The Pirate's Guide to Money Laundering

Why the oldest financial crime techniques still work today

Most people would probably think of drug cartels shifting large volumes of cash over the US/Mexican border, organised crime groups using shell companies, or cybercriminals hiding funds through cryptocurrency.

The truth is that criminals, merchants, politicians and statesmen were disguising the origins of wealth long before modern banking, payment systems or cryptocurrencies existed.In fact, the first money launderers lived thousands of years before the term "money laundering" was ever invented. (Even the term money laundering itself has unclear origins!)

Imagine you are a pirate operating in the Caribbean in the 17th century. You've just stolen a ship carrying valuable cargo.The problem isn't stealing the goods... it's getting rid of it!

You would need to have a good explanation for where it came from when you try and flog it at the next port. Whilst there would have been many ships arriving to sell cargo at the same port, they will all have receipts, licences, trade agreements etc to verify the origin of the cargo as being legitimate. So when you turn up with a load of cargo and nobody knows who you are or where you come from, plus you have no evidence to show the origin of the cargo, you will stick out like a sore thumb.

Maybe you get lucky. Maybe you get away with it and sell the cargo for a profit. Now you have what appears to be legitimate income and can spend the proceeds without anyone questioning where the money came from.

The next day you go out and steal another ship with similar cargo. You then try and sell it at the port. And the next day. And the next day.

The first sale is often the most important. If nobody questions the cargo the first time, the pirate learns something valuable: the system is vulnerable.The second shipment becomes easier. The third becomes routine. Before long, what started as a one-off crime has become an operating model. You will now be recognised at the port and they would expect you to arrive regularly with high-value goods, so why would you be questioned?

Financial crime rarely scales immediately. It usually begins with a small test of the controls. If that test succeeds, confidence grows, activity expands, and the criminal becomes increasingly embedded within legitimate systems.

However, this success creates its own risk.

Whilst you may have appeared unusual but not concerning the first time, repeatedly arriving with large amounts of wealth without a clear origin will eventually attract attention from merchants and "police" at the port. Unless you have a solid story to back it up.The pirate's challenge is therefore not simply getting away with it once. It is continuing to operate whilst avoiding the patterns that trigger suspicion.

The same challenge faced corrupt Roman governors, smugglers, tax evaders and countless others throughout history. And the same challenge applies to the modern day.

How do you make illegitimate wealth appear legitimate?

Going back to the pirate, they would need to think of a way to bypass any potential controls in place at the ports that watch out for pirates selling their loot.

One of the pirate strategies could be simple impersonation. Instead of arriving as an unknown vessel, a pirate could capture a legitimate merchant ship that regularly ships cargo to the port. They would keep its flag, papers, and crew identity and use it to enter port without raising suspicion. To outside observers, nothing looks unusual.

The pirate could also decide to split up the stolen cargo and sell the goods at multiple different ports. The idea being that one large and unexpected cargo haul at one port may be suspicious but ten smaller drop-offs at different ports would likely go unnoticed.

They may also operate a genuine trade business. Let's say they trade in sugar and every week they ship 10 bags of sugar to the port to sell for profit, all of which are legitimate from their sugar plantation on a nearby island. However, if they started acting like pirates and stole another 5 bags of sugar from a passing vessel, would anyone really notice if they turned up with 15 bags instead of 10?

Maybe they keep things simple and just pay off the authorities at the port.

All of these are methods used in the modern world to move proceeds of crime. The only difference is the rails used to move the assets.

If the cargo was cash, ships were payments and ports were bank accounts, we would recognise these techniques used by the pirate to obfuscate the assets. In the modern payment ecosystem these would be seen as ATO, smurfing, trade-based money laundering, bribery and corruption.

The pirate is trying to gain trust through a stolen identity. The fraudster takes over a legitimate customer account.

The pirate splits cargo between ports. The money launderer splits transactions between accounts.

The pirate mixes stolen goods with legitimate trade. The criminal mixes illicit funds with legitimate economic activity.

The pirate bribes the dock official. The criminal corrupts the gatekeeper.

The methods evolve. The objective remains the same.

Of course, these examples are analogies rather than documented pirate operating procedures. However, they illustrate something important: the underlying principles of financial crime often remain consistent, even when the methods evolve.

So why am I talking about pirates?

Money laundering has been a part of economies for as long as economies have existed. Ever since humans started trading in assets, financial or otherwise, there have been bad actors ready to exploit the system.

Pirates may conjure images of eye patches, parrots and the Jolly Roger, but the underlying challenge they faced is not so different to the modern criminal.

As we have seen, the basics of trying to move assets whilst disguising the origin and the methods used to do this seem to be consistent whether you're a 17th-century pirate or a 21st-century cybercriminal.

However, it doesn't take a financial crime expert to work out that the way the local authority at the port would monitor and investigate this activity is very different from how a FinCrime analyst at a bank would approach the same challenge.

The challenge for today's investigators is that they are not watching a single harbour. They are monitoring millions of transactions moving across banks, payment providers, crypto exchanges and gambling platforms every day. And a successful investigation is not just about identifying past crime. It is about preventing future occurrences and potentially victims.

If authorities had challenged the pirate the first time they arrived at port, they may have prevented future ships from being attacked. One inspection. One challenge about provenance. One disruption to the cycle. If the pirate is stopped after the first suspicious cargo sale, perhaps the next merchant ship is never attacked. If a mule account is identified early, perhaps the next fraud victim never loses their savings. The earlier suspicious activity is identified, the greater the opportunity to disrupt the cycle before harm spreads.

In many ways, today's investigator is simply the modern equivalent of the official standing on the dock watching ships arrive. And this shows that although the methodologies used by criminals are consistent, investigators will need to adapt their approach to be effective in identifying suspicious activity. You might work in different industries and sectors, whether gambling, banking, crypto, acquiring or art dealing. You will find the same fundamentals in all areas, but the approach taken to identify suspicious activity will need to be refined to the situation.

Having worked across different industries, I often found the guidance I received to be one-dimensional, frequently delivered by someone who had spent years in the same organisation. Senior managers would tell me to look for improvements, use real case studies and think critically during investigations. I would read articles, listen to podcasts and follow industry news to educate myself. However, there was very little practical advice aimed at lower-level employees looking to grow their careers and understand how to actually apply these ideas in their day-to-day work.

Internal training can often focus heavily on buzzwords such as placement, layering and integration, whilst using very generic terminology. However, it quite often doesn't provide specifics about what this:a) looks like for your role in the chosen business, andb) how you should approach investigations.

The purpose of Beyond the Alert is to bridge that gap.

Not by teaching theory for theory's sake, but by exploring practical examples, historical lessons and real-world investigations that can help analysts think differently, improve their effectiveness and grow their careers.