In itself, a third-party payment is a lawful act. A company may have valid reasons for using a third party to make its payments for goods or services. For example, if a business partner is based in a country without a properly functioning banking system and still wants to pay for goods. However, third-party payments also pose a risk. Because the actual destination of goods or services and/or the origin of the money involved is difficult or impossible to trace, third-party payments are sometimes used for criminal purposes. In some cases, the paying and supplying legal entities are aware of the risks and consciously use third-party payments. In other examples, legal entities unknowingly facilitate criminals in, for example, money laundering or sanctions evasion through a third-party payment.

Reports

Various institutions report unusual transactions that indicate third-party payments with a possible criminal purpose to FIU-the Netherlands. These range from banks and accountants to payment service providers (PSPs). For instance, banks noticed on numerous occasions that one of their customers received money from a company operating in a completely different sector. Another example is an accountant who spotted that a company was being paid by a completely different party than the customer listed on the invoice. When questioning their customers, the reporting parties did not receive a clear answer.

All kinds of crime

FIU analyses show that third-party payments are used to facilitate all kinds of crime, including money laundering, terrorist financing and sanctions evasion. Sometimes these involve larger networks. For example, one analysis revealed several companies that systematically acted as financial intermediaries. This presumably facilitated sanctions evasion and money laundering. In another case, front companies continuously processed transactions for sanctioned entities. Analyses also indicate that third-party payments are used to evade sanctions on dual-use goods or are used to finance terrorism.

Reporting is useful

All these examples show how important reports of unusual transactions are for recognising and preventing third-party payments for criminal purposes. A report can provide an important piece of the puzzle when complex, extensive networks with numerous companies are involved. Together we see more.