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Top 10 money
laundering risks
To effectively prevent financial crime, we must first identify the
primary risks, write Jack Donnelly and Olivia Goldberg

C
ollectively across the financial services industry, a
huge amount of time is spent on implementing and
refining financial crime control frameworks. Resources
are prioritised according to a ‘risk-based approach’ by
devising risk taxonomies, conducting enterprise-wide risk
assessments, and directing attention towards the areas of the
business with the greatest number of ‘ambers’ and ‘reds’.
However, these risk taxonomies tend to give a
disproportionate amount of attention to regulatory
requirements, and the risk of not meeting them, rather than
the means by which financial crime is actually carried out –
that is, the financial crime typologies the organisation is at
risk of being exposed to.
Recent research, undertaken by Baringa Partners LLP in
collaboration with financial institutions from around the globe,
sought to identify the most prevalent typologies for laundering
money, and how well each of these typologies is being mitigated
across the industry. It was intended to establish benchmarks for
(i) the typologies which are employed most frequently, and (ii)
the typologies which require greater attention from financial
institutions to reduce financial crime effectively.
Top 10 risks
The research identified the following as the most prevalent
typologies for laundering money, on average, across all sectors:
1. Use of complex corporate structures to conceal ultimate
beneficial owners (UBOs)
2. Cash or quasi cash deposits (direct)
3. Direct cash deposits into another individual(s) or entity’s
account
4. Use of money services businesses (MSBs)
5. Structured cash deposits
6. Use of ‘off the shelf’ shell company
7. Significant use of cryptocurrency or non-fungible
tokens (NFTs)
8. Appointment of nominees into key company positions
9. Transfer of funds from a high crime/corruption
environment to a low crime/corruption environment
10. Transfer of funds from a low crime/corruption environment
to a high crime/corruption environment
Whilst the prevalence of some of these typologies may be
expected, there are several key findings from the research.

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Figure 1: Top 10 typologies – Effectiveness of mitigation

TP1 Cash or quasi cash deposits (direct)

TP2 Structured cash deposits

TP3 Direct cash deposits into another individual

or entity’s account

TP7 Significant use of cryptocurrency or

Non-Fungible Tokens

TP9 Use of money Services Businesses (MSBs)

TP15 Appointment of nominees into key company

positions

TP16 Use of complex structures to conceal

Ultimate Beneficial Owner (UBO)

TP20 Transfer of funds from a high crime/corruption

environment to a low crime/corruption environment

TP21 Transfer of funds from a low crime/corruption

environment to a high crime/corruption environment
or low transparency environment

TP30 Use of ‘off the shelf’ or shell company

Very Ineffective Neutral Effective Very

ineffective effective

Cash still prevalent purposes of money laundering. Subterfuge in business

Three of the Top 10 are cash-based typologies, which is
only one less than when the Top 10 benchmark was first
established in 2020.1 It may be considered somewhat
surprising that, despite the reduction is cash usage during
the pandemic, it is still a preferred method for criminals.
activities is clearly a compelling way to carry out financial
crime, and ongoing scandals highlighted by investigative
journalism and increased awareness of the lack of controls
in place for company registration, may have helped to bring
this to the fore.

Anonymity a key enabler Crypto misuse increase

Many of the Top 10 typologies enable individuals who are
unknown to a financial institution to place funds into that
organisation, whether directly or via third party organisations.
As long as financial institutions continue to permit channels
which offer such a high degree of anonymity, criminals will
continue to exploit them.
Misused corporate structures
Three of the Top 10 most prevalent typologies, (use of
complex corporate structures to conceal UBOs, use of
‘off the shelf’ or shell companies, and appointment of
nominees into key company positions) all relate to corporate
structures and highlight how they can be abused for the
Use of crypto and non-fungible tokens (NFTs) for laundering
money has seen the biggest increase over the last few years.
This change is likely because of a heightened awareness
of this medium for laundering money, coupled with a
recognition that not enough is currently being done to
address this risk.
Financial institutions must ensure they fully understand the
use of cryptocurrency and non-fungible tokens as an avenue
for money laundering, and tighten the controls in place for
how they are used. This includes through tracing transactions
via the ledger, to implementing detective controls in relation
to ‘off chain’ transactions.2

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Sector variations
Some sectors within financial services are by nature more
susceptible to money laundering than others, given the
products and services offered. For example, Baringa
Partners LLP’s research identified 25 typologies relevant
to business banking, versus five typologies for asset and
wealth management. This does not mean that asset and
wealth management organisations are not at risk of money
laundering; rather that there are fewer ways by which they
can be used to launder money.
Risk mitigation
The research also considered how well each financial
institution was mitigating the most prevalent typologies,
which is summarised in Figure 1.
This led to the following key conclusions.
• The controls in place across the industry are not considered
to be effective at mitigating any of the Top 10 risks,
highlighting that there is significant opportunity for
financial institutions to do more to reduce financial crime.
• There is a relatively weak correlation between the
prevalence of a risk and how effectively it is being
mitigated, which suggests the current approach to
mitigating financial crime is not truly ‘risk-based’.
• Of the Top 10 most prevalent typologies, organisations are
most confident in their ability to mitigate money laundering
via cash or quasi-cash deposits. This is likely to be because
it is such a well-established typology and the physical
nature of cash means there are a broader range of controls
that can be put in place to reduce misuse. However, the
FCA’s recent first criminal prosecution3 is a timely reminder
of how important it is to understand source of funds, even
for clients where high cash usage might be expected.
• Whilst financial institutions have become more aware
of the use of crypto and NFTs for money laundering,
the effectiveness of controls are still the weakest of the
Top 10. Therefore, a continued focus on improving these
controls is required.
Improving prevention
Based on the findings of this research, firms should consider
taking the following actions to improve their financial crime
prevention controls:
Undertake more precise risk assessments – controls must
be much more targeted if they are to effectively protect
an organisation from money laundering. Currently, risk
assessments are often not specific enough to the typologies
likely to be used in exploiting an organisation to carry out
financial crime.
1. The research was originally undertaken in 2020 and then
repeated in 2022.
2. ‘Off chain’ transactions can happen, for example,
when the ownership of a wallet is transferred between
individuals without a transaction taking place.
3. https://www.fca.org.uk/news/press-releases/natwest-
fined-264.8million-anti-money-laundering-failures
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Despite the reduction is cash
usage during the pandemic, it
is still a preferred method for
criminals
Understand the typologies relevant to the products and
services offered, so that detective controls are appropriate
to identify risks, and preventative controls are in place to
mitigate them.
Tighten the controls around the use of cryptocurrency
by more consistently identifying customers transacting
with crypto exchanges, particularly where the value of
transactions is disproportionate to their profile. Controls
should be put in place to identify where mixers or ‘off chain’
transactions have been exercised.
Recognise that for larger, more complex clients, KYC is
even more critical – as is clear from the Fowler Oldfield case,4
identifying whether or not a business is expected to deal in
cash does not go far enough to understand whether or not
the value of cash it is dealing in is appropriate for the nature
of its business. For these types of clients, detailed review by
trained financial crime professionals is the only effective way
to identify, measure and manage the risk appropriately.
Be aware that prevalent pre-pandemic typologies may
re-emerge – cash deposits through third party channels and
use of high value dealers were significantly more prevalent
at the beginning of 2020. Whilst the reliance on transactions
through physical outlets and businesses may have reduced
their prevalence during COVID-19, there is no reason these
typologies will not re-emerge given their prevalence in the
past. Therefore, it is important financial institutions keep
controls up to date to mitigate these risks.
Jack Donnelly is a Senior Consultant and
Olivia Goldberg is a Senior Manager at
Baringa Partners, an independent business
and technology consultancy. Jack and
Olivia are part of Baringa’s Financial Crime
team, which supports financial institutions
to better manage financial crime risk and
improve the efficiency of their technology
and operations. Read more on this report at
Baringa’s website5
4. ‘Fowler Oldfield jury see CCTV footage of cash arriving’.
(12 May 2022). Telegraph & Argus. https://www.
thetelegraphandargus.co.uk/news/20133036.watch-
fowler-oldfield-jury-see-cctv-footage-cash-arriving/
5. https://www.baringa.com/en/insights/financial-crime/
top-10-financial-crime-risks-2022/