Tamara Tanaskovic/ June 28, 2020/ Uncategorized

There are three stages involved in money laundering: placement, layering and integration.  Micro-money laundering follows the same principle, but on a much smaller scale.

As soon as money launderers receive incriminated money, they place it in letterbox companies, which are companies that only exist on paper and not physically. However, most criminals become conspicuous in this first stage (placement), as depositing large sums of money in accounts with no verifiable source seems suspicious if not done carefully. Once placed, the money undergoes multiple transactions so that the original illegal source cannot be traced (layering). Finally, the laundered money is reintegrated into legal financial transactions (integration).

However, with stronger controls on traditional financial transactions and more effective systems to identify fraud and money laundering, criminals are increasingly looking for new ways to launder money. Frequently, digital channels and online platforms offer loopholes to escape the attention of law enforcement and regulatory agencies.

Recently, micro-transactions have been observed more frequently. Transactions that are so small that they fall below the radar of common thresholds. Those micro-transactions are small payments that are often in the almost insignificant range of € 1.00-10.00. However, when thousands of such small electronic payments are initiated through platforms such as PayPal, a significant amount of money can be involved.

How does Micro-Money Laundering work?

Online job markets with fiduciary services such as Freelancer and Fiverr can be misused for money laundering to disguise transactions through a financial agent system:

Thereby, money launderers create an account to make a fake job request, in which they search for a service that is offered for a certain fee. Meanwhile, they log on to the same freelancer website with a different IP address and a different user account to respond to their own job offer. Then, the amount for the advertised work is paid to the platform before it is paid to the person supposedly providing the service. Finally, the first account can then select the second account to perform the pretended service. Afterwards the marketplace will be informed to release the amount for the second account.

Fortnite, one of the most popular games in the world, was misused for similar practices not long ago. Here, the game was used to launder money by using stolen credit cards to buy and sell play money. The process is remarkably simple: Stolen credit card information is used to create a Fortnite account to purchase V-Bucks (the payment currency within the game). Once the in-game account is restocked, this currency will be offered for sale to other players via popular platforms such as eBay or the Dark Web. There the purchase price is lower than in the game itself, which favors the purchase of the game currency.

However, most providers of online games prohibit currency transactions in the game. But, since the action is not a crime per se, there is no continuous monitoring of such actions. In addition to Fortnite, Minecraft, FIFA, World of Warcraft, Final Fantasy, Star Wars Online, GTA 5 and many other providers of online and app games are also affected.  

The impact of micro-money laundering

The global reach of applications, messaging systems and games has developed much faster than businesses, governments and corporations can keep up with the new digital fraud and money laundering networks.

The big change in recent years is that money launderers now like to launder their money in much smaller amounts and more often, due to the ease of digital transactions and the lower probability of detection, rather than putting illegally acquired funds into larger ventures. This way, criminals can spread the risk of being tracked down to thousands of smaller, more mundane, and therefore supposedly unremarkable transactions. With micro-money laundering, we see a new form of money laundering threat whose risks must be recognized by supervisory authorities, payment service providers and companies before criminals can benefit.  This also means that stricter processes and increased use of technology are essential to identify potential money laundering and uncover the individuals or organizations behind it. 

Foto: Jonathan Brinkhorst / unsplash

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Tamara Tanaskovic

About Tamara Tanaskovic

Tamara Tanaskovic is a Senior Consultant with targens GmbH. After her university degree with the focus on criminal law, postgraduate studies in London in the fields of competition law, bank regulation and compliance followed. She is currently project manager within the product SMARAGD MDS and therefore responsible for the creation and optimization of rulesets in coordination with the respective department of the customer company. Furthermore, the specialist review and the determination of legal and regulatory requirements to the SMARAGD Compliance Suite are part of her core competences.