Why 'Following the Money' Isn't Enough to Stop Organised Crime Anymore

The way many organised crime gangs launder their cash has become so hard to trace that following the money “gets you absolutely nowhere”, according to the UK’s National Crime Agency. 

When they are not exploiting the banking system, organised crime groups such as drug traffickers are increasingly using international networks of professional money launderers to clean illicit cash worth billions of pounds each year. 

“Financial investigators get told to follow the money. But if you follow the money with international controller networks (ICNs), it gets you absolutely nowhere,” Brian Ludlow, a senior money laundering expert at the NCA, told VICE News. 

“We concentrate on the vehicles used to move money, and one of the main methods is via ICNs. More and more criminals are using them now, and the further up the chain they are, the less likely they are to try and launder the money themselves.”

For a small fee ICNs use a web of informal money transfer systems to move criminal cash around the world. As soon as cash is handed over to these networks, the trail hits a dead end for investigators trying to work out where this money has gone or how it has been spent.

Informal money transfer systems have been used by law-abiding citizens as a way of transferring money from one place to another for centuries. In place of banks, a network of brokers arrange the movement of money in a system based on honour and trust. Because there is no documentation, the system is totally anonymous. And this, alongside their apparent reliability, is why they are so popular with criminals. 

The best known of these systems is the ancient hawala system, mostly used in the Middle East, north Africa and India, but over the last two decades increasingly used by crime gangs including Mexican cartels. 

In systems such as hawala it is the value of money that moves, not the money itself. A broker will receive the money in one country, tell another broker to hand out the same value of money in another country, and then the two brokers will settle the debt between them. 

Ludlow explains it like this. “For example, a British drug trafficker wants to turn £200,000 of dirty cash in London into the equivalent amount of cash in euros in Rotterdam. He contacts an ICN and they agree on a fee, usually around six and a half percent, an exchange rate and time and place to collect the money. If you are handing over £200,000 in cash, you need to be sure the right person is taking it off you. So a token system is used. One of the most common tokens used in the UK is the serial number on a £5 note. 

“The ICN messages the customer this serial number. Before the money is handed over the collector working for the ICN presents the £5 note to the customer. If the serial number is right the deal takes place and the note is retained as a receipt. Then in Rotterdam, the equivalent amount of euros will be handed over to a colleague of the drug trafficker, and this time another token, probably a €5 note, will go the other way in return for the cash.”

These networks move the finances of the international drug trade and have the ability to move “billions in currency” around the globe, according to Ludlow. 

Specialist money laundering networks are increasingly using crypto currency and Chinese underground banking to launder criminal money. 

Data gleaned from encrypted phone systems, used by high level criminals to communicate with each other, found “large movements of crypto being sent between South America and Europe” to pay for cocaine shipments to Europe, according to Ludlow. 

Initially developed to avoid strict red tape moving money in and out of China, underground Chinese banking, like hawala, enables the transfer of value between countries without actually moving any funds. 

It too has been co-opted by some of the biggest criminal organisations in the world. Laundering networks have been known to recruit Chinese students in host countries to set up hundreds of bank accounts which are used to deposit underworld cash. They have also infiltrated the daigou system of shopping, where high value goods are bought in the U.K. and then shipped to China to be re-sold, to clean criminal cash. 

The NCA estimates £12bn of criminal cash is generated annually in the U.K. But Ludlow said it’s a conservative estimate “when you think there's £50bn of cash moving around that the Bank of England cannot account for”. 

Ludlow suspects a portion of this missing cash is connected to the drug trade. Analysis of encrypted mobile phone systems hacked by police revealed that, “a lot of major players wanting to move their money were drug traffickers”, according to Ludlow. “You did see others involved in human trafficking, in firearms, but overwhelmingly, it was drugs. They are still the big players. ”

Despite the huge drop in cash being used by the public, twice as many bank notes are in circulation in the UK now than 10 years ago. 

“So why’s that? If you have a thousand people going on a cocaine bender over the weekend they're going to go to their banks and withdraw it in cash, they’re not going to pay their dealer with a bank transfer, and that will show great demand coming out the cash machines.”

While the money trail becomes increasingly opaque, the NCA said it is still managing to take down organised crime gangs and those involved in wholesale money laundering. 

This has largely been achieved by the police building their own international networks of intelligence, and sharing information with police overseas. If the money cannot be followed, the people responsible for moving it can. 

“Where following the money is ineffective, there's a range of other techniques that we use in law enforcement to target organised crime groups,” said Celestino Calabrese, from the National Economic Crime Centre, the UK’s centre of expertise on money laundering, and an organisation attached to the NCA. 

“We’re following the networks, mapping out behaviour patterns and international relationships, building up a picture of these organisations and connections. We’re also following the people, the couriers, the coordinators and, and the controllers.”

In court, prosecutors do not have to show a direct money trail to prove the extent to which an organised crime group has been involved in money laundering. If a gang has been using international controller networks to move money around the world, it can be inferred that the money they were moving was criminal cash.   

A significant number of the ICNs involved in moving and converting profits for U.K. gangs are based in the United Arab Emirates (UAE), most notably in Dubai. Dubai’s rise as a haven for laundering dirty cash has dovetailed with the city state becoming a key hideout for Europe’s top gangsters. 

The ICNs have to dispose of the dirty cash they receive, and one of the most common ways is to shift it into countries where it can more easily enter the legal financial system. In 2021 a cash smuggling ring linked to an international controller network was busted by the NCA after moving £104m in criminal cash in suitcases on 83 flights from the U.K. to Dubai. 

Using zoom calls and a WhatsApp group called “Sunshine and Lollipops”, several women, including an ex-girlfriend of former world champion boxer Joe Calzaghe, were recruited as couriers to smuggle suitcases each packed with up to £500,000 in cash. After receiving the cash from organised criminals, the gang moved it to counting houses in rented flats in central London before being vacuum packed and sprayed with coffee or air fresheners in an effort to prevent it being found by sniffer dogs. 

Couriers were paid around £3,000 plus expenses for each trip from Heathrow to Dubai, and were booked on business class flights for the extra luggage allowance. Using a Dubai gold trading firm as cover in case they were stopped at customs, once in Dubai, where ringleader Abdullah Alfalasi lived, the money was used to buy gold, a commodity often linked by investigators to the profits of organised crime. The cash smuggling ring was described by investigators as “important cogs in a large money laundering wheel. One of those accused of recruiting the couriers online, Michelle Clarke, a British woman living in Dubai, is still being hunted by police. 

European police are also being assisted by the U.S. In 2022, Johnny Morrissey, alleged to be a key money launderer for the Kinahan crime gang, one of Europe’s most prolific drug trafficking groups, was arrested near Marbella by Spanish police, suspected of using hawala networks to clean €200m in drug trade cash in just 12 months for the organisation. Morrissey’s arrest came five months after the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) declared war on the Kinahans, announcing a series of sanctions against seven key members, including Morrissey, and offered up a reward of ​​$5 million for information leading to the arrest of the gang’s leaders, Christy Kinahan and his sons Daniel and Christy Jr, who built their drug smuggling empire from their hometown of Dublin, Ireland, and fled to Dubai in 2017.  

Calabrese said although ICNs have become a preferred method of cleaning money for gangsters, they are by no means the only way. 

Often money is laundered under cover of the legitimate world, through banks, post offices and the movement of precious metals. 

U.K. corporates, which Calabrese described as “a big vulnerability” are used by domestic and international criminals to hide their assets and buy property, while concealing the identity of the true owners. Property is still one of the main endpoints of cleaned criminal cash, said Calabrese. “To [criminals] property is an asset which is safe and secure. It’s the realisation of the laundering process. It's what the criminals get at the end of the day.”