Practice to Deceive: A Taxonomy of Money Laundering Deception Based on US and Australian Case Studies

The practice of deception is integral to financial crime in many of its forms. The criminal offence of money laundering involves knowingly conducting transactions, movements of funds or dealings in property that are derived from criminal activity. Concealing or disguising the criminal origins of crime-derived wealth is one of the acts which distinguishes money laundering from simply spending the proceeds of crime. Despite the centrality of deception to money laundering, there has been limited research into how money laundering deception operates and the forms it takes. The established three-stage conceptual model of the money laundering cycle provides a useful framework for understanding certain kinds of laundering activity. However, it does not support the granular analysis of deception practice which this chapter argues is fundamental to developing effective anti-money laundering control environments within advanced economies.

The chapter aims to develop deception as a lens through which to facilitate applied research into the detection and prevention of money laundering by combining legal analysis with financial intelligence case studies. It draws on frameworks developed within cybersecurity and intelligence to support a deeper analysis of deception practice in money laundering. The chapter begins with a review of the element of deception in the criminal law of money laundering, focusing on the common law jurisdictions of Australia and the United States. The chapter then applies a taxonomy of deception developed by cybersecurity researchers Rothstein and Rowe to two case studies of complex money laundering: the Toronto Dominion Bank and Changjiang Financial cases. The chapter posits a distinction between primary deception, which focuses on concealing the criminal origin of transactions, funds and assets through various means, and secondary deception, which involves plausible denial of criminal knowledge, usually by third-party facilitators.