Glossary Category: AML & Financial Crime

Targeted financial sanctions are restrictions aimed at specific named individuals and entities, rather than whole countries. They usually mean freezing the target’s assets and banning any dealings with them, and firms comply mainly through sanctions screening. Key takeaways Targeted financial sanctions hit specific named people and entities. They usually freeze assets and ban any dealing with the target. They differ from broad sanctions aimed at whole countries. They are used heavily against terrorism and weapons proliferation. Bodies such as the UN Security Council and OFAC impose them. Firms comply through sanctions screening. On this page What they areTargeted vs broadWhat they involveWho imposes themTerrorism and proliferationHow firms complyThe challengeHow firms manage itFAQsRead more 2001 Year the FATF added targeted sanctions duties after 9/11 Source: FATF $8.9B Largest US sanctions penalty, BNP Paribas 2014 Source: US Department of Justice $800B to $2T Laundered worldwide each year that sanctions help disrupt Source: UNODC What are targeted financial sanctions? Targeted financial sanctions are restrictions aimed at named individuals, groups, and entities, rather than an entire country. They single out specific targets, such as a terrorist, an arms dealer, or a company linked to a weapons program. The core effect is simple: the target’s assets are frozen, and no one may provide them with funds or economic resources. In practice, this cuts the target off from the financial system. For firms, the duty is to find and stop any dealing with these targets. Read more: that is done through sanctions screening. Targeted sanctions vs broad sanctions Sanctions come in two broad shapes, and the difference matters. One aims at a whole country, the other at specific people. Broad, or comprehensive, sanctions restrict dealings with an entire country, such as a full trade embargo. Targeted financial sanctions, sometimes called smart sanctions, aim only at named individuals and entities. The idea behind targeting is to pressure the people responsible while sparing an ordinary population from the worst effects. Targeted sanctions Broad sanctions Aimed at Named people and entities A whole country Effect Freeze specific targets’ assets Restrict a country’s economy Also called Smart sanctions Comprehensive sanctions Most modern sanctions are targeted, because they focus pressure where it is meant to land. What targeted financial sanctions involve For the parties who must apply them, targeted financial sanctions come down to a few clear prohibitions. Each closes off a route the target could use. Asset freezes. Any funds or assets the target holds are frozen and cannot be moved. A ban on providing funds. No one may make funds or economic resources available to the target. No dealing. Firms must not process transactions for or with the target. Reporting. Firms must report any assets or attempted dealings they find. The aim is total: to leave the target with no way to use the financial system. Who imposes targeted financial sanctions Several bodies impose targeted financial sanctions, and firms often have to check against all of them. The main sources overlap but are not identical. The United Nations Security Council agrees sanctions that member states apply worldwide. The US Office of Foreign Assets Control runs an extensive program through its list of designated parties, and the EU and UK maintain their own. The global standard-setter, the FATF, requires countries to enforce targeted financial sanctions relating to terrorism and proliferation through its Recommendations 6 and 7. Terrorism and proliferation Targeted financial sanctions are used most heavily against two threats: terrorism and the spread of weapons. This is where the tool does its most important work. Against terrorism, the aim is to freeze the assets of terrorists and their backers, cutting off the money that funds attacks. Against proliferation, sanctions target those linked to weapons of mass destruction. The FATF’s Recommendations 6 and 7 cover exactly these two areas, which is why proliferation financing and terrorism are so closely tied to the sanctions system. Screen against sanctions lists Run one search across sanctions, PEP, and adverse media data to check a customer or payment against designated parties. Try Combined AML Screening → How firms comply For a firm, complying with targeted financial sanctions is mostly about screening. The duty is to make sure it never deals with a designated party. Screen customers. Check names against the relevant sanctions lists at onboarding. Screen payments. Check transactions for links to designated parties. Freeze and stop. If there is a match, freeze the assets and halt the dealing. Report. Tell the authorities about any match or frozen asset. Do this: weigh a counterparty’s country risk with our Country Risk Checker. The challenge of compliance Complying sounds simple but is harder in practice. Two problems make it difficult. The first is false positives: many people share names with sanctioned parties, so screening throws up matches that turn out to be innocent, each needing review. The second is change: sanctions lists are updated constantly as parties are added and removed, so a firm must keep its screening current. A list checked last month may already be out of date. Worth knowing. Targeted financial sanctions carry strict liability in many regimes, meaning a firm can breach them without meaning to. Processing a single payment for a designated party, even by mistake, can be a violation. This is why screening has to be thorough and current, and why the largest sanctions penalties have run into billions of dollars. How firms manage sanctions risk Managing sanctions risk well means screening thoroughly, staying current, and handling matches with care. A few priorities matter most. Use current lists. Screen against up-to-date sanctions data. Screen at the right points. Check at onboarding and for every payment. Resolve matches carefully. Review each hit rather than dismissing or over-blocking. Act fast on a true match. Freeze, stop, and report without delay. Getting this right is as much about people and process as it is about technology. A screening system flags the matches, but trained analysts decide which are real, and clear escalation routes make sure a genuine hit reaches the right person quickly. … Read more

Predicate offence list A predicate offence list sets out the underlying crimes whose proceeds can form the basis of a money laundering charge. The Financial Action Task Force maintains the reference version: 21 designated categories, covering everything from drug trafficking to insider trading. Individual countries then decide how broadly to apply the concept, and some go well beyond FATF’s list. Key takeaways A predicate offence is the underlying crime that generates proceeds someone then tries to launder. FATF’s General Glossary sets out 21 designated categories, from drug trafficking to insider trading. The list is a floor, not a ceiling. Countries can criminalise laundering tied to offences well beyond it. The UK takes an “all crimes” approach instead of a defined list, treating any criminal conduct as a potential predicate. FATF only formally added tax crimes to the designated categories in its 2012 standards revision. A shared predicate offence list makes dual criminality easier to establish in cross-border asset recovery cases. On this page What a predicate offence actually isFATF’s 21 designated categoriesWhy the list isn’t exhaustiveThe “all crimes” approach vs a defined listTax crimes: the most contested additionHow the list affects what gets reportedPredicate offences and international cooperationWhere this shows up in a firm’s risk assessmentFAQsRead more 21 Designated categories of predicate offences set out in FATF’s General Glossary Source: FATF 2012 Year FATF formally added tax crimes to the designated categories Source: FATF standards revision, via IMF What a predicate offence actually is A predicate offence is the crime that generates the proceeds someone then tries to launder. Without a predicate offence, there’s no dirty money to clean. Money laundering is, by definition, a crime that depends on another crime having happened first. Drug trafficking is the classic example, and historically the one AML law was built around. The concept now spans a much wider range of criminal activity, from tax evasion to wildlife trafficking, which is exactly what FATF’s designated categories try to capture. FATF’s 21 designated categories FATF’s General Glossary sets out 21 designated categories of offences that, at minimum, countries are expected to treat as predicate offences to money laundering: Participation in an organised criminal group and racketeering Terrorism, including terrorist financing Trafficking in human beings and migrant smuggling Sexual exploitation, including sexual exploitation of children Illicit trafficking in narcotic drugs and psychotropic substances Illicit arms trafficking Illicit trafficking in stolen and other goods Corruption and bribery Fraud Counterfeiting currency Counterfeiting and piracy of products Environmental crime Murder, grievous bodily injury Kidnapping, illegal restraint and hostage-taking Robbery or theft Smuggling Tax crimes, related to direct and indirect taxes Extortion Forgery Piracy Insider trading and market manipulation That’s a genuinely wide net. It reflects FATF’s core position, set out under Recommendation 3, that money laundering law should apply as broadly as possible, not just to a narrow set of obviously serious crimes. Why the list isn’t exhaustive The 21 categories are a floor, not a ceiling. FATF is explicit that this is a convenient categorisation for comparing countries, not a fixed, exhaustive list. Countries are free, and in many cases expected, to criminalise laundering tied to offences well outside these categories too. The European Union’s Sixth Anti-Money Laundering Directive, for example, added cybercrime as an additional predicate offence category, something not explicitly named in FATF’s original 21. The “all crimes” approach vs a defined list Some jurisdictions don’t use a list at all. The UK’s Proceeds of Crime Act 2002 takes what’s often called an “all crimes” approach: criminal property is property that represents the proceeds of any criminal conduct, full stop, rather than a defined set of qualifying offences. Other countries prefer a defined list precisely because it gives prosecutors and financial institutions a clearer, more predictable standard to work against. Both approaches trace back to the same FATF standard; they just implement the “as broad as possible” instruction differently. Tax crimes: the most contested addition Tax crimes are worth calling out specifically, because their inclusion was contested and relatively recent in AML history. FATF only formally added tax crimes to the designated categories as part of its 2012 standards revision, after years of debate about whether tax evasion should count as a money laundering predicate at all, separate from straightforward financial crime. The addition matters in practice. It means proceeds of tax evasion, not just fraud or bribery, can now trigger money laundering reporting obligations in countries that implement it, which significantly widened the scope of what compliance teams need to watch for. Worth knowing. Tax crimes weren’t always treated as a money laundering predicate. FATF only formally added them to the designated categories in 2012, after years of debate, which significantly widened what compliance teams need to watch for. How the list affects what gets reported For a compliance team, the predicate offence list isn’t academic. It shapes what a suspicious activity report actually needs to identify: not just that a transaction looks unusual, but what underlying criminal conduct it might connect to, even if that connection is only suspected rather than proven. Firms don’t need to prove a specific predicate offence occurred before filing a SAR. Reasonable suspicion is enough. But understanding the range of offences that count helps analysts recognise patterns tied to less obvious predicate crimes, environmental crime or market manipulation, for instance, that a narrower mental model built only around drug trafficking would miss. Predicate offences and international cooperation The list also does quiet work in international cooperation. When one country asks another for help freezing or seizing assets, dual criminality, the requirement that the underlying conduct be a crime in both countries, is often part of the test. A shared reference list of predicate categories makes it easier for countries with different legal systems to agree that a given case actually qualifies. That’s part of why FATF pushes for broad, consistent adoption of the categories, even though implementation still varies by country. Where this shows up in a firm’s risk assessment In a firm’s own risk assessment, the … Read more

Commingling is the mixing of illicit money with legitimate funds, so the dirty money is hidden among honest revenue. It is a common laundering technique, often used through cash businesses, and it makes criminal proceeds hard to tell apart from clean income. Key takeaways Commingling is mixing dirty money with legitimate funds. The goal is to hide illicit money among honest revenue. It is often done through cash-intensive businesses. Mixed funds are hard to separate, which disguises the criminal money. It is a layering and integration technique in money laundering. Detecting it means spotting revenue that does not fit the business. On this page What it isHow it worksCash-intensive businessesA laundering techniqueWhy it is hard to detectExamplesRed flagsHow firms detect itFAQsRead more $800B to $2T Laundered worldwide each year, some through commingled funds Source: UNODC 1989 Year the FATF set the global AML standard Source: FATF 1970 Year the US Bank Secrecy Act framework began Source: FinCEN What is commingling? Commingling is mixing money from crime with money from a legitimate source, so the two become hard to tell apart. Once dirty cash is blended into a genuine flow of income, it looks like part of that honest income. The word simply means mixing together. In money laundering, it is a way of hiding illicit funds in plain sight, by folding them into revenue that has an innocent explanation. It is one of the more effective disguises a launderer has. Read more: it is a technique within the money laundering typologies. How commingling works Commingling works by giving dirty money a legitimate-looking home. The mechanics are simple, which is part of why it is so common. A criminal who controls a business with real income can add dirty cash to that income and report the total as earnings. On paper, the money now comes from the business. Separating the illicit portion from the genuine takings becomes very difficult, because they have been mixed into a single stream. The business, in effect, launders the money by absorbing it. The scale a launderer can push through depends on the business itself. A small shop can only absorb so much before its numbers start to look absurd, while a large cash operation can swallow far more without raising questions. Criminals often choose businesses whose genuine takings are big enough to hide the sums they need to clean, which is why some legitimate-looking firms are quietly built for exactly this purpose. Commingling and cash-intensive businesses Commingling works best through businesses that already handle a lot of cash. These give the perfect cover. A cash-intensive business such as a restaurant, car wash, or bar takes in cash as a matter of course, so extra cash does not look out of place. A launderer can add dirty money to the daily takings and report inflated revenue. Because the real income is already in cash and hard to verify precisely, the mixed-in criminal money is hidden inside it. This is why cash businesses are so often linked to laundering. Get an indicative AML risk rating See where your money laundering risk is concentrated, including cash-business exposure. Try the AML Risk Assessment → A laundering technique Commingling sits in the middle and later stages of laundering, where the aim is to disguise the origin of money. It plays a role in both layering and integration. In layering, commingling helps break the link between money and its criminal source by mixing it into other funds. In integration, it lets the money re-enter the economy as apparently legitimate business income. Either way, the technique blurs the line between clean and dirty, which is exactly what a launderer wants. Why commingling is hard to detect Commingling is difficult to catch precisely because it hides money among genuine transactions. There is no separate dirty stream to find. When illicit funds are mixed into real revenue, there is no single suspicious transaction that stands out. The criminal money is spread through ordinary-looking income, and separating it requires understanding what the business should genuinely be earning. Without that baseline, inflated but plausible revenue can pass as real, which is what makes commingling so effective. A quiet method leaves little to find, and commingling is about as quiet as laundering gets. Worth knowing. The strength of commingling is that it does not create an obvious anomaly. Many laundering methods leave a trace, an odd transfer or a suspicious counterparty, but commingled money simply looks like more of the same honest revenue. This is why detecting it often depends less on any single transaction than on judging whether a business’s overall income makes sense for what it actually does. Examples of commingling Commingling shows up wherever a legitimate business can absorb extra cash. A few examples make the pattern clear. A restaurant. Dirty cash added to daily food and drink takings. A car wash. Criminal money reported as extra customer payments. A retail shop. Illicit funds mixed into sales revenue. A cash service business. Dirty money blended into genuine fees. In each case, the business has a real income that provides cover, and the criminal money hides inside it. Red flags of commingling Because commingling hides in normal revenue, the red flags are about mismatch rather than any single transaction. A few stand out. Revenue that does not fit. Income too high for the size or location of the business. Unusual cash ratios. More cash than the business type would normally generate. Inconsistent records. Takings that do not match customer numbers or activity. Sudden growth. Reported income rising without a clear business reason. The common thread is income that looks wrong for what the business actually does. How firms detect commingling Detecting commingling means looking at the whole picture of a business rather than single transactions. A few approaches help. Understand the business. Know what the customer genuinely does and should earn. Compare to peers. Judge revenue against similar businesses. Watch cash ratios. Question cash levels that do not fit the business type. Investigate mismatches. … Read more

AML governance is the structure of oversight and accountability that sits above a firm’s anti-money laundering program. It sets who is responsible, how decisions are made, and how the board oversees financial crime risk. Weak governance is behind most major enforcement cases. Key takeaways AML governance is the oversight and accountability layer above the program. It makes the board and senior management responsible for financial crime risk. A common model is the three lines of defense. Good governance needs clear roles, reporting, escalation, and a healthy culture. The TD Bank case in 2024, about $3 billion, was at heart a governance failure. It differs from the AML program, which is the controls governance oversees. On this page What it isWhy it mattersWho is responsibleThree lines of defenseKey elementsAccountabilityBoard reportingSigns of weaknessHow to strengthen itFAQsRead more $3B Paid by TD Bank in 2024 after governance and control failures Source: US Department of Justice 1989 Year the FATF set the standard governance supports Source: FATF $800B to $2T Laundered worldwide each year that governance aims to stop Source: UNODC What is AML governance? AML governance is the way a firm oversees and takes responsibility for its anti-money laundering effort. It is the layer of leadership, roles, and oversight that sits above the day-to-day controls. Where the program is the machinery, governance is the steering and the accountability. It answers who is in charge, how decisions get made, and how the board keeps sight of financial crime risk. It is a distinct idea from the program itself. Read more: governance oversees the AML compliance program rather than being the program. Why AML governance matters Governance matters because most failures are failures of oversight, not of technology. When something goes wrong, regulators ask who was accountable and whether leadership was watching. The TD Bank case in 2024 is the clearest recent example. The firm left whole transaction types unmonitored, and about $3 billion in penalties followed, a breakdown that stronger oversight should have caught (US Department of Justice, 2024). Good governance also sets the tone. When leadership treats financial crime risk seriously, the rest of the firm tends to follow. Get an indicative AML risk rating See where your money laundering risk is concentrated so leadership can oversee it with real information. Try the AML Risk Assessment → Who is responsible for AML governance? Responsibility runs from the top down, and it cannot be delegated away. Three groups carry it. The board. Sets the tone, approves the program, and holds management to account. Senior management. Owns the program, funds it, and answers to the board and regulator. The MLRO or compliance officer. Runs the program day to day and reports upward. See the MLRO role. Regulators hold leadership accountable for failures, which is why board-level ownership is the heart of good governance. The three lines of defense A common way to organize AML governance is the three lines of defense. It clarifies who does what, so nothing falls through the gaps. Line Who Role First line The business Owns the risk it creates and applies front-line checks Second line Compliance and the MLRO Sets rules, reviews alerts, and advises Third line Internal audit Tests that the first two lines work The model is not a legal requirement, but it gives a firm a clear structure and helps show a regulator that oversight is deliberate. Key elements of AML governance Sound governance rests on a few building blocks. Each keeps oversight real rather than nominal. Clear roles. Named owners for each responsibility, not vague teams. Management information. Regular, useful reporting so leadership can see the risk. Escalation. A defined path for concerns to reach decision-makers quickly. Board oversight. Regular review and challenge of the program at a senior level. Culture. A tone from the top that treats financial crime risk as everyone’s job. Worth knowing. The quiet test of AML governance is what happens to bad news. In a firm with strong governance, a front-line worker’s concern reaches a decision-maker quickly and is acted on. In a weak one, it dies in an inbox. Regulators increasingly probe that path, because it reveals whether oversight is real. Governance and personal accountability Accountability has grown sharper as regulators pursue individuals, not just firms. The message is that someone must own the risk. In the UK, the Senior Managers and Certification Regime ties named individuals to specific responsibilities, including financial crime. Similar expectations apply elsewhere, and an MLRO can be held personally responsible for failures. This makes clear ownership more than good practice. It is a protection for the individuals in the roles as much as for the firm. Start your AML policy in minutes Generate a tailored AML policy draft that sets out roles and oversight, ready for your board to review. Open the AML Policy Generator → Board reporting and management information Governance lives or dies on the information that reaches the top. A board can only oversee financial crime risk if it sees the risk clearly and in good time. Useful management information is more than a pile of numbers. It should tell leadership where the risk sits, what is changing, and what needs a decision. A report that lists alert counts without explaining what they mean does not help a board govern. Risk trends. How the firm’s financial crime risk is moving, not just a snapshot. Program health. Whether controls are working, with gaps flagged honestly. Key decisions. Matters that need the board’s attention or sign-off. Incidents and lessons. What went wrong and what changed as a result. The best boards ask hard questions of this information rather than accepting assurances. That challenge is a large part of what oversight actually means. Signs of weak AML governance Weak governance shows up in a few recognizable ways. Spotting them early is the point. No clear owner. Responsibility is spread so thin that nobody really holds it. A silent board. Leadership never reviews or challenges the program. Poor reporting. Management information is thin, late, or … Read more

Beneficial ownership transparency means knowing who really owns or controls a company, not just the names on the paperwork. It is a defense against criminals hiding behind shell companies, and it is driven by rules such as the FATF standard and the US Corporate Transparency Act. Key takeaways Beneficial ownership transparency reveals who really controls a company. A beneficial owner is the real person behind a legal entity, not a nominee. It is the main defense against criminals hiding behind shell companies. The Panama Papers exposed more than 11 million documents on offshore companies. Rules include the FATF standard, the US Corporate Transparency Act, and public registers. Most rules define a beneficial owner as someone holding more than 25 percent. On this page What it isWhat a beneficial owner isWhy it mattersThe problem it solvesRules and registersHow firms verify itChallengesWhy it strengthens AMLFAQsRead more 11.5 million Documents exposed in the Panama Papers leak Source: ICIJ, 2016 $800B to $2T Laundered worldwide each year, often through hidden ownership Source: UNODC 1989 Year the FATF was founded to set the global standard Source: FATF What is beneficial ownership transparency? Beneficial ownership transparency is the principle that the real people behind a company should be known. It looks past the names on a registration document to whoever actually owns or controls the business. The idea matters because companies can be used to hide people. A criminal can sit behind layers of firms and nominees, so knowing the true owner is what breaks that cover. It has become a central plank of financial crime rules worldwide. Read more: the person it reveals is the beneficial owner. What is a beneficial owner? A beneficial owner is the real person who ultimately owns or controls a company, even if their name is not on the paperwork. It is a person, never another company. Ownership can be direct, through shares, or indirect, through a chain of companies or a nominee who holds the shares for someone else. Control can also come without ownership, for example through the power to appoint directors. Most rules set a threshold, commonly more than 25 percent ownership or voting rights, above which someone counts as a beneficial owner. Why beneficial ownership transparency matters Transparency matters because hidden ownership is the engine of much financial crime. Anonymous companies let criminals move and hold money without a face attached. They are used to launder the proceeds of crime, evade sanctions, hide corrupt wealth, and dodge tax. A shell company with an unknown owner is one of the hardest things for an investigator to see through. Knowing the real owner turns an anonymous structure into an accountable one, which is why regulators have pushed hard on it. Screen a company’s people and links Run one search across sanctions, PEP, and adverse media data to check the people behind a company. Try Combined AML Screening → The problem it solves The scale of hidden ownership became clear through a series of leaks. They showed how widely anonymous companies are used. The Panama Papers, published in 2016, exposed more than 11 million documents from a single offshore law firm, covering more than 200,000 offshore entities (ICIJ, 2016). Later leaks told a similar story. Much of the activity was legal, but the leaks showed how easily the same tools can hide crime. Beneficial ownership rules are the direct response: if owners must be known and recorded, the hiding place shrinks. Weigh the country risk behind a company Look up a country against corruption and financial crime data before you take on a company from there. Try the Country Risk Checker → Key rules and registers Several rules and registers now push for beneficial ownership transparency. They differ by country, but the direction is shared. FATF standard. The global standard-setter requires countries to make beneficial ownership information available to authorities. US Corporate Transparency Act. Created a requirement for many companies to report their beneficial owners to FinCEN, though its scope and enforcement have faced legal challenges. EU registers. EU anti-money laundering rules require beneficial ownership registers, with access rules that have shifted over time. UK PSC register. The register of People with Significant Control lists the real owners of UK companies. The trend across all of these is the same: away from anonymity and toward recorded, checkable ownership. How firms verify beneficial ownership For a firm onboarding a company, verifying ownership is part of due diligence. It goes beyond taking a name on trust. Identify the owners. Ask for the ownership structure and the people behind it. Check the chain. Follow ownership through any intermediate companies to the real people. Verify identity. Confirm the beneficial owners as part of customer due diligence. Apply extra checks. Use enhanced due diligence for complex or high-risk structures. Keep it current. Re-check ownership when it changes. Do this: weigh the country risk behind a company with our Country Risk Checker. Worth knowing. The 25 percent threshold has a weakness criminals exploit. By splitting ownership into slices just under the line, held by different parties, a structure can be built where no single person has to be named as a beneficial owner. Good checks look past the percentages to who actually controls the company. Challenges of beneficial ownership transparency Transparency is easier to require than to achieve. A few problems get in the way. Data quality. Registers are only as good as the information filed, which is not always accurate. Complex structures. Ownership across many countries and layers is hard to unravel. Threshold gaming. Splitting ownership to stay under reporting limits. Access limits. Some registers are not fully open, which slows checks. These challenges mean a register is a starting point, not the whole answer. Firms still need to verify for themselves. Why it strengthens AML Beneficial ownership transparency strengthens anti-money laundering by removing the anonymity that laundering depends on. When owners are known, the classic hiding tactics get harder. It supports customer due diligence by giving firms real people to check, and … Read more

Environmental crime covers offenses against the natural world, such as illegal logging, wildlife trafficking, illegal mining, and waste trafficking. It is one of the most profitable forms of crime, and a major source of proceeds that then need laundering. Key takeaways Environmental crime is offenses against the natural world. It includes illegal logging, wildlife trafficking, mining, fishing, and waste. It is one of the most profitable forms of transnational crime. It is a predicate offense that generates money to launder. The FATF has made it a growing anti-money laundering focus. Its proceeds are often laundered through trade and shell companies. On this page What it isTypesScale and profitA predicate offenseHow the money is launderedA growing AML focusRed flagsHow firms address itFAQsRead more $91 to $258B Estimated value of environmental crime each year Source: UNEP-INTERPOL 4th Largest criminal enterprise worldwide, by value Source: UNEP-INTERPOL $800B to $2T Laundered worldwide each year, some from environmental crime Source: UNODC What is environmental crime? Environmental crime is crime that harms the natural world for profit. It covers a range of offenses, from cutting down protected forests to trafficking endangered animals, all driven by the money to be made. For years it was treated as a lesser issue, a matter for conservationists rather than financial investigators. That has changed. Environmental crime is now recognized as a serious, organized, and hugely profitable form of crime, with all the dirty money that implies. It has become a real concern for anti-money laundering. Read more: it is a growing category of financial crime in its own right. Types of environmental crime Environmental crime spans many activities, united by the illegal exploitation of nature. The main categories are wide-ranging. Illegal logging. Cutting and trading timber in breach of the law. Wildlife trafficking. Trading protected animals and their parts, such as ivory. Illegal mining. Extracting minerals and metals, such as gold, unlawfully. Illegal fishing. Taking fish in breach of quotas and protections. Waste trafficking. Illegally dumping or trading hazardous waste. Each generates significant proceeds, and each has been linked to organized crime networks operating across borders. The scale and profit of environmental crime The scale of environmental crime is far larger than many realize. It is big business for the criminals who run it. The UNEP and INTERPOL estimated the value of environmental crime at $91 to $258 billion a year, making it one of the largest criminal enterprises in the world, ranking fourth after drug trafficking, counterfeiting, and human trafficking. Illegal gold mining, wildlife trafficking, and timber crime each run into the tens of billions. These are not marginal activities; they are major, profitable crimes. Environmental crime as a predicate offense For anti-money laundering, the key point is that environmental crime is a predicate offense. It generates money that then has to be laundered. Like drug trafficking or fraud, environmental crime produces large criminal proceeds. Those proceeds are dirty money, and criminals must clean them to use them, which brings environmental crime squarely into the AML system. Treating it as a predicate offense means the proceeds of illegal logging or wildlife trafficking can be pursued as laundering, opening a financial front against these crimes. Screen a customer or counterparty Run one search across sanctions, PEP, and adverse media data to check a party in a high-risk trade. Try Combined AML Screening → How environmental crime money is laundered The proceeds of environmental crime are laundered much like those of other crimes, often through trade and companies. A few routes are common. Criminals frequently mix illegal products, such as unlawfully logged timber or illegally mined gold, into legitimate supply chains, so the proceeds look like honest trade. Shell companies help disguise ownership and move money, and trade-based methods hide value in the flow of goods. Illegal gold mining, in particular, has become a favored way to launder money, because gold is valuable, portable, and easy to blend into legitimate markets. Because these routes run through ordinary trade and companies, the dirty money can be hard to tell apart from honest commerce, which is exactly why it slips through when firms are not looking for it. A growing AML focus Environmental crime has moved up the anti-money laundering agenda, and fast. Regulators and standard-setters now treat it as a priority. The FATF has highlighted money laundering from environmental crime and urged countries and firms to treat it seriously, reflecting the scale of the proceeds involved. This means financial institutions are increasingly expected to consider environmental crime in their risk assessments and monitoring, looking at the sectors and flows where its dirty money is likely to appear. It is no longer only a conservation issue; it is a financial crime priority. That shift has pulled banks and their compliance teams into a fight once left largely to rangers and customs officers. Worth knowing. Attacking environmental crime through its money is often more effective than chasing the physical crime alone. Seizing a shipment of illegal timber stops one load; following and freezing the proceeds can disrupt the whole network behind it. This is why treating environmental crime as a predicate offense, and pursuing the laundering, has become a powerful tool against some of the world’s most damaging criminal trades. Red flags of environmental crime Certain signs suggest a customer or transaction may be tied to environmental crime. Firms in exposed sectors watch for them. High-risk goods. Trade in timber, wildlife, gold, or waste from risky regions. Opaque supply chains. Goods whose origin cannot be clearly traced. Mismatched activity. Trade or payments that do not fit the stated business. High-risk geographies. Links to areas known for environmental crime. The common thread is value flowing from natural resources in ways that cannot be cleanly explained. How firms address environmental crime Firms address environmental crime by bringing it into their existing financial crime controls. A few priorities matter most. Assess the risk. Consider exposure to sectors linked to environmental crime. Know high-risk trades. Understand timber, wildlife, gold, and waste flows. Watch the geographies. Pay attention … Read more

A money service business (MSB) is a firm that transmits money, exchanges currency, or cashes checks. Because these services move money quickly and often in cash, criminals target them, so MSBs must follow anti-money laundering rules and register with regulators. Key takeaways A money service business transmits money, exchanges currency, or cashes checks. MSB is the term used in US regulation for these firms. They include money transmitters, currency exchanges, and check cashers. MSBs must register with FinCEN and follow full AML rules. Criminals target MSBs because they move money fast, often in cash. Many MSBs face de-risking, losing bank accounts over perceived risk. On this page What it isTypes of MSBWhy they are regulatedAML dutiesRegistrationThe de-risking problemMSB vs bankStaying compliantFAQsRead more 1970 Year the US Bank Secrecy Act, which covers MSBs, was enacted Source: US Bank Secrecy Act ~20% Fall in correspondent banking links from 2011 to 2019, hitting MSBs Source: Financial Stability Board $800B to $2T Laundered worldwide each year, some through money services Source: UNODC What is a money service business? A money service business is a company that provides money services rather than traditional banking. It moves money, changes one currency for another, or turns a check into cash, without being a bank. The term comes from US regulation, where MSBs are a defined category with their own rules. Many people use these firms every day to send money abroad or exchange currency for travel. Because they handle other people’s money, MSBs carry real AML duties. Read more: those duties flow from the Bank Secrecy Act. Types of money service business MSB is a broad label covering several kinds of firm. They share the trait of moving or converting money. Money transmitters. Firms that send money from one person or place to another, including remittance companies. Currency exchanges. Bureaux de change that swap one currency for another. Check cashers. Businesses that turn checks into cash for a fee. Money order and traveler’s check issuers. Firms that sell these instruments. Some crypto firms. In many places, exchanges that convert crypto to cash count as MSBs. A single firm can fall into more than one type. A corner shop that both cashes checks and sells money orders is an MSB on both counts. Why money service businesses are regulated MSBs are regulated because their services are attractive to criminals. The very features that make them useful, speed and cash, also make them a target for laundering. A money transmitter can move funds across borders in minutes. A currency exchange can turn one pile of cash into another. Without controls, these services would be an easy way to move and clean dirty money, which is why the rules pull them in. The aim is to keep money services open and useful while closing the door to abuse. There is a public interest here too. Money transmitters carry billions in remittances that families depend on, so regulators try to control the risk without shutting down services that people genuinely need. Screen a customer before you send Run one search across sanctions, PEP, and adverse media data to check a customer or beneficiary before moving money. Try Combined AML Screening → The AML duties of an MSB An MSB carries the same core AML duties as other regulated firms. The obligations are set out clearly in law. Register. Sign up with the relevant regulator, such as FinCEN in the US. Run customer checks. Verify customers through customer due diligence. Keep records. Retain evidence of transactions and checks. Report. File reports on suspicious activity and large cash transactions. Have a program. Run a written AML program with a compliance officer and training. Do this: get an indicative read on your exposure with the AML Risk Assessment. Registration and oversight Most countries require MSBs to register or be licensed before they operate. Registration puts them on the regulator’s radar. In the US, an MSB must register with FinCEN and often hold state licenses as well. Registration is not a one-time formality; it comes with ongoing duties to report, keep records, and stay compliant. Operating an unregistered money transmitting business is itself a crime in the US. Registration also makes an MSB visible to law enforcement, which is part of the point. A registered firm can be supervised and held to account, while an unregistered one operating in the shadows is exactly what the rules are designed to surface. The de-risking problem MSBs face a problem that other firms often do not: losing their bank accounts. Banks sometimes decide the whole sector is too risky and cut ties, a practice called de-risking. When a bank closes an MSB’s account, the MSB may struggle to operate at all, since it needs banking to function. This has hit remittance firms especially hard, sometimes cutting off affordable ways for people to send money home. Regulators have warned that blanket de-risking can do more harm than good. Worth knowing. De-risking is a real bind for money service businesses. A bank that drops an entire sector avoids the cost of checking each firm, but it also pushes legitimate money flows into less visible channels, which is the opposite of what AML is meant to achieve. The better answer is to assess each MSB on its own controls, not to shun the category. Money service business vs bank An MSB and a bank both handle money, but they are not the same. The difference lies in what they are allowed to do. Money service business Bank Core service Transmitting or exchanging money Full banking, including deposits and loans Holds deposits No Yes AML duties Full AML rules Full AML rules Oversight Registration and licensing Full banking regulation Both must follow AML rules, but a bank does far more and is regulated more heavily. An MSB is focused on the movement and exchange of money. How MSBs stay compliant An MSB stays compliant by running the same disciplines as any regulated firm, scaled to its business. A few steps matter … Read more