The presence of financial institutions on the Internet has grown rapidly over the past several years. However, it is important to distinguish between merely being present on the Internet and offering 'transactional' services. Transactional services vary from one institution to another, but may include such activities as opening new accounts, checking existing accounts, bill payments, debit, ATM, and credit cards, on-line lending and in some cases deposit taking.
The concern in respect to on-line banking is the obvious reduction in face-to-face contact between the customer and the financial institution. The customer would normally access his or her account from a personal computer using Internet browser software and world-wide web access through an Internet Service Provider (ISP). Access would be obtained when the customer provides his personal identification code to the banks web server, and, when encryption software is used, the browser software generates the appropriate key. Because this access is indirect, the financial institution has no means of verifying the identity of the individual actually accessing the account. Furthermore, with the increasing mobility of Internet access, a customer has the possibility of accessing his or her account from virtually anywhere in the world. Therefore money launderers would have unrestricted on-line access to and control of his bank accounts in any location. (FATF 1999-2000 Report on Money Laundering Typologies).
Recent revelations seem to indicate that launderers have been taking advantage of the near anonymity that can sometimes be achieved through Internet communication and the difficulty of following the path of communication from one Internet server to another. The FATF suggest that one method of laundering money through the Internet would be to establish a company offering services payable through the Internet. The launderer then uses those services and charges them for using credit or debit cards tied to accounts under his control, perhaps located in an offshore area, which contain criminal proceeds. The launderers' company then invoices the credit card company, which, in turn, forwards the payment for the service rendered. The launderers' company may then justify these income payments for a service rendered.
The problem for the investigator in dealing with such schemes is being able to follow the links between the various parts of the scheme. The launderer can easily use fictitious identities in setting up his presence on the web. If he takes advantage of the easy access to Internet services in other geographical locations so as to ensure additional distance between him and his activities, he can be sure that the lack of uniformity in maintaining on-line communication records by service providers will also work to ensure his anonymity. In short, the criminal using the Internet takes advantage of certain inherent aspects of the system to ensure that the whole picture is not visible by the investigator (FATF 1999-2000 Report on Money Laundering Typologies).
However, it has also been argued that the claim that the Internet provides new and undetectable methods of money laundering has no place in serious consideration of the interface between money laundering and technology. In essence, the Internet is nothing more than a messaging system. To move money, banks move information by whatever messaging system available, from physically moving lumps of gold from one place to another to processing checks. In this context, the Internet is simply an updated check system or a more efficient, cheaper, and more secure means of moving financial information (Morris-Cotterill, 2001).
Some use claims of 'cyberlaundering' simply as an excuse to move towards more extensive regulation of the Internet. Even if it were possible to create effective regulation of the Internet, which is a dubious proposition, such an undertaking merely would raise the barriers to entry for poor nations. The Internet can benefit large parts of the world at a low cost by reducing isolation and allowing remote communities the chance to provide services and publish catalogues of locally produced goods. Tighter regulation would only exacerbate the 'digital divide' between rich and developing economies (Morris-Cotterill, 2001).
Despite these claims above John Walker has suggested that global Internet money laundering totals around $50 billion per year, out of a total global money laundering estimate of $2800 billion. As a consequence of the US's dominant position in the Internet, over 80% of the total laundered originates in that country. While the US is also the greatest single destination country for Internet laundering, it is by no means as dominant in this respect. Only one third of the total laundered is laundered in the US, with other principal destinations being European financial centres or central American tax havens (Walker, 1998).