What are Money Laundering Typologies?
Money laundering typologies are the recognized methods and patterns criminals use to launder money.
Money laundering typologies describe how laundering actually happens in practice. Each typology captures a repeatable technique, such as splitting cash deposits or routing funds through shell companies, along with the warning signs it tends to leave behind.
Money laundering typologies give compliance teams a shared language for risk. Regulators, financial intelligence units, and international bodies such as FATF publish typology research based on real cases, and firms use that research to understand which threats apply to their business.
What are common money laundering typologies?
The most widely recognized money laundering typologies include the following.
- Structuring and smurfing, where cash is split into amounts below reporting thresholds
- Trade-based money laundering, using over- or under-invoicing and circular trade flows
- Money mule networks, where funds pass rapidly through many personal accounts
- Shell companies and layered ownership structures that hide beneficial owners
- Cash-intensive front businesses that mix illicit funds with real revenue
- Real estate and luxury goods purchases used to integrate laundered money
- Crypto laundering through mixers, chain-hopping, and high-risk exchanges
Money laundering typologies vary by market. A remittance-heavy market may see more smurfing through small transfers, while a trade hub may face more trade-based laundering.
How do compliance teams use money laundering typologies?
Compliance teams use money laundering typologies to design detection and train staff. A common practice is to map at least one monitoring rule to each typology relevant to the business, with target alert ranges and regular tuning notes. That makes sure transaction monitoring covers the threats a firm actually faces.
Money laundering typologies also feed risk assessments and training. Firms update their risk assessments when new typologies emerge, and many train analysts by having each one specialize in a typology and draft the detection rules and investigative questions for it.
What is the difference between a typology and a red flag?
A money laundering typology is the method, while a red flag is a sign that the method may be in use. Structuring is a typology. Several cash deposits just under the reporting threshold on the same day is a red flag for structuring. Typologies explain how a scheme works, and red flags help analysts spot it in the data.
