Cash in construction, Fraud in healthcare among top financial crime trends of 2023

The Dutch Financial Intelligence Unit (FIU-NL) reported over two million suspicious transactions in 2023, according to its annual review published on Friday. The report identifies worrying trends regarding money laundering techniques and organized fraud linked to the healthcare system.

A total of 180,578 transactions were flagged in 2023 as being highly suspicious, according to FIU-NL, the national center responsible for analyzing financial transactions for signs of criminal activity. Another 2,153,589 transactions were deemed unusual, and potentially suspicious.

These transactions accounted involved over 25.25 billion euros, FIU-NL said. The research into suspicious transactions provided valuable insights into financial crime patterns, which were shared with investigative, intelligence, and security services. Some 17,848 criminal investigations were opened by authorities, including the Dutch police, financial crimes inspectorate FIOD, and the Marechaussee, which monitors the country's borders.

The top crimes investigated were money laundering, fraud, and drug-related activity. "Case files reveal money laundering structures, criminal or terrorist networks, terrorist financing or other (underlying) criminal activities such as fraud or human exploitation. A case file may contain one transaction, but it could sometimes be thousands," the report stated.

One trend highlighted in the report is the "Cash Compensation Model" used in money laundering. The model involves large, well-known companies in labor-intensive sectors like construction and parcel delivery where subcontractors are hired. While these companies pay subcontractors via wire transfers, FIU-NL found evidence that little to no salary payments occur through official channels for the subcontractors' employees. Instead, employees are paid in cash, often suspected to be of criminal origin.

The subcontractors then compensate the criminal cash with non-cash payments like invoices. This "clean" money is then used to purchase luxury goods, invest in real estate, or finance further criminal activities. Underground bankers are believed to play a role in facilitating these transactions.

"Work that our society partly runs on is paid for with criminal cash through these constructions," the FIU-NL report states. "This again shows the intertwining of the underworld and the upper world in Dutch society." Beyond money laundering, the Cash Compensation Model raises concerns about labor exploitation, unfair competition, and fraud.

This theory emerged from the Fintell Alliance (FA), a partnership between FIU-NL and six banks, namely ABN Amro, ING, Knab, Rabobank, Triodos and Volksbank. Their analysis found that many labor-intensive sectors hire workers who are paid fully or partially under the table, hired out by secondment agencies and subcontractors to big businesses in transport and logistics, construction and package delivery.

"Whereas a secondment service provider was previously able to pay its employees in cash by using withdrawals, it seems that stricter controls by banks have made this more difficult. FA analyses indicate that this need for cash for (partly) undeclared labour now seems to be largely met with criminal cash," the report stated.

The report also identifies organized healthcare fraud as a growing area of concern. FIU-NL observed increasingly complex networks of multiple legal entities involved in healthcare fraud schemes. In some cases, these schemes appeared linked to serious organized crime.

The fight against money laundering and terrorist financing requires international cooperation, according to FIU-NL. The report highlights successful intelligence sharing with foreign partners in 2023, including cases related to sanctions circumvention and dual-use goods. Additionally, FIU-NL collaborated with other Financial Intelligence Units to tackle the financing of terrorist organizations like Hamas.

Dutch authorities were most frequently asked to look into suspicious transactions from their counterparts in Germany, Malta, Belgium, Spain and Finland. At the same time, the Netherlands sought assistance from 69 countries abroad, with Germany, Belgium, Spain, Lithuania and the United Arab Emirates contacted most frequently.