[PDF]Cyber Crime And Money Laundring

dnqillail |ln

<#► DAR ALMANDUMAH

1 ■ P l * X_ _! 1


Cyber Crime and Money Laundring
alhammad, Omarabdullah
Wollongong
1 - 38
752513

JJLujj

jjJLjuJJS'IjO cJLuJj

Wollongong University
Faculty of Law

ui^i

Dissertations

JI^jo\JI J^uJLC i
http://search.mandumah.com/Record/752513


lulgjLsdl
: v_s^jujlJ_)J I "jdgjoJI
:&9^o
lobsisL^aJI
:MD p3j

£9j

:cUoJLsdl

:LsJI
:qJKJI
:qJ 9 jJI
lologlaoJI JlcI^S


.qJb^ojs^o £jjOJ> .cLo^JdijoJI jli 2016 ©

/)|jdtCj-u\U O^LoJI OJlA clcLJo 9I dLtSuOJ ^juuuJI S-*joj> ul loJLc cJ^-C cOa e ^>Lio O^LoJI 0-iib

jli 9I jjJllJI 3 ^Q-> i>° S i 5v -^ > tjgi (v_s09>iSJ\JI -Xj>JI 9I gsl^jo JjLo) ciJL_mj 9 sSl j+C ^jlUjJI 9I jJjcptiJI 9I ^lj-uuJI ^juojg tJaa 9

.cLo^JaJuoJI






Cyber Crime and Money laundering


3429246


Cyber crime and money laundring

Omar abdullah alhammad

Master of transantional crime
preventioon

University of Wollongong


For the library of saudi cullture
mission in australia


1



Cyber Crime and Money laundering


3429246


Introduction


1.1 Background of the Study

Ecommerce has necessitated increased transference of funds, information and data from one
person to another through emails and website technology, from one account to another
through the electronic payment systems especially through the internet as well as through
social networking sites. Today, people are buying goods and services around the world
through the internet, without the need to travel to shops. The upsurge of the internet
technology and networking will continue to drive these trends upwards, as more and more
people continue to absorb it in their culture. Internet dealings have largely been admired
because of the speed with which they can deliver products and services as compared to
traditional methods. They have increased the reduction of costs of data and information
sharing and transfer, they have reduced errors associated with information as well as led to
delivery of messages in a more stylistic comfortable means.

Thus, payment methods, and generally, methods for exchange of data and information
between persons and organizations through the internet are being practiced more and more.
They are therefore becoming very prone to attacks from people who are targeting these
transfer lines, so as to gain unauthorized access of data for evil motives. Data being
transmitted across two or more people can be tapped and used for other reasons such as
forging for money withdrawals from online accounts, access of people’s accounts as well for
other purposes. There are many people who are making payments online and fraudsters are
using this as a channel to steal money through compromising data and access points.
Continued usage of online payment systems will mean that more hackers and fraudsters will
be interested in their deals than before, hence the need to study the crime and role in money


2



Cyber Crime and Money laundering


3429246


laundering. Financial institutions can now move funds through Electronic Funds Transfer
(EFT) System across the globe with the click of mouse. Besides legitimate beneficiaries-
banks, airlines, media, universities, non-financial businesses- of information and
communication technologies (ICT) and the internet, criminals take advantage of ICT and the
internet to commit various types of cyber crimes, such as, hacking; spamming; spoofing;
cyber terrorism; cyber forgery; plastic card (debit/credit and stored value cards) and cyber
fraud. Cyber fraud is one of the effective tools in the hands of cyber criminals which
generates huge amount of illegal money without being detected by law enforcement agencies
because cyber crime is the crime with anonymity. Furthermore, cyber crime can be
committed in various jurisdictions of world simultaneously therefore it involves transnational
jurisdiction, which poses great challenges for law enforcement agencies to prevent, detect and
investigate such crimes. Transnational nature of cyber crime supports criminals to commit
crime without being detected by law enforcement agencies; therefore, world is witnessing
increased number of cyber crimes. As discussed above, cyber crime can generate huge
amount of illegal money. Such money is of course illegal and requires laundering to avoid
detection by law enforcement agencies. Therefore, cybercriminals use cyber technology to
hide the true origin of their criminal proceeds to look like clean money. This process is
known as money laundering. 1
1.2 Problem Statement

Globalisation has increased the movements of goods and services across the world, which has
increased economic interdependence resulting in profound benefits and opportunities. 2 The
benefits and opportunities include quick and easy travel of people across the globe; quick

1 Rajev Saxena, ‘Cyberlaundering: The Next Step for Money Launderers?’(1998) 10 Saint Thomas Law Review
685. 685.

2 Santha Vaithilingam and Mahendhiran Nair, 'Mapping Global Money Laundering Trends: Lesson from the
Pace Setters' (2009) 23 Research in International Business and Finance 18, 18.

3



Cyber Crime and Money laundering


3429246


movement of funds from one part of the world to another with the help of electronic funds
transfer (EFT) system- FedWire, Society for worldwide Interbank Financial
telecommunication (SWIFT) code, Clearing House Inter Payment system (CHIPS)- 3 , plastic
cards and Internet banking- cyberpayment systems. 4 The technology and innovation are the
drivers of widening of globalization, 5 which is not only being used by legitimate users but
also but illegitimate users. The illegitimate users of technology are using internet and
technology for generating illicit proceeds as well as for laundering illegitimate proceeds,
which pose great challenge for law enforcement agencies to prevent, detect, investigate and
prosecute such technology-based crimes as it involve transnational jurisdiction. Therefore,
there is a need to understand how technology and internet is used by cyber criminals for
generating illegal proceeds and by cyber-launderers for laundering illicit proceeds.

1.3 Purpose of Research

The main purpose of this research proposal is to twofold. First purpose is to understand how
criminals are generating illegal proceeds by the commission of cyber crime. Second, how
cyber-launderers are exploiting technology and internet for laundering ill gotten money by
using plastic cards- Debit Card, credit Card and Stored value Card. The research will help
law enforcement agencies to formulate effective policies and procedures for detecting,
preventing and investigating such crimes.

1.2 Aims and Objectives of the Study

The main purpose of this research proposal is to twofold. First purpose is to
understand how criminals are generating illegal proceeds by the commission of cyber crime.

3 Gregory Calpakis et al. Study Guide for the CAMS Certification Examination (4 th ed, 2007), 29.

4 James R Richards, Transnational Criminal Organizations, Cybercrime, and Money Laundering : a Handbook
for Law Enforcement Officers, Auditors, and Financial Investigators (1999) Accessed: UoW Database at 02
September 2010.

5 Santha Vaithilingam and Mahendhiran Nair, 'Mapping Global Money Laundering Trends: Lesson from the
Pace Setters' (2009) 23 Research in International Business and Finance 18, 18.

4



Cyber Crime and Money laundering


3429246


Second, how cyber-launderers are exploiting technology and internet for laundering ill gotten
money by using plastic cards- Debit Card, credit Card and Stored value Card. The research
will help law enforcement agencies to formulate effective policies and procedures for
detecting, preventing and investigating such crimes.

1.4 Hypothesis

This study will seek to test the following hypothesis as relates to money laundering through
cyber crime.

i. Money laundering cases are increasing and mostly connected to online business dealings
(ecommerce) and connection between companies and their customers.

ii. Little has been done on the international law perspective in defining and covering cyber
crime. This would be required to ensure that the issues relating to the modem types of
crimes are solved amicably and responsibly without contradictions.

iii. A large amount cyber crime behaviour can be dealt with through observance of the basic
rules set regarding handling of communications over the internet or that cyber crime has
flourished amidst carelessness and little concern, or ignorance among the users of related
services.

iv. The complexity of the computer and electronic systems as well as security issues (and
relatively newness of computer dealings) has had its own contribution in the
advancement of cyber crime involved in money laundering.

1.5 Significance of the Study

Money laundering has been practiced for quit long time now. It is live on many countries and
on the international scene, and companies have suffered from the practices, loosing billions
of money. Cyber crime has diverse problems, and therefore, its solution will have more
advantages to the online trader than just loosing money. Just to focus on a few, cyber crime


5



Cyber Crime and Money laundering


3429246


has had an impact of compromising privacy and confidentiality of online dealers, through
unauthorized access to their private data and confidential accounts. Cyber crime is thus a
breach of individual rights to privacy and confidential information as captured in many legal
frameworks of many countries. Information regarding the execution of cyber crime will be
expected to lead the way in helping solve this problem. Loosing money through cyber
criminals has been experienced by companies and hence it is necessary that these type of
crime be combated using a comprehensive legal framework on the international scene, so as
to save many organizations from collapse. Such a study would provide adequate information
regarding how cyber crime related to money laundering takes place, and how it can be
avoided. Usually, it would be expected that knowledge on the most current trends of cyber
crime involving laundering of money through debit cards would help in chatting the way
forward against the vice. There are two ways through which cyber crime may be combated;
formulating an international legal framework that captures the whole issue regarding cyber
crime, and secondly, countering the crime through best technology suited for this purpose. It
is therefore necessary that there be studies regarding the trends of occurrence and impacts of
cyber crimes.

There has been much attempt to ensure that cyber crime has been combated through basic
mechanisms. Usually, providers of electronic systems have tried to ensure security through a
number of mechanisms. It can already be established that cyber crime has flourished amidst
little knowledge and lack of awareness of the complex issues surrounding cyber crime among
the users. Cyber criminals almost certainly will be successful where issues of security are
overlooked as far as payments are concerned. Thus, the information regarding the occurrence
of cyber crime would be beneficial so as to help the general user on the best way to secure


6



Cyber Crime and Money laundering


3429246


their communications. In addition, organizations would be expected to observe even the basic
rules regarding communications in an attempt to keep away the cyber criminals.

2.0 Literature review

A number of scholars have separately researched the issues of generating illegal proceeds by
committing cyber crimes and cyber laundering- laundering of illegal proceeds by the use of
cyber technology. Peter Grcibosky refers that cyber space has abandoned physical borders
and cyber criminals can easily commit crimes across the borders; therefore, modern crimes
are becoming transnational in nature. He further adds that cyber crime is used in both
conventional crimes such as pornography, piracy fraud and forgery and in modern crimes for
example, hacking; phishing. Grcibosky claims that huge illegal money can be generated from
the commission of cyber frauds, which can further laundered through cyber technology. He
refers to the case of Russian hacker, Vladmir Levin, who compromised Citibank’s electronic
funds transfer system and transferred heavy amount from the accounts of corporate customers
of Citibank into the accounts of his accomplices in various jurisdictions- Israel, United States,
the Netherlands, Finland and Germany. 6 Aclam Salifu adds that financial institutions are one
of the victims of cyber crimes, for example, plastic card frauds; which cause huge financial
losses to financial institutions. According to author, cyber crime is of transnational nature to
that extent that the offenders and victims are available in different jurisdictions, therefore, it
becomes challenging job for law enforcement agencies. 7

Richards claims that “cyber payment system” or “cyberbanking” has taken over traditional
currency system: paper notes, coin, cashier checks or any other financial instruments. In
modem period money has become “financial value” which can easily be transferred from one

6 Peter Grabosky, ‘the Global Dimensions of Cyber crime’ (2004) 6 Global Crime 146, 146, 48.

7 Adam Salifu, ‘the Impact of Internet Crime on Development’ (2008) 15 Journal of Financial Crime 432, 437-



Cyber Crime and Money laundering


3429246


place to another place through plastic cards and Internet banking by cyberpayment systems. 8
Saxena is of point of view that it is very easy for money launderers to hide illegal proceeds in
financial system and subsequently transfer proceeds by using technology based products, for
example, plastic cars (debit/visa/stored value cards) and electronic funds transfer system. He
evidences that argues that criminals can instantaneously transfer huge amounts of funds in a
very short time by using technology. 9 Jaarsvelcl refers to some other aspects of technology
which are helpful for criminals to launder money. He states that Internet has made easy for
everyone to make quick transactions from remote areas by maintaining the anonymity of the
users. He further adds that “capacity” is one of the effective tools in the hands of users of
online transactions. One can make huge transactions across the borders which also poses a
great challenge for law enforcement agencies to make trail of these transactions. It is also
difficult for financial institutions to keep record of internet / online transactions. 10

Weaver's research refers that “cyberlaundering” is one of the favourable tool in the hands of
criminals not only to launder proceeds but also generate illegal proceeds through online
casinos and other gambling websites. Weaver argues that physical cash has been replaced by
“e-money” in the shape of “stored value cards (SVC)”.He adds that e-money can be stored on
SVC in the form of bits, therefore, huge amount can easily be stored on such cards, which is
very easy to carry as compared to physical cash. E-money is not only easy to carry but it is
also easy to keep anonymity because the SVCs can be used from any part of the globe. The
authors further add that e-money can be loaded on SVCs as well as on hard disks of the


8 James R Richards, Transnational Criminal Organizations, Cybercrime, and Money Laundering : a Handbook
for Law Enforcement Officers, Auditors, and Financial Investigators (1999) 30-1.

9 Ibid, 688.

10 Izelde Van Jaarsveld, ‘Following the money Across Cyber Highways: A Herculean Task or International
Challenge? Some Thoughts on Money Laundering on the Internet’(2004) 16 South African Mercantile Law
Journal 685, 691.



Cyber Crime and Money laundering


3429246


computers. Therefore, it will be difficult for customs and other law enforcement and border
agencies to detect illegal smuggling of huge amount of cash. Moreover, the users of e-money
can withdraw cash from Automated Teller Machines (ATMs); therefore, it gives a great
opportunity for money launderers to launder illegal proceeds through e-money. 11 Welling and
Rickman state that use of electronic payment system is increasing rapidly; which gives
various facilities to its users. He refers to the Mondex card frequently used in United
Kingdom (UK), which provides facility to its users to transfer cash on Mondex card from
their internet bank account. Moreover, the users of Mondex cards can also transfer amount
from one Mondex card to another without obtaining help from intermediary. Furthermore, the
users of Mondex can make payment on the Mondex terminals as well as can withdraw money
from Mondex enabled ATMs. This transfer of funds either from internet ban account or from
Mondex card to Mondex card and making payment at terminals or withdrawing money
>>>