How Do Cyber Criminals Launder Money?

@zacamos

Zac is the Features Editor at ReHack, where he covers cybersecurity, AI and more.

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Cybercrime is a booming business. As one might expect from illegal activity, though, profiting from it can be a little more complicated than running a traditional company.

Criminals who don’t want to get caught when spending their ill-gotten gains must first learn how to clean dirty money.

Now that the world pays more attention to cybercrime, online fraudsters must jump through more hoops to stay hidden. As that happens, more are turning to money laundering, much like conventional criminals before them.

What Is Money Laundering?

Money laundering is the process of turning illegal proceeds into seemingly honest income. Cybercriminals can avoid suspicion that could lead to their arrest by hiding illicit money in the legitimate economy.

This dark laundering predates cybercrime. The United Nations estimates it accounts for as much as 5% of the global GDP — a whopping $2 trillion. Of course, it’s hard to offer firm facts and figures over the practice because it’s so secretive by nature.

Criminals have to clean dirty money because spending or depositing large amounts of cash at once will raise questions about where it came from. Laundering makes it look like this money came from a legitimate transaction.

Suddenly getting a lot of money seems suspicious, but if it looks like it came from a real business, cybercriminals can spend it without triggering a thorough investigation.

How Cybercriminals Clean Dirty Money

Addressing and steering clear of money laundering schemes means learning how they work first. Here are a few of the most popular ways cybercriminals clean dirty money.

1. Money Mules

Many cybercriminals clean their illicit cash by using “money mules.” These are people they bring in — often unknowingly — to do the laundering for them. That way, they create more distance between themselves and potentially suspicious activity.

Money mule schemes come in many forms, but a common one is to enlist people through fraudulent job offerings. Many scammers use fake job ads to steal sensitive data, but they can also hire people to move money from one place to another, hiding illegal proceeds in the process.

These jobs may involve things like buying goods from a store that doesn’t ship internationally and sending them to international buyers, or simply moving funds between accounts. The mules don’t know that these businesses and their customers are all fraudulent.

By moving money or valuable goods, they’re just performing a false but seemingly legitimate transaction to stand in for an illegal one.

2. E-Commerce Fraud

E-commerce sites are another popular target for dark laundering schemes. Because e-commerce sales generated $262 billion in the fourth quarter of 2022 alone, suddenly booming online stores don’t raise much suspicion. That makes them ideal fronts for money laundering.

Cybercriminals can set up fake e-commerce sites relatively easily. They can then create multiple user accounts to “buy” items and funnel illicit money through the site without actually moving any goods.

As a result, they have a record of seemingly real purchases on a legitimate business when all they’ve really done is move stolen money from one account to another to hide its origins.

Similarly, cybercriminals can make fake sales through multiple accounts on existing e-commerce platforms like Amazon or Etsy. That way, they have records from a legitimate payment processor for their illegal proceeds.

3. Gig Economy Fraud

A similar way to clean dirty money is to use gig economy platforms like Uber. These scams start by using money mules to move illegal cash into gift cards or financial accounts. They can then use these less-eyebrow-raising payment methods to buy services that never happen.

In the Uber example, one cybercriminal will sign up as an Uber driver and another — or the same person using a different account — act as a user. The user will book a ride with the dirty money, but no ride will ever occur.

Then, the driver can point to this transaction on a trusted platform as the source of the funds.

Similar schemes can happen on other ride-sharing platforms, Airbnb, Fiverr, or any other space where individuals can get money directly from customers. It looks like normal self-employment in all these cases, but it’s just a cover-up.

4. Cryptocurrency Exchanges

As internet crime has grown, so have web-based ways to dark launder. Cryptocurrency exchanges have started to get cybercriminals’ attention as a way to hide their illegal gains.

Blockchains themselves are highly secure, but individual crypto wallets can be vulnerable. Criminals pose as the official platform to trick users into giving them access to their accounts.

They can then use these accounts to use illegal funds to buy crypto and exchange it back into fiat currency.

Because blockchain transactions are anonymous, cybercriminals can also do this without stealing someone else’s account. However, they’d have to use multiple anonymous accounts to spread the exchanges and avoid drawing attention to one big sale.

5. NFTs

NFTs — another blockchain-based asset — have emerged as a money laundering opportunity. Just like with the gig economy and e-commerce fraud, criminals can use NFT marketplaces to hide their money’s origins by selling things to themselves.

First, criminals list a piece of digital art for sale as an NFT. Then, using another anonymous account, they buy it with their illegal funds. Even though this money goes to another account they control, it cleans the dirty money because it looks like they’ve earned it through this sale.

Some NFTs have sold for tens of millions of dollars, making them ideal for money laundering. It’s hard to say what an anonymous user would think a random piece of digital art is worth, so a colossal sale doesn’t stand out as much.

Learning About Dark Laundering Is the First Step

When more people know how criminals clean dirty money, it becomes easier to spot what is clean money and what isn’t. Awareness of these techniques will draw more attention to suspicious transactions.

As that happens, officials can crack down on this dark laundering, ensuring cybercriminals don’t get away with their crimes.

Cybercriminals hide their money in many ways and will likely find new methods as law enforcement catches on to these techniques. Staying on top of these trends is crucial in the ongoing battle against cybercrime.