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The BBC's Mary Gahan
"Internet banks and casinos have become the new haven for criminal gangs"
 real 28k

Friday, 2 February, 2001, 17:36 GMT
Money laundering in cyberspace
Online banks and casinos are used by criminals to hide cash
International experts on money laundering say the internet is especially vulnerable to abuse by criminals
by BBC News Online's David Schepp

In a tactic as old as banking itself, criminals have always used banks as a sure-fire way to launder money gained through illegal means.

But with the advent of internet banking, "following the money" to locate and prosecute money launderers and criminals has become more difficult than ever.

Money laundering, which involves disguising the origins of illegally obtained cash and then transforming it into apparently legitimate investments, is bolstered by the near anonymity that can sometimes be achieved through internet communication.

Internet banks allow for access to accounts from anywhere in the world
Internet banks allow for access to accounts from anywhere in the world
"A potential risk exists at any stage of the contact between a new customer and a financial institution," says a report issued Thursday by the Financial Action Task Force (FATF).

But, the group says, in the case of internet banking, the difficulties "are increased if the procedures for opening [accounts] are permitted to take place without face-to-face contact..."

International access

FATF, set up by the G7 group of major industrialised nations, also noted that worldwide access further complicates detection of fraud.

It is not always clear whether an account is accessed from a country other to where the money is held, and account managers may simple be too busy to monitor all the activity of individual account holders.

Gambling with illegal cash

It isn't just online banks that are vulnerable. Internet-based gambling operations can also act as a haven for illegal cash-washing operations.

The FATF said there is evidence that criminals are using online casinos to commit crimes and launder the proceeds.

Aside from the problems inherent in internet banking, online casinos further complicate tracking of questionable transactions because gambling records are software based and at the gambling site - often located offshore.

That makes evidence gathering more difficult because the records are harder to find and may not exist at all.

Combatting cyber crime

In issuing its report, the FATF said countries could take several measures to counter money laundering. They include:

  • Requiring internet service providers to maintain accurate and thorough subscriber information
  • Require the establishment of log files, showing access and telephone number identity
  • Ensure that information is made available internationally
The report on the potential of internet fraud coincided with one on the progress that the G7 has made to counter countries harbouring money-laundering schemes, among them Israel, Panama and the Bahamas.

In June, members of the G7 group of industrialised nations published a list of countries that made money laundering easy, and threatened tough action and sanctions if their governments failed to join international efforts to crack down on the criminals.

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See also:

22 Jun 00 | Business
Suspect financial centres named
30 Mar 00 | Americas
US regulators fight internet fraud
24 Mar 00 | Business
US leads internet fraud sweep
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