In recent years, FATF investigations have exposed money laundering initiatives in the securities sector by identifying an increasing range of innovative, yet irregular, transactions.  These transactions originated both from internal and external sources.  Much of this fraudulent activity originated inside the industry, including brokers accepting cash payments from clients in violation of industry regulations.  These funds were often deposited into a relative’s money market account and accessed in the form of checks.  Other illegal activity has originated from outside, where offenders have purchased securities with monies acquired through other criminal enterprises and use sheltering processes to launder these funds.  Other vulnerabilities in the securities market include the establishment of companies as “fronts,” through which money is laundered as it is combined with legally obtained revenues.

Research conducted by the FATF, FSRBs and other oversight entities have proven that the securities sector is a highly lucrative source of profit for money launderers and other financial manipulators.  The securities market is especially vulnerable because launderers who have acquired ill-gotten funds through the securities establishment utilize the same resources to “wash” their illegal gains.  Financial criminals, for instance, may purchase large amounts of stock in a company before it goes public, then disseminate false intelligence about the company in order to inflate the stock price.  The success of those who have perfected such manipulation has opened new avenues of opportunity for terrorists, who often seek to form relationships with unscrupulous brokers or others who possess a high degree of savvy in such practices.

The FATF has made significant inroads against such scams, thanks in part to stricter regulations governing authorities have concluded that perpetrators are frequently able to gain access through brokers, who rely on commissions for a large percentage of their income.  As such, brokers have a vested interest in the success of initiatives put forth by their clients, even if these plans are questionable, or blatantly illegal.  Other vulnerabilities based in the broker-customer relationship stem from a lack of oversight.  In the interest of maintaining clients, brokers may overlook questionable details or transactions.  This is part of an unspoken “wink-and-a-handshake practice, which scam artists have often used to their advantage.

FATF’s research has also determined that the securities sector’s “borderless” composition has facilitated the spread of illegal activity.  Many of the more enterprising transgressors have crafted intricate operations, with components in multiple countries.  Not only does this confuse the process of investigation, these geographically diffuse operations obscure the very processes by which such individuals profit, creating a deceptively disjointed sequence of events that are difficult to trace and often nearly impossible to prosecute.

This international nature of money laundering has benefited terrorists significantly.  Physical assets are increasingly important as a source of wealth for terrorists, who find it easier and safer to “bank” on property, antiques, jewelry and other investments to finance their operations.  One of the newest typologies is the laundering of funds through investment in football clubs, which in many ways function as multi-national entities through which illegal financial manipulation can be hidden.  This typology has given, as the meteoric financial success of the football clubs is a typology that gives terrorists a highly profitable haven for their activities.  Club owners and officials are often loathe to report instances of money laundering because they fear that such disclosure, and embarrassment, may discourage sponsors from supporting the team.  In any event, football clubs have proven to be effective cash cows for terrorists and other financial criminals.

Through the efforts of FATF and complimentary organizations, initiatives have been developed aimed at establishing a unified international enforcement strategy.  These tactics were designed to facilitate a coordinated international effort to combat money laundering and, by extension, the funding of international terrorism.  Some of the key proposals include securing universal agreement that money launderers be prosecuted as criminals, a necessary step if the multi- jurisdictional obstacle to prosecution is to be overcome.  Under such an agreement, the assets and property of money launderers would also be confiscated, a move aimed at removing a fundamental means of support for terrorist organizations.

AML training and awareness is an important part of this strategy as well because the involvement of private companies is necessary if appreciable progress is to be made in the war against financial criminal activity.  To that end, monitoring and record-keeping have been made compulsory.  Other arrangements involve coordination among international investigative agencies in the identification and appropriation of money and assets obtained through money laundering and other illicit financial activity.