How Advanced Technologies Can Fight Money Laundering by Drug Traffickers

Drug Trafficking Is Widespread

Drug trafficking is a world downside—and regardless of many years of analysis, rules, and enforcement, it stays a $400 billion global business. Government ministries and businesses around the globe constantly
monitor and analysis illicit drug markets to realize a extra complete understanding of this nefarious business—however the issue persists. 

One motive drug traffickers are arduous to establish is that they’re always adapting and evolving their techniques. For instance, the shuttering of non-essential companies as a result of COVID-19 has impacted a
money-laundering system in North America generally known as the “black-market peso exchange.” With storefronts closed, drug trafficking teams are reverting to older, riskier methods of repatriating income, like money smuggling. Fortunately, final 12 months, the U.S. Drug Enforcement
Administration (DEA) made three seizures in Los Angeles’ vogue district―the alternate’s epicenter―that every netted greater than $1 million in suspected drug proceeds that had piled up. 

Drug Trafficking Is Hard to Detect

Because drug trafficking is the highest supply of funds to be laundered (outpacing human trafficking, arms dealing, and the unlawful wildlife commerce), it’s a prime focus inside monetary crime and compliance applications at monetary establishments.
The monetary companies business has invested in progressive know-how similar to machine studying (ML), synthetic intelligence (AI), and robotics course of automation to fight the difficulty. However, regardless of great dedication and assets, monetary establishments
proceed to overlook a big quantity of legal exercise associated to drug trafficking. Why do gaps stay?

  • Lack of holistic community view: Transnational legal organizations depend on intricate networks of specialised cells for drug distribution, transportation, consolidation of proceeds, and cash laundering. These rings leverage tactics such
    as transferring funds to/from different nations or mirroring schemes, making it notably difficult for monetary establishments to realize a holistic view of the community.
  • International sprawl: The manufacturing, distribution, and consumption of illicit medicine spreads throughout the globe and includes deep-rooted
    criminal groups
     who usually exploit worldwide commerce. Criminals can use illicit proceeds to purchase items for export; misrepresent the worth, items, or high quality; and successfully launder the proceeds. The largely paper-based techniques used within the commerce finance
    enterprise make this course of difficult to detect.
  • Cash focus: Criminals use money as an nameless cost technique, making it troublesome to hint a particular sale, legal exercise, or technique of laundering.
  • New cost strategies: The world funds system is altering, and criminals are exploiting new applied sciences and networks, such because the darknet (an encrypted digital community), which might be altering the character of the illicit drug commerce and the
    forms of gamers concerned. For instance, teams working in digital networks are inclined to have looser ties and to be organized in horizontal constructions somewhat than the standard hierarchical constructions. Studies have highlighted that smaller teams have turn into extra
  • Challenges with the artificial drug market: Information on artificial drug manufacturing is extra restricted than that obtainable on plant-based medicine (cocaine, opiates, and hashish). This is basically as a result of artificial medicine might be manufactured
    wherever, as the method doesn’t contain the extraction of lively constituents from vegetation that need to be cultivated in sure situations. The challenges in monitoring artificial drug manufacturing stop correct estimation of the quantity of the corresponding
    market worldwide. Nevertheless, knowledge on artificial drug seizures and drug use counsel that the availability of artificial medicine is increasing. 

Technology Can Transform the Detection of Money Laundering by Drug Traffickers

Graph analytics, mixed with different applied sciences like machine studying and synthetic intelligence, represents a brand new path ahead in understanding the intricate patterns of cash laundering related to drug trafficking. These applied sciences can supply
transformation on a number of fronts. Let’s use fentanyl manufacturing and distribution for example.

  • Screening: All monetary establishments display prospects in the course of the onboarding course of. However, a typical single or restricted attribute matching engine produces a excessive fee of false positives. A multi-dimension algorithm can improve the effectiveness
    of matching outcomes by leveraging key entity data with exterior data similar to media scans and UBO data. For instance, whereas a particular drug trafficker could not seem on a sanctions checklist, that particular person could also be concerned with a high-risk shell
    firm or be the topic of detrimental information. This connection might be detected instantly, stopping the onboarding.
  • Client threat score: Once a prospect is screened, all required data, together with anticipated transaction quantity, worldwide exercise, function, and supply of earnings, is collected. This data helps decide the entity threat section
    (excessive, medium, low) and anticipatory profile. If a prospect is predicted to interact with high-risk nations related to drug manufacturing, the monetary establishment could select to ask for justification or to not onboard that particular person. Further, this data
    must be monitored on an ongoing foundation and checked for discrepancies with the data that was offered throughout onboarding.
  • Transaction filtering: Once the prospect is permitted, transactions must be screened in real-time for exercise with prohibited nations or counterparties. By leveraging a configurable screening methodology, monetary establishments can
    establish potential drug traffickers primarily based on embedded messages within the cost knowledge or references on web sites that point out unlawful drug transactions utilizing closed digital forex (CVC) exchangers. Payments to any prohibited web sites or CVC exchangers ought to
    be declined instantly. In the case of commerce finance, monetary establishments ought to display the recognized items in opposition to prohibited, restricted, or dual-use items to make sure the client just isn’t dealing in managed substances (regulated below Controlled Substances
    Act) with no legitimate enterprise justification.
  • Mass surveillance: A drug trafficking scheme just isn’t a siloed exercise—somewhat, it’s a sequence of associated actions which will seem unrelated. For instance, in a typical fentanyl scheme, people incessantly switch funds utilizing a number of
    Money Service Business (MSB) agent places. Financial establishments ought to, due to this fact, transfer away from particular person/red-flag monitoring towards mass surveillance―in different phrases, evolving from an alert/event-based investigation to a case-based investigation. Correlation
    of assorted occasions ought to occur primarily based on shared data, similar to phone numbers, addresses, and extra. This will permit analysts to see holistic entity exercise as an alternative of siloed occasions. Once comfy with this idea, monetary establishments ought to
    leverage graph analytics for occasion correlation, thereby uncovering hidden networks that may in any other case be missed. For instance, drug trafficking rings will usually recruit many individuals to interact in “micro structuring.” The employed individuals will make small ($500 -
    $1,000) money deposits into ATMs in a area. Shortly thereafter, the cash is withdrawn overseas. Graph analytics might help establishments discover these accounts by figuring out teams of comparable patterns or figuring out accounts which might be funded solely by
    small money deposits. Graph analytics can even assist discover round flows of funds, one other typical design of cash launderers.
  • Machine studying: Supervised ML utilizing graph analytics could be a game-changer in rising monitoring effectiveness. Detailed data gathering throughout onboarding is important to figuring out entities behaving exterior “normal” exercise.
    ML might be leveraged to uncover new patterns and schemes, establish situations of recognized legal patters, and to attain buyer behaviors and non-behavioral attributes. For instance, a person transacting with a enterprise in a high-risk nation and making a
    excessive quantity of digital forex funds exterior the “normal” habits of its section might be simply detected leveraging graph analytics and ML. Unsupervised machine studying must be utilized to detect beforehand unmarked, unknown drug trafficking schemes.
  • Contextual investigation: Financial establishments can leverage highly effective graph analytics to attach the dots between inside and exterior knowledge, offering a holistic illustration of networks that uncovers hidden patterns. Investigators
    can click on by entities and their connections—represented as nodes on the graph mannequin—to research networks and suspicious actions. For instance, as soon as detected by an ML mannequin, investigators can increase the graph by bringing in exterior knowledge, similar to enterprise
    registry data, to make sure that not one of the final beneficiary house owners are designated drug traffickers or have detrimental information on them.
  • Collective intelligence studying: AI might be leveraged to boost human experience by suggestions and next-best actions whereas additionally serving to analysts acquire situational consciousness and be taught institutional greatest practices. Once detected
    by an ML mannequin and designated by the investigator as a real optimistic, beforehand detected organized drug trafficking circumstances might be leveraged to make suggestions for brand new proof in a graph. This manner, establishments might be making certain collective studying.
  • Natural language processing (NLP) narrative: Leveraging investigation outcomes, NLP can generate automated case narratives, eliminating the handbook element, decreasing investigation occasions, and avoiding human errors. Case
    narratives are very important for the prosecution of suspect entities—and might help monetary establishments enhance investigation high quality and scale back drug crime. NLP might be helpful in making certain the concluded drug-trafficking case has been nicely documented (within the case
    narrative) to help regulation enforcement in prosecuting these extremely refined legal rings.
  • Sentiment evaluation: Sentiment evaluation might help establish and extract opinions from suspicious exercise studies, leveraging textual content throughout blogs, social media, media scans, and extra. Sentiment evaluation findings ought to suggestions into the system
    to uncover unknown behaviors and supply case suggestions for fast decisioning.
  • Entity recognition and backbone: Graph matching can present a holistic view of all of the matched entities by varied attributes, similar to title, tackle, or e mail. This unifies knowledge in real-time to create a single entity view throughout the enterprise.
    Entity decision might be utilized to resolve completely different entities primarily based on shared addresses, cellphone numbers, tax IDs, or names—key indicators to establish a drug ring community. In many circumstances, criminals use aliases or pseudonyms, which might be resolved by bringing
    inside and exterior knowledge collectively for a constant entity definition. Specifically, that is helpful when criminals are utilizing completely different services to “layer” inside one establishment.

The Time to Act Is Now

The downside of cash laundering by drug traffickers has continued to develop in recent times, with worldwide drug use increasing
 between 2009 and 2018. Fortunately, latest advances in know-how are giving monetary establishments the instruments they should win this combat. As a outcome, they maintain themselves, their clients, and our world safer.


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