• High number of deposits of cash in accounts; 
• Money transactions to various accounts and banks; 
• Investments in real estate/high value goods; 
• No explanation about the origin of the funds. 

AML software as a tool to prevent money laundering

At DX Compliance, we use artificial intelligence to monitor online transactions. Our anti-money laundering software detects suspicious patterns of activity in real-time. Our transaction monitoring solution enables LFIs to detect, investigate and report suspicious transactions, which in turn have the potential to trigger migrant smuggling investigations. 

Both bank and nonbank institutions should have set anti-money laundering regulations in place. Entities can use AML software or databases to cross-reference their customers and to monitor and report suspicious behavior. Staying up to date with current security measures is needed to effectively comply with national and institutional regulations and efforts to stop money laundering/terrorist financing linked to migrant smuggling. 

To read more about how transaction monitoring works in AML software, click here!