Money Laundering: Financial Analysis for the Investigation

Money laundering rarely appears as a standalone crime. More often it hides behind the look of ordinary payments, contracts and turnover. The task of financial analysis for an investigation is not to “name the scheme” but to show, on documentary evidence, the movement of funds, their source, and their mismatch with genuine business activity. Below I explain how a forensic economic examination approaches such cases, and where the line runs between examining facts and legal characterisation.

Money laundering as a standalone offence: what the law says

In Ukrainian law, liability for the legalisation (laundering) of property obtained through crime is set out in Article 209 of the Criminal Code of Ukraine (KK). Its core idea: punishable conduct is not only the “primary” crime itself, but also the subsequent actions that give criminally obtained funds the appearance of legality — through financial operations, contracts, or a change in the form or owner of the assets.

Alongside it operates the specialised Law of Ukraine “On Prevention and Counteraction to the Legalisation (Laundering) of the Proceeds of Crime, the Financing of Terrorism and the Financing of the Proliferation of Weapons of Mass Destruction” — the country’s AML/CFT law. It establishes the financial-monitoring system: the duty of banks and other primary financial-monitoring entities to detect and report suspicious transactions.

This system is coordinated by the State Financial Monitoring Service of Ukraine (Derzhfinmonitoring). It gathers reports of suspicious transactions, analyses them, and, where grounds exist, forwards consolidated materials to law-enforcement bodies — in particular the Bureau of Economic Security (BEB), the National Police and the SBU (Security Service of Ukraine). Where the predicate is a tax offence, the State Tax Service (DPS) is drawn into detection as well. Once criminal proceedings are open, under the rules of the Criminal Procedure Code (KPK) on ordering examinations, an investigator, prosecutor or court may commission a forensic economic study. The institution of forensic expertise itself is governed by the Law of Ukraine “On Forensic Expert Activity”, while the procedure for ordering and conducting it comes from Ministry of Justice acts; the Ministry also maintains the Register of certified forensic experts and approves the examination methodologies.

It is important to understand how the roles relate: Derzhfinmonitoring detects and signals, the investigation investigates and characterises, the court decides — and the forensic economic expert gives an independent opinion on the factual side: the movement of funds and its economic nature.

The predicate offence — the foundation without which there is no laundering

Laundering is always “secondary.” The funds must originate somewhere — from tax evasion (breaches of the Tax Code), embezzlement, misappropriation, fraud, illegal sale, a corruption offence, and so on. This is the so-called predicate (primary) offence. Without an established criminal source of the funds, it is legally premature to speak of their “laundering.”

What financial analysis examines in this context:

• where the funds came from — the source of credits to the accounts and their documentary basis;
• whether that basis matches a real operation — whether goods, a service or an asset stand behind the payment;
• how the funds moved onward — the chain of transfers, splitting, withdrawal into cash or assets;
• how they were introduced into legal circulation — through contracts, the purchase of property, contributions to charter capital, and the like.

The expert does not establish the fact of the predicate offence — that is the competence of the investigation and the court. But it is financial analysis that shows whether the movement of funds is consistent with the theory of their criminal origin and subsequent laundering.

How the examination traces the movement of funds

Building the funds-flow scheme

The foundation of the study is a reconstruction of the full route of the money: from the credit to the ultimate recipient or its conversion into an asset. In practice this looks like a step-by-step table or a graph of links — “who → to whom → how much → when → on what basis.” Such a scheme makes visible the nodes where money “vanishes” from real turnover and returns with a different purpose.

Transit accounts and the splitting of sums

Two characteristic signs of artificial fund movement:

• transit accounts — accounts where funds barely linger: credited today, transferred onward the next day, with no sign of use in the enterprise’s own activity;
• splitting (structuring) of sums — breaking a large amount into many smaller transfers, often below the thresholds for mandatory financial monitoring, or spreading it among numerous counterparties to “dilute” the trail.

The expert records these patterns quantitatively: how much passed through in transit, over what period, what share was withdrawn onward immediately, and how far the balances and turnover on the account diverge from the declared activity.

Conversion centres and goods-less operations

A distinct type of scheme is the so-called conversion centre: a group of related legal entities and sole proprietors (FOP) which, under fictitious contracts, accept non-cash funds and return them as cash (or the reverse) for a fee. Financial analysis here shows the goods-less nature of the operations: a payment exists while there is no real movement of goods, works or services confirmed by primary documents, warehouse records, transport, or production resources.

The documents the expert works with

The opinion rests on documents, not assumptions. The typical set of sources:

Source	What it establishes
Bank statements for the accounts	Actual credits/debits, dates, sums, payment purpose
Payment instructions (orders)	The basis of the payment, party details, match with the contract
SWIFT messages	Cross-border transfers, the chain of intermediary banks, the ultimate beneficiary
Data on counterparties	Reality of the parties, signs of fictitiousness, relatedness, activity history
Contracts and primary documents	Presence or absence of real goods or service content
Accounting and tax records	How operations were recorded, divergences from reporting and returns

The quality of the opinion depends directly on the completeness of the materials provided. If some accounts or primary documents are missing, the expert must state the limits of the study rather than “filling in” the absent links.

Signs that draw attention

In my expert work, the most informative thing is not individual transactions but their systemic mismatch with economic logic. The most typical markers:

1. Turnover out of proportion to real activity — sums pass through the account that are incommensurate with the scale, staff, resources or declared income of the enterprise.
2. Goods-less transfers — payments for goods or services with no trace of real performance: no warehouse, no transport, no production capacity, no personnel.
3. Cash operations — the systematic withdrawal of significant sums in cash immediately after credits, with no economically justified purpose.
4. Rapid transit — funds do not linger on the account but move onward the same or the next day.
5. Relatedness of counterparties — “circular” payments among parties effectively controlled by a single group.
6. A gap between the stated purpose and the fact — one thing in the documents, another in the real movement of assets.

None of these signs alone is “proof of laundering.” But their combination, backed by documents, forms a well-founded picture of artificial fund movement, which the investigation and the court then assess in legal terms.

The limit of competence: what the expert may assert

This is a matter of principle, and it is here that mistakes most often arise.

The forensic economic expert:

• describes the actual movement of funds, its volumes, routes and chronology;
• records discrepancies between documents, accounts and real operations;
• shows signs of transit, goods-lessness and splitting;
• answers the questions put within the bounds of specialised economic knowledge.

The expert may not:

• characterise the act under an article of the Criminal Code;
• conclude that “laundering” or a “crime” has occurred, as a legal assessment;
• establish the guilt or intent of a specific person.

The legal characterisation of the act is given by the investigation and the court. This flows directly from the division of functions under the procedural legislation, the Law of Ukraine “On Forensic Expert Activity” and the Instruction on the Assignment and Conduct of Forensic Examinations (approved by Order No. 53/5 of the Ministry of Justice of Ukraine): the expert examines factual circumstances on the basis of specialised knowledge and does not resolve questions of law.

A typical mistake to avoid

The most common defect in such opinions is an assertion of “money laundering” with no established predicate act. If the criminal source of the funds has not yet been proven in the proceedings, the expert cannot present the movement of funds as “the laundering of criminal proceeds” — that oversteps the bounds of competence and is at once a weak point for the defence in court.

The correct wording sounds different: the expert describes that the funds passed in transit, had no goods content and did not match the turnover — and leaves the legal assessment of these facts to the body that ordered the examination.

Practical guidance for the parties to proceedings

What is worth taking into account in advance:

• For the investigator or detective — frame the questions to the expert correctly and exhaustively (on the movement of funds, the match of operations with documents), rather than asking to “confirm laundering”; provide the full body of bank statements and primary documents.
• For the lawyer — check whether the expert has overstepped their competence, whether the opinion rests on documents, and whether alternative economic explanations of the operations were taken into account.
• For the business owner — understand that transit payments and “convenient” counterparties with no real content create risk even absent ill intent; keep the primary documents that confirm the reality of operations.
• For the private individual — do not accept or make payments “for a fee” through your own accounts: that is the classic role in someone else’s scheme, with real consequences.

Financial analysis in laundering cases is painstaking work with documents, not loud conclusions. The strength of the examination lies precisely in its restraint: to show the movement of funds and the discrepancies accurately, while leaving the legal characterisation to the court.

If you are a party to proceedings, or a manager who wants to assess fund-movement risks in advance, a considered consultation and a professional forensic economic examination will help you build a position on facts rather than assumptions. Get in touch — I will consider your question within the bounds of my expert competence.