At a time when the financial sector globally is looking at leading-edge anti-money laundering (AML) systems and RegTech tools as “a rich area of development,” it is important to remember that money launderers continue to succeed in moving vast amounts of criminal proceeds through the global financial system with the simplest of laundering techniques.
A notable example of that fact came to light last week in Hong Kong, when Hong Kong Customs announced that it had arrested six people, including a family of five and the licensee of a money changer, on money laundering charges in the “largest money laundering case in its history.” The case allegedly involved a total of more than US$387 million (more than HK$3 billion).
According to Hong Kong Customs, it began an investigation in 2020 after identifying a money laundering syndicate. The initial investigation found that the family of five involved in the case “had opened more than 100 personal bank accounts in various local banks to deal with over [HK]$3 billion of suspected crime proceeds since 2018, in which [HK]$170 million was related to the money changer licensee.”
The investigations also determined “that the background and the financial status of the family members involved were highly incommensurate with the large-value transactions of their personal bank accounts.” It identified a total of approximately HK$30 million of assets that the arrested persons held. That total included approximately HK$15 million in bank deposits and two properties with net asset values of approximately HK$7 million and $8 million, respectively.
With regard to the money changer, Customs stated that “[i]t is not ruled out” that that individual “had used personal bank accounts of third parties to deal with large-value transactions from unknown sources, in an attempt to use the money changer company to disguise the money laundering activities.”
Ultimately, on September 10 Customs conducted an operation, designated “Operation Shadow Hunter,” in which 30 officers raided four residences and a licensed money changer and arrested the family of five and the licensee of a money changer. It also froze the HK$30 million of the arrested persons’ assets.
All six individuals were arrested for conspiring to violate the money laundering offense in section 25 of the Hong Kong Organized and Serious Crimes Ordinance. Under section 25 of the Ordinance, it is an offense for someone to deal with any property, knowing or having reasonable grounds to believe that that property in whole or in part, and directly or indirectly, represents any person’s proceeds of an indictable offence. The maximum penalty for a conviction on indictment is 14 years’ imprisonment and a fine of HK$5 million, as well as confiscation of the criminal proceeds.
Under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO), it is an offense for a licensed money service operator to contravene the AMLO regulations, The maximum penalty for a conviction on indictment is seven years’ imprisonment and a HK$1 million fine.
This case indicates that AML compliance officers need to ensure that their compliance programs continue to address all categories of indicators and not assume that money launderers are no longer using more basic laundering techniques.