Money laundering in the time of Covid-19

By Christina Poursanidou, Lawyer

The rapid and massive spread of the Covid-19 around the world had a dramatic effect on both global health and economy. At a time when governments were focusing on designing the most effective measures to prevent the spread of the Coronavirus and all other sectors have been suspended, financial crime and especially money laundering was "blooming".

Despite the fact that both the European Commission and Financial Crimes Enforcement Network (FinCEN) had warned competent authorities, credit institutions and other obliged entities of the increased volume of money laundering during similar crises in the past, the latter did not act accordingly. Ongoing criminal investigations in banks were suspended, many countries such as the United Kingdom have extended the deadlines for submitting Annual Company Accounts, while other have relaxed supervision, reporting deadlines and due diligence requirements. These decisions had as a result the lack of transparency, which is one of the most important factors in the fight against money laundering. In the same time, the fact that more and more staff of companies and credit institutions worked in a part time basis or remotely resulted in a delay in AML procedures, while due to the remote working the compliance officers had no access to encrypted and fragmented files, which occurred even more difficulties for the efficient combat of money laundering.

The above measures activated fraudsters and money launderers, who, taking advantage of the current situation, proved once again that even a global crisis is not capable of limiting the illicit financial flow. This time, the establishment of a huge number of charities, acting as intermediaries between individuals who made donations for the purchase of medicines, masks and the scientific research against the Coronavirus, in combination with the increase of unemployment due to the pandemic contributed to the creation of a new form of "money mules". How the “money mules” transfer the “dirty” money this time? Recently incorporated charitable organizations recruited staff, which staff was asked to receive illicit money under the guise of donations, in their personal bank accounts. Following, they were asked to withdraw these donations as cash and deposit them in certain bitcoin ATM. Obviously, the “donations” were made by the money launderer and the Bitcoin wallet to which the “donations” were deposited was controlled by the him, as well. As a result, the illicit money were placed into the legitimate financial system via an irreversible transaction.

As a conclusion, the ingenuity, but mainly the adaptability of money-launderers in extraordinary circumstances can be addressed by the competent authorities with corresponding adaptability to the current digital world. Financial authorities and the compliance departments of the credit institutions and companies shall use the legal digital technology in their screening and monitoring reviews, have the bots to complete tedious tasks, such as collecting vast amount of data for KYC procedures and in the same give to their staff the opportunity to focus in work, requiring human judgment. Technology plays a pivotal role in the attempt to regulate and stop money laundering in general, but even more during such crisis periods.