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JMLC
25,2 “Cyber-laundering”: the change of
money laundering in the
digital age
330 Christoph Wronka
Deloitte GmbH Wirtschaftsprüfungsgesellschaft, Hamburg, Germany

Abstract
Purpose – This study aims to illustrate and determine how illegally obtained funds are laundered through
online platforms and companies in different economic sectors in the digital age.
Design/methodology/approach – A qualitative analysis approach using purpose sampling methods,
including 21 semi-structured interviews with prevention experts, compliance officers and convicted
cybercriminals, resulted in the determination of concrete money-laundering methods involving the
employment of online platforms provided by companies and institutions in different economic sectors.
Findings – The current study focuses on various companies in different economic segments that mitigate
cyber laundering and the anti-money laundering measures that can be adopted. Therefore, this paper
provides a detailed discussion and analysis on how money launderers avoid being detected. Both preventive
and criminal perspectives are taken into consideration.
Originality/value – By identifying the gaps in the current anti-money-laundering mechanisms, it will
provide compliance officers, legislators and law enforcement agencies with an in-depth insight into how cyber
laundering operates in various economic sectors.
Keywords Digital age, Cybercrime, Money-laundering, Financial crime prevention measures
Paper type Research paper

Journal of Money Laundering
Control
Vol. 25 No. 2, 2022
pp. 330-344
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-04-2021-0035
1. Introduction
Money laundering refers to the illegal process of making large amounts of money that have
been gained from actively participating in criminal activities, such as drug trafficking, and
which seem to be generated from a legitimate source (Li et al., 2020). The criminal justice
system views the money from the criminal system as dirty, and the entire illegal business
“launders” it to make it look clean. Legalizing incomes is of great importance as it allows
criminals to use the proceeds obtained through unlawful means without revealing its source.
The term “money laundering” was first used at the beginning of the twentieth century to
label the operations that in some way intended to legalize the income generated from illicit
activity, thereby facilitating their entry into the economy’s monetary flow (Naheem, 2016).
Organized criminal gangs were making a lot of money from extortion, prostitution,
gambling and bootlegging. Therefore, laundering became the perfect means of showing that
their sources of cash were legitimate. With the new age of technological advancements, it
was only a matter of time before criminals started using the internet for laundering purposes
(Leslie, 2014). The criminal practice of money laundering in cyberspace through online
transactions has been termed cyber-laundering. Individuals practicing money laundering
are continuously looking for new ways to avoid being detected by law enforcement, and the
internet has opened a plethora of opportunities for them. As of January 2021, there were 4.66
billion active internet users globally, making up 59.5% of the global population. Of this
number, approximately 92.6% (4.32 billion) are currently using mobile devices to access the
internet. Moreover, cybersecurity ventures expect international cybercrime costs to grow by Change of
15% annually over the next five years, reaching $10.5tn, up from $3tn in 2015 (Morgan, money
2021). This research is essential as it will enable a better comprehension of the change of
money laundering in the digital age and offer its comparisons and contrasts to traditional
laundering
methods of the vice.

2. Literature review 331

In the twenty-first century, technological advancements continue to impact people’s lives
positively and negatively. For money launderers, the traditional techniques of laundering
money are hardly used anymore. These developments have provided individuals access to
opportunities through the internet that was not possible two decades ago. One of the sectors
that have been digitalized is undoubtedly the financial sector and, much more specifically,
the banking industry. For example, open banking systems provide banking customers with
the opportunity to interact with financial institutions across the country effectively.
Moreover, there have been developments in the provision of currency changes in the
financial sector, such as 24/7 mobile wallets and the ever-growing presence of
cryptocurrencies such as Dogecoin and Bitcoin. However, this positive technological
progress has also resulted in new money laundering schemes, with most of the targets being
mobile devices, which have led to an increase in criminal activity. As such, it has also been
evident over the years that with the rise in money laundering threats and terrorist financing,
countries across the globe have increased financial regulations. Cybercrime is projected to
result in adverse damages totaling $6tn globally at the end of 2021, which will be the same
as the third-largest economy after the USA and China. Examples of such cybercrime costs
include stolen money, theft of personal and financial data, robbery of intellectual property,
embezzlement of funds, damage and destruction of data and forensic investigations and
reputational harm. This represents the most significant transfer of economic wealth in
history, which also affects the incentives for innovation and investment in the financial
sector because of organized crime gang hacking activities and a drastic increase in the
sponsorship of terrorist groups worldwide.

2.1 Aspects of the internet that attract money launderers

The internet is made up of unique and modern features resulting from the development of
4G and 5G connectivity advancements and the simultaneous growth of the information
technology (IT) industry (Aravazhi, 2020). With these advancements also come
consequences in the financial sector across the globe.
2.1.1 Anonymity. The internet provides users with the ability to hide among millions of
other users to imitate persons, as no one can truly identify them. However, specific measures
have come into play after thorough research and development procedures conducted by
analysts in the financial industry (Sarda et al., 2019). The internet service providers can
record and keep log files for a long duration. These measures have been bypassed so far
with the invention of new technological advancements such as internet protocol spoofing,
wireless fidelity technology, the use of prepaid phones as modern and encryption
technology.
2.1.2 No face-to-face contacts. The ability of the internet to allow the automatic placing of
orders and executing them without the presence of a human factor is referred to as the
depersonalization of financial operations. The server of financial institutions only checks
two elements, the login credentials and the password, to effectively authenticate a user. It
becomes hard to detect and monitor transactions related to money laundering schemes.
JMLC 2.1.3 Speed of transactions. Traditional money-laundering methods are much more
25,2 expensive and slower compared to the new cyber laundering techniques (Mabunda, 2018).
Advanced payment techniques that use artificial intelligence enable the illegal funds to
move more rapidly on long distances and burden law enforcement and other financial
regulators.
As such, the entire cyberspace makes the whole procedure cheaper and more convenient
332 in the digital era of money-laundering activities. There are different cyber laundering
methods used in cyberspace that have replaced the traditional money laundering techniques
in almost every aspect, including efficiency.

2.2 Transaction laundering

In online banking, when the client makes a connection with the bank’s web server, with his/
her personal identification (ID) code and then proceeds by entering their passwords, the
bank’s system is automated to recognize and match the information through verification
and authentication (Yantis et al., 2018). With this system, organized criminals and
individuals can make transactions without going to the banks and physically filling out the
forms, making their work easier and more effective than the initial traditional laundering
activities. Due to this access, the bank cannot complete verification and notice that the user
is a fraud and not the original customer (Nobanee and Ellili, 2018). Moreover, as these money
launderers can conduct illegal business anywhere in the world without actually having to
access the banks physically, they are less likely to be monitored. Almost every citizen
should expect that most of their data (personal identification information) has been stolen
already and can be found on the dark web, where information is intentionally hidden and
used to conceal and promote criminal activities, including money laundering. Studies
conducted in this field suggest that the size of the deep web, which is not accessible by
search engines such as Google, is 5,000 times much larger than the surface web that most
people currently use and is growing at a rate that defies quantification (Orsolini et al., 2017).
The dark web is also where cyber launderers buy and sell malware, cyber-attack services
and exploitation kits to conduct money laundering activities that target businesses,
governments, essential financial providers and governments. Therefore, through the dark
web, money launderers have online access and control over the customers’ bank accounts
regardless of their location. Moreover, it is difficult to ascertain the activities carried out with
electronic cash than real money laundering activities. As such, that is the reason why
financial criminals currently prefer to carry out electronic money activities rather than
physical money. Another factor that makes cyber laundering different from its traditional
forms is the advancement in technology in e-commerce, which has made it easy to develop
online businesses and hide them behind legitimate store websites (Alsaibai et al., 2020). As
such, money launderers have over the years mastered the art of using e-commerce websites
to take advantage of this vulnerability and proceed with their illegal activities. These types
of money laundering activities are referred to as transaction laundering. Chattopadhyay
(2018) defines it as an activity through which entities, unknown to a merchant acquirer,
process their payments through the acquirer’s facilities to a known merchant. It is a criminal
activity that violates the merchant’s agreement with its acquirer. Transaction launderers
can connect the extended networks of confidential, undeclared and illegal e-commerce
websites and the service providers’ payment networks. The technique of using legitimate
websites as a front is being used by criminals to conduct illegal activities, including selling
counterfeit goods, weapons and drug trades, illegal pharmaceuticals, unlawful gambling,
money laundering and illicit pornography. Also, referred to as “unauthorized aggregation,”
the activity creates an environment where the merchant service providers can become a part
of illegal activities and promote money laundering without their knowledge. Not only does this Change of
damage their reputation, but it also makes them vulnerable to excessive chargebacks, money
regulatory penalties and lawsuits. However, it is important to understand aggregation is a legal
payment model that small and medium businesses depend on payment aggregators to take
laundering
credit and debit card payments from their customers. Therefore, this indicates that the
payment itself can be used for fraudulent activities as the payment system is altered to launder
money. Financial fraudsters find it hard to launder money through traditional means such as
cash and wires, given the complex nature and advanced monitoring systems that exist for such 333
payment techniques. However, for credit cards, the aim has often been on frauds instead of
money laundering schemes. The merchant service providers are expected to ensure that the
e-commerce websites are legitimate, as unrecognized online corporations can easily access
payment systems through payment laundering. The ultimate penalty is borne by the acquiring
merchant’s bank that has knowingly or unknowingly indulged in transaction laundering. To
mitigate risk and the responsibility regarding the facilitation of transaction laundering,
payment processors ought to incorporate advanced cyber intelligence technology that uncovers
hidden e-commerce networks, facilitators and other relatable fraudulent activities. Regulations
require the merchant service providers to verify the legal identity of their clients and determine
the ultimate beneficial owner of that entity. Nevertheless, the traditional know your customer
(KYC) still majors on the legal entity’s physical components instead of the digital aspects,
making the payments environment extremely vulnerable to transaction laundering. As
observed from the discussion above, transaction laundering can be conducted in various ways
and happens if the merchant is unaware. Complicit, the merchant is owned by a criminal
syndicate and through a combination of traditional and complicit merchants.
Very low-risk businesses can be fronts for money laundering activities. Therefore, banks
should be aware of that, and develop non-traditional methods of monitoring and
investigation are required (Frechtling, 2017). There also needs to be a way by which
financial regulators, including banks, can supervise the cash deposits and their credit card
activity with inputs from the merchant acquirer to develop a complete picture of how money
laundering schemes occur. Moreover, the merchant acquirer can examine the type of
merchants they have and the average credit card processing volumes per month for each. By
doing so, they will observe if the income generated by the merchants matches the card
processing volumes in the same category. Simultaneously, there is an equally crucial
responsibility for the regulatory bodies to play in identifying how rules are adhered to and
the effects to the financial perpetrators when caught. By doing so, transaction laundering
will be mitigated in the long run.

2.3 Cryptocurrency exchanges as a money-laundering vehicle

Criminals readily take advantage of the fast-moving pace of technological advancements
with financial transactions through new payment methods such as cryptocurrencies rapidly
gaining traction globally. According to estimates as recorded by the United Nations,
between $800bn and $2tn are being laundered annually across the World, representing 2%–
5% of global gross domestic product. Out of this, more than 90% go undetected. The exact
volume associated with cryptocurrency laundering is yet to be determined. However, studies
suggest that crypto thefts, frauds and hacks amounted to approximately $3tn in the first
half of 2020, lower than $4.5tn in 2019 (Orcutt, 2020).
Additionally, as of 2019, the total spending of bitcoin on the deep web was recorded at
$829m, which represented 0.5% of all bitcoin transactions (Elliptic, 2019). Another study
conducted on the subject matter and which examined more than 800 market maker
exchanges, identified that 56% of the entire cryptocurrency exchanges globally had weak
JMLC KYC identification guidelines, with most of Europe, the UK and the USA listed among the
25,2 worst offenders (Varshney, 2020). When discussing cyber laundering, it is often hard not to
mention cryptocurrency as a money-laundering tool. Cryptocurrency exchange services aim
to convert digital coins to spendable money anonymously. Even though the use of digital
currency for money laundering is complex than the traditional forms, criminals have
perfected using it and are going undetected. The most significant reason for applying this
334 method is that money laundering is hard to conduct in this industry. Organizations must
adhere to the Bank Secrecy Act and its implementing regulations (anti-money laundering
(AML) rules). The purpose of these regulations is to assist in detecting and reporting
suspicious activities, including predicate offenses to money laundering such as market
manipulation and securities fraud. Therefore, fraudsters prefer this industry because no
AML regulations guide the digital currency sector. The crypto money-laundering activity is
made up of three main steps.
2.3.1 Placement. First, digital coins such as Bitcoins can be bought with fiat or other
forms of crypto. Online cryptocurrency trading markets have different levels of adherence to
financial transaction regulations. These coins are then converted on exchanges that do not
adhere to AML laws, and therefore, money is easily laundered because of anonymity.
Legitimate online deals comply with the regulatory requirements for identity verification
and fund sourcing, and, more importantly, AML compliance. This vulnerability is
identifiable where a lot of transactions associated with cryptocurrency laundering happens.
When the financial institutions step in to regulate the exchanges, they must make use of
KYC guidelines to their clients. Doing so allows for the matching of transaction information
to the subsequent client, therefore breaking the anonymity for every transaction.
2.3.2 Layering. The second stage is remaining anonymous. Cryptocurrency laundering
can leave digital footprints tracked through monitoring transactions through Blockchain.
However, organized criminal syndicates may be currently using an anonymization service
such as the deep web (known as “dark web”) to hide the source of money, making it
impossible for forensic investigators to detect money laundering activities. As such, the
links between cryptocurrency transactions are broken, therefore remaining untraceable. The
main argument for the use of anonymity services is that it protects the clients’ privacy.
2.3.3 Integration. Third, integration, which is the last stage of the cyber laundering
activity has been enhanced to the point that the dirty currency cannot be easily tracked.
Such dirty money cannot be easily traced back to criminal activities. However, despite the
currency no longer being directly related to the crime, money launderers still need to explain
how they obtained the cash they possess. Integration explains the entire process. At this
point, criminal syndicates can develop an online firm that accepts bitcoin payments to turn
dirty crypto into legal crypto. As such, cryptocurrencies have the potential to make it easier
for criminals to hide their sources of income and move their funds across borders without
being detected. A simple technique of legitimizing the illegal proceeds is to highlight it as the
result of a profitable venture or other corporate appreciation. To the financial institutions
monitoring the money transactions, it can be challenging to disapprove it in a market where
the value of any cryptocurrency can change by the second.
To effectively counter the increasing cyber-laundering threats related to
cryptocurrencies, regulators worldwide need to develop rules and recommendations for
organizations dealing in these currencies. In 2019, the financial action task force (FATF)
published its regulations for virtual assets and virtual asset service providers by
introducing AML financing requirements (Financial Action Task Force, 2019). Countries
worldwide are now required to examine and prevent their risks related to virtual assets,
financial activities and providers and ensure that they are licensed and subjected to being
monitored by competent and credible national monetary authorities. As layering and Change of
integrating transactions are the main techniques of cryptocurrency laundering, insisting on money
a clear record in the Blockchain can further mitigate money laundering threats (Tai and
Kan, 2019). When clear digital tracks represent a trail of verifiable transactions, it becomes
laundering
much harder to hide the origins of the illegitimate digital currencies.

2.4 Online gambling as a money-laundering vehicle 335

In addition to cryptocurrency, other peer-to-peer social sites such as online gambling are
also used to launder money over the internet. Even though online gambling has been
deemed illegal, it does not detract from the fact that it offers an excellent platform for money
laundering activities (Boere, 2020). By channeling money through gambling platforms, it
clears up the digital footprints, which is the origin of the illegal money. These sites are not
registered, and therefore, the regulators cannot control them, meaning that their activities,
including money laundering schemes, often go undetected. There are plenty of ways to
easily launder money through online gambling sites such as Chip Dumping. It refers to an
online application where one or more players lose the game intentionally to transfer all their
chips to a single player (Zerafa et al., 2021). Another option is when an individual opens a
gambling account and must verify their identity by providing a bank account number. Once
this step is completed, the player can put money in the gambling account through several
payment options (Banks, 2016). While the linked bank account can be applied for the entire
process, many other anonymous payment techniques are also available, such as debit cards,
credit cards and cryptocurrency. Crypto can be used to purchase credit or virtual chips,
which users can cash out again after just a few small transactions. The money put into the
gambling account is then paid out, and therefore, provided legal status. As such, when a
player receives all the chips, he/she can earn money and the money played by the entire
group of players is converted to clean money. Due to the availability of anonymous payment
methods and the fact that the authorities lack awareness and knowledge of what happens in
a gambling account, it is hard to effectively verify whether the gambling account is used for
actual gambling or money laundering purposes. The attractiveness of online gambling as a
medium for cyber laundering activities can be attributed to various aspects. First, the
gambling industry has one of the most significant transaction volumes. These transactions
are global, and therefore, developing jurisdictions to monitor international commerce is not
accessible due to different modes of governing found in each country in the world. Finally,
gambling does not require any physical attributes, which results in a smooth correlation
between input and output and an increase in the difficulty of determining this output.
The new European Legislation regarding the control and supervision over the financial
system to mitigate money laundering, mainly anti-money laundering directive (AMLD), has
gone through a lot of changes since its conception. The latest regulatory document, also
known as AMLD5, enrolled in 2020, is a new directive in mitigating the threats resulting
from money laundering schemes through online gambling and targets companies offering
exchanges between virtual currencies fiat money (Pine, 2019). As such, the online gambling
industry needs to adhere to legal regulations to prevent and report money laundering affairs
that may negatively affect their financial status and reputation. Some of the tools being used
to achieve this success include; suspicious activity reports (SARs), currency transaction
reports and KYC, among other AML compliances and regulations (Naheem, 2018). Overall,
stricter procedures will have to be incorporated by licensed operators and monitored by the
regulators, including those licensed in remote gambling jurisdictions, especially when it
comes to large transactions and withdrawals.
JMLC 2.5 The video game industry as a money-laundering vehicle
25,2 Moreover, the rapid developments and technological advancements in the video game
industry have also led to increased money laundering schemes. Over the years, the industry
has become a potential target for organized criminal syndicates, as actual in-game
purchases become a thing. Due to the lack of regulations to guide the industry, it has become
a potential target for money laundering. Rules on financial institutions, including the
336 ultimate beneficial owner and the AML requirements, make it harder for criminals to
launder money through the previously used traditional methods (Hughes, 2020). As such,
the videogame industry has provided an environment that favors money laundering
schemes because of in-game trades. Even though not every game has selling material
features, some video games have been specifically programmed to allow game materials to
be bought with real money, such as unique clothes for the characters and weapons, to pass
challenging levels. When individuals play these games, they get these materials by paying
real money for them. The video game industry also provides a haven to harbor criminal
syndicates that launder cash because of its ability to allow for convertible and non-
convertible virtual currencies (Karapatakis, 2019). Even though the FATF has reported that
non-convertible currency cannot be converted to fiat currency, criminal syndicates can still
create a secondary black market to change this currency and convert it into a virtual
currency. Moreover, the anonymity that they provide their players creates an environment
for criminal activities. Criminals purchase a buy-in-game game inventory with credit cards
belonging to the original owners and then sell the stock at a lower price than the black
market. Criminals can access the information in the credit cards when purchases are being
made for the games and use the collected data to log into the account that is not protected
with two-factor authentication to purchase in-app money. Inevitably, the owners of the
games may not find any solution even if they are aware that the money laundering activities
are taking place on their platforms. By doing so, the dirty money they had is washed and is
finally converted to clean cash (Axelrod, 2017). As can be observed, in the online video game
industry, money laundering has become more accessible due to a lack of customer
identification and due diligence, lack of monitoring of financial activities and failure to
report through reports such as SAR (Loh, 2020).
Even though there are not enough regulations to mitigate money laundering activities in
the online video game industry, FATF added a requirement in the 15th money laundering
recommendations in 2019. According to this regulation, approaches to the supervision and
monitoring of virtual asset service providers have been incorporated. It is perceived that the
criminal offenses will reduce as regulators continue developing new and effective
regulations for the online video game industry. Because of the increase in money laundering
activities in the sector, criminals will likely take advantage of the absence of such
regulations. If there were regulations such as banks, the vice’s risks will drastically reduce.

2.6 Social media as a money-laundering vehicle

In the current digital age, individuals spend a lot of time on social media. It provides society
a medium to interact and stay connected globally, but these platforms are often taken
advantage of by sophisticated money launderers. Reports suggest that internet users spend
an average of 2 h and 22 min daily on social networking in 2019 (Metev, 2021). Moreover, the
average daily time spent on social media in 2018 was 142 min each day. By the end of 2021,
more than three billion individuals worldwide are expected to be on social media. As such,
financial crimes through these social media platforms are also increasing every day.
However, what started as a simple way of connecting with peers has evolved into a complex
network where users can now make money through online activities. For example, in 2019,
the influencer market value share was estimated at $6.5bn (Sikora, 2020). Influencers refer to Change of
social media users who have a large number of followers. As such, because of their money
popularity, a fashion brand or a makeup company may reach out to them and ask them to
promote their products, leveraging their large following to reach more potential customers.
laundering
A social media influencer can be any person that has the appearance of having credibility
and the ability to convince others, including the authorities, of their legitimacy. Organized
criminal syndicates can make fake money-making programs through social media and try
to engage the social media users in these processes. They then use these individuals to 337
withdraw money from their many financial accounts and, in turn, are provided with
commissions to encourage them to continue with the act. This means that the money
launderers use these social media users as money mules and criminals generally target
young people. Criminals select accounts that have no previous criminal records to reduce the
likelihood of getting caught while choosing money mules. The money to be cleaned is
transferred from the individual’s account to the third-party bank account through bank
transfer, and the money received is exchanged to virtual currency such as Dogecoin. Due to
the complexity of the transactions, it is often difficult for financial regulators to detect the
flow of money and its origin.
Even though regulations and monitoring methods have been affected by the rapid
developments in social media technology, the measures have also improved. Organizations
can now prevent money laundering activities and avoid regulatory penalties with AML
incentives that are specifically developed by artificial intelligence mechanisms. Users can
give away their locations by checking in or using different social media platforms such a
Facebook and Twitter to show off to their followers. As such, investigators can then
determine the sources of the funds for the lifestyles displayed. Moreover, investigators can
use external research to ascertain the average influencer earnings in their customers’ niche
and compare if they logically match. If their figures are unusually higher than average, their
following does not coincide with the transaction volumes. By taking these measures, money
launderers will be discouraged from approaching social media influencers. This may reduce
the criminal activities associated with the exchange of dirty money to clean money on social
media.
Overall, the literature reviewed above has adopted a compliance perspective on the
laundering money issue. However, to prevent money laundering schemes effectively,
authorities, financial regulators and compliance officers need to comprehend how money
launderers behave and act the way they do (Teichmann and Falker, 2020). This next section
of the study provides an in-depth insight into the criminal’s perspectives. It aims to fill the
identified literature gap by highlighting how money launderers operate through online
platforms and differentiate it from the traditional money laundering methods. With such
limited existing regulations of cryptocurrencies, they continue to entail significant
compliance risks.

3. Research methodology
3.1 Introduction
This section discusses the methodology applied in the current research in adherence to the
strict Covid-19 protocols currently enforced by the government. The procedures discussed
consist of the purpose of the method, the data collection tools, the research problem and the
process of interpreting and analyzing data. The ethical process is also included in the section
and how the study’s outcomes will be disseminated. The current investigation aims at
providing the field of research with exploratory and narrative perspectives on the change of
money laundering in the digital age. Therefore, the study applied the use of a qualitative
JMLC research design. Unlike quantitative approaches that use scientific data, qualitative
25,2 techniques are associated with the help of words. It is appropriate to collect and analyze
essential research data because the course emphasizes reality’s social construct (Maxwell,
2012). It also aims to explain how and why a specific phenomenon happened in a certain
way, enabling the researcher to access first-hand insights into the investigated
phenomenon’s social construct. As the research is exploratory, the qualitative research
338 design will allow the collected data to speak for itself.

3.2 Validity
In research, validity refers to how accurate the data collection tools were when gathering the
necessary data to fulfill the study’s requirements. Therefore, to ensure that validity is
observed, the investigation developed semi-structured interview questions based on the
study’s objectives. Construct validity was also applied, which helped establish the
inferences on the theoretical foundations of the paper (Notelaers and Van der Heijden, 2019).
This was ensured by providing an in-depth review and synthesis of the literature on the
change of money laundering in the digital age.

3.3 Reliability
In exploratory studies, reliability refers to the investigation’s soundness regarding the
appropriateness of the techniques used during the research and the integrity of the paper’s
final, conclusive remarks. The report accounted for and acknowledged the bias in the
applied sampling methods and provided countermeasures incorporated to reduce and
mitigate the bias to guarantee reliability in the study. Furthermore, the research also
ensured that the interpretation and analysis of the collected data were transparent and was
consistent with the findings by comparing them to those of other researchers in the field to
seek out the similarities and differences in their accounts regarding cyber laundering
processes (Noble and Smith, 2015).

3.4 Research approach

To explore the change of money laundering in the digital age, the researchers used the
inductive research approach (Liu, 2016). The selection and use of this method were because
it studies the patterns and behaviors of individuals and later on develops theories regarding
the participants and links them to the paper’s objectives (Nouman et al., 2018). As such, the
research method was found to be suitable to the study as it promoted exploration and
provided the paper with flexibility and freedom to alter its direction anytime, enabling the
identification of literature gaps that needed to be explored under the same topic (Andreani
et al., 2019).

3.5 Instrumentation and data collection

The current investigation applied semi-structured interviews to ensure that the data
collection process was a success. Interviews are crucial tools for qualitative research
techniques as the participant’s responses are recorded in narrative form (Sutton and Austin,
2015). The paper used interviews instead of questionnaires because the former provided a
platform for interaction between the interviewees and the interviewer, which eliminated the
non-response rate, enabling the researcher to gather enough data to inform the study
effectively. To provide flexibility regarding the interviews’ flow, the questions were
unstructured, which created a conducive environment to conclude that the research had not
initially focused on (Rahman, 2017).
3.6 Research process Change of
The research sought permission from the various financial regulators and other institutions money
such as the correctional facilities harboring previous cybercriminals indicted for money
laundering irregularities that were important in informing the study. The willing
laundering
participants were reported on the investigation’s purpose and were required to sign a
consent form before the actual research kicked off officially. The research team sent out
Google forms containing the consent via email addresses to accomplish this process. The
participants were required to achieve a verification procedure to show that they agreed to
339
participate in the study legally. Due to the strict Covid-19 protocols, the interviewing process
took place through Zoom meetings. The participants were also required to go through the
interview scripts to familiarize themselves with the questions before the actual interview
sessions. During the interviewing procedure, they were free to express themselves and share
their concerns and opinions without bias.

3.7 Sampling
Based on the Covid-19 protocols, the researchers selected a sample size based on both
criminals’ and prevention experts’ proximity and availability on the matter under study. As
such, as the current research was qualitative, the paper used non-probability sampling
techniques. Moreover, to obtain an optimum sample size, the investigation uses purposive
sampling, which required selecting a sample size based on the researcher’s judgment while
subsequently putting considerations on the quality and purpose of the study (Etikan et al.,
2016). The sampling process also included respondents with more than five years of
experience in cyber laundering activities. It was based on their ability to provide the
investigation data (Alvi, 2016). However, purposive sampling also generated problems for
the research in several ways. First, the researcher is prone to bias as it depends on his/her
judgment. If the discretion on selecting the participants is lacking, the fundamental research
will be grounded as a failure and will not contribute to the field of the study. A qualitative
content analysis of 21 semi-structured online interviews with both criminals and prevention
experts and compliance officers in the UK led to the determination of concrete money
laundering methods involving the employment of online financial institutions and
companies in different economic sectors.

4. Data analysis
In this investigation, the semi-structured interview questions developed were centered on
answering the three research questions:

RQ1. How do criminals use the digital platforms in the different economic sectors to
launder illegally made funds?
RQ2. Are there any existing laws at the national and international level that have any
bearing on cyber laundering schemes?
RQ3. What legal measures can ensure the regulation of cyber laundering?
When conducting an investigation, a researcher must decide whether to use open or closed
interview questions and what it will examine in the research (Baggetta and Alexander,
2016). Different methods were used to develop the questions to inform the entire paper
better. The research aspects used to form the basis for the qualitative study included; cyber
laundering, how cyber laundering occurs and how the financial regulators can mitigate it.
The semi-structured interviews began with a list of preliminary questions to ensure that the
JMLC respondents felt comfortable participating in the entire data collection process. Afterward,
25,2 the study followed up with direct probing queries regarding money laundering in the digital
age. The study selected 30 individuals across the UK to participate in the research. Out of
this number, 21 participants completed the entire interview session, and therefore, their
knowledge and expertise were used. The majority of the individuals who responded to the
interview stated that they conducted their businesses mainly on the internet (90.5%). The
340 next question that was asked in the discussion was on the most popular laundering methods
in cybercrime. In total, 11 participants (52.3%) responded by stating that the most popular
process was through offshore accounts, followed by 4 (19%) who believed that the most
common techniques were through anonymous shell accounts. The rest were evenly divided
into money mules and unregulated financial services, as shown in the figure below
(Figure 1).
Finally, the participants were then asked about the best preventive mechanisms that
could be used by financial organizations to monitor their security systems effectively and
watch account activities for suspected individuals and organized crime syndicates. Six
participants (28.6%) responded by claiming that device identification was the most
appropriate incentive to be applied. In total, 7 (33.3%) responded by claiming biometrics
would drastically reduce the vice, while 4 (19%) suggested the alternate use of geographical
dispersion software. The other remaining recommended applying customer behavior
monitoring software (19%) (Figure 2).

5. Findings
With the rapid development in mobile technologies, the internet can now be accessed from
anywhere in the world, provided there are facilities necessary to achieve connectivity. Many
online channels of laundering illegal funds have ensured a shift in how cyber laundering is
managed. It is nearly impossible for a financial regulator to be omnipresent and detect every
transaction made by cybercriminals (Joveda et al., 2019). From the above interviews
conducted, it is evident that cyber laundering is linked to organized criminal syndicates.
These cybercriminals are popularly known to be scam artists who use the internet to
conduct their money laundering schemes. Moreover, there is a significant amount of money
circulating over the internet, and the proceeds of these crimes rarely leave the realm of the
internet. Cyber laundering can, therefore, be perceived as a viable means to an evil end.
However, it is important to note that even though cybercriminals undermine the state’s
authority and its financial institutions, it would be counterproductive for the state to
investigate the very foundations on which cyber laundering is built in a bid to mitigate the

12

10

4
Figure 1.
The most popular
2
money laundering
methods in 0
cybercrime
Offshore accounts Anonymous shell accounts Money mules Unregulated financial services
 8
Change of
7 money
6 laundering
5

3 341
2
Figure 2.
1
Monitoring
0 suspicious financial
activities
device identification biometrics transaction velocity monitors geographical dispersion

practice. According to the analysis, the most common method for money laundering is
through the use of shell companies, which is usually designed to facilitate the layering of
illegal proceeds. These accounts are based offshore, complete with bank account details to
aid in the layering of funds. As such, a shell company acts as a component to facilitate
illegal; business transactions without having any major assets or operations. Currently,
some trends involve the creation and design of shell organizations on the internet. This is
advantageous to the criminals as the internet has boundless borders, and along with its
anonymity traits, it has opened a gateway for shell companies to launder illegal funds
(Sabella, 2019). Another clear difference that has emerged through this study regarding
money laundering in the digital age has to do with the evolution of the internet of things that
has revolutionized connectivity. Unlike in the traditional methods of money laundering
schemes where cybercriminals focused their efforts on private computers, cybercriminals
currently have mastered the art of infiltrating mobile systems to launder money through
unsuspecting mules. An average mobile phone user spends about 5 h using their devices,
with approximately 70% of the mobile devices lacking an anti-virus program installed
(Hamilton, 2019). Due to this technological ignorance, cybercriminals have opted to take the
path of least resistance. The paper further suggests that the digital currency’s mere
existence is a threat to the fight against cyber laundering schemes. Unlike the traditional
method where horse racing could be used to launder money, cryptocurrencies have
revolutionized how illegal money is transferred as it is more complex than the conventional
methods. Cybercriminals can access better privacy to obscure the money’s origin so that it
cannot be traced back to them by the authorities. The process is accomplished by placing
the dirty money into the cryptocurrency system that converts fiat money with
cryptocurrency through a bank account. Cybercriminals create several layers to achieve
maximum anonymity by exchanging major currencies with altcoins. As can be observed,
this is far much more complex than the traditional methods of laundering proceeds. As
described by one of the interviewees in the study, the advent of video games also reveals
how the methods of money laundering have changed. As a former employee of Sony Online
Entertainment, the participant recalls the company going through a case where it detected
one of its users is moving large amounts of funds from an account in the USA to the one in
Russia through online games with the mode of purchasing multiple virtual items that are
rare and difficult to obtain by users. Additionally, equity crowdfunding platforms are easy
targets as they can act as tools to facilitate money laundering activities. For example, the
distributor of an illegal product such as unregistered firearms and narcotics can develop a
JMLC fake company and market that organizations’ securities on an equity platform. To date,
25,2 money laundering activities have devastating impacts on the state and businesses’
economy. For example, according to the International monetary fund, dirty money
legalization affects major changes in the demand for money, volatility of international
capital flows and increases distrust of banks. To sum up, digital technology has opened up
opportunities for cybercriminals and other organized criminal syndicates to conduct
342 financial crimes. However, this technology can also gain leverage against them and mitigate
the money laundering schemes. Artificial intelligence is the best method of dealing with
financial crimes in the digital era, including cyber laundering. The AML solution that uses
artificial intelligence will greatly help financial analysts automate the search process, map
and link an individual’s or company’s suspicious activities in the long run.

6. Conclusions and recommendations

Overall, people in Europe and worldwide live in an ever-expanding digital world. Criminals use the
latest technology to exploit companies’ vulnerabilities to orchestrate serious crimes, including cyber
laundering where they are not bound by data protection or national borders. It is futile to use
traditional techniques to fight cyber laundering schemes. It is nearly impossible for financial
institutions to monitor, detect and regulate transaction violations. With digital payment systems
now becoming the norm in society, cybercriminals have been able to launder money using
conventional methods as transactions transparent in a matter of milliseconds. Even in a world
operating in batch, AML systems generate too many false positives, heavily impacting banks and
financial investigation units due to the heavy workload required. To detect and prevent new money
laundering methods in this digital age, it is necessary to attract financial institutions such as the
Central Bank, which has the required expertise in the area under study. Moreover, the court should
have the right to investigate accounts that it deems as having suspicious activities. Therefore, the
paper suggests that more research be conducted to determine the new ways money laundering is
taking place in the digital age and how individuals and organizations in the different economic
sectors can remain vigilant online. Crowdfunding sites are easy to access, are user-friendly and have
not yet incorporated anti-fraud and AML systems, which makes it the perfect environment for
cybercriminals to get their dirty money laundered without the risk of detection.

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Further reading
Etikan, I. and Bala, K. (2017), “Sampling and sampling methods”, Biometrics and Biostatistics
International Journal, Vol. 5 No. 6, p. 00149.

Corresponding author
Christoph Wronka can be contacted at: cwronka@deloitte.de

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