Page 561 - IOM Law Society Rules Book

enforcement experience has shown that successful covert ARS operators involved in
criminal ML quickly attract levels of cash that make detection easier. Having an
entire business that is cloaked in secrecy where illicit and genuine transactions take
place, allows the criminal money launderer to hide more of the illegal business. In
some cases, criminal money launderers may also progress to overt operations to
ensure they can obtain banking facilities to service criminal customers.

In terrorist financing significant transactions may be small. There is no way of
measuring the importance of covert ARS operators in terrorist financing without
better intelligence on their activities. However, logic suggests that a covert ARS
operator embedded in a community which also contains covert terrorist cells will be
the natural first port of call for transactions. Terrorist cells have used franchised
multi-national ARS operators, but this was in a situation where they were operating in
a country where they were not supported by an embedded ethnic community.

Covert ARS Operation – No Premises

A covert ARS operator having no specific premises may operate in the same way as
the previous category. They also include criminal money laundering groups who act
as purely criminal ARS operators. These ARS groups will use the services of overt
and covert ARS operators to move money within their systems, but they also act as
their own network.

The roles of key players within these criminal money laundering networks can be
broken down into three distinct functions: control, collection and cash disposal.

• Control. The controller organises the ML activity and thus has a complete
overview of the operation. He buys cash from criminal groups and arranges
payment at the destination chosen by the criminal. The controller may be
associated with an ARS operator and is normally based in a third country,
often in South Asia or the Middle East. The controller employs collectors to
gather cash and disburse the money on his behalf. Finally, he uses various
ARS techniques to move money or value from the originating country to cash
pooling accounts, third party accounts or to settlement accounts via back-to-
back transfers.

• Collection. The persons carrying out the collection function serve as the
interface between the ARS operators and the criminal customers. The
collector receives instructions by mobile phone or SMS from the controller
with details of criminal customers who are holding cash. He may use pre-
paid mobile phones to contact the criminal and collect the cash in a covert
meeting. The collector counts the money and reports any shortages or
counterfeit notes and stores the cash in a safe house and then disposes of the
money on instructions from the controller.

• Cash disposal. For this function, funds may be sent to destination parties or
third parties by money transmission through complicit ARS operators. Cash
may be moved by organised cash couriers to jurisdictions where the banknotes
can be safely sold. The funds may also be used to complete back to back
transfers through cuckoo smurfing. Finally, the money is handed over to