ACAMS

European Union notable documents

-1st directive on Prevention of the Use of the Financial System for the Purpose of Money Laundering (1991) -2nd directive (2001) -3rd directive (2005) -4th Directive (2015)

Second EU Directive

-Amended the First Directive to require stricter money laundering controls across the continent 1. Extended the scope of the first directive beyond drug-related crimes 2.explicitly brought bureaux de change and money remittance offices under AML coverage. 3.clarified that knowledge of criminal conduct can be inferred from objective factual circumstances 4. Provided a more precise definition of money laundering 5. Widened the businesses and professions that are subject to the obligations of the directive -covered lawyer, auditors, external accountants, tax advisers, real estate agents, notaries and legal professionals. -scope -money service business -willful blindness -precise def -businesses&professions

European Union Directive

-Requires EU member states to ensure that money laundering and terrorist financing are prohibited. -requires EU members to ensure that obligations are imposed on a wide range of professionals including auditors, attorneys, tax advisers, real estate agents, notaries and some providers of gambling services. - EU member states are expected to oversee financial institutions and other obliged entities, including: 1. establishing standards for customer due diligence 2.prohibition of shell banking relationships 3.establishing FIUs 4. developing standards for document retention and requiring consequences for failure to comply

What is the FATF and what do they do ?

-The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions. -The FATF is a "policy-making body" which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas. -FATF stated objectives 1. standard setting, remains the ONLY standard setting body 2. ensuring effective compliance with the standards 3.identifying money laundering and terrorist financing threats -Just gives recommendations

Recommendation 5

-encourages companies to criminalize terrorist financing and the financing of terrorist organizations and individual terrorists with or without a link to a specific terrorist act, as well as ensuring these crimes are designated as money laundering predicate offenses -Recommendation 5 was developed with the objective of ensuring that countries have the legal capacity to prosecute and apply criminal sanctions to persons that finance terrorism. -Given the close connection between international terrorism and, inter alia, money laundering, another objective of Recommendation 5 is to emphasize this link by obligating countries to include terrorist financing offenses as predicate offenses for money laundering.

Criteria of FATF membership: Additional Considerations

-level of adherence to financial sector standards -participation in other relevant international organizations 1. standards 2. participation

Basel Committee on Banking Supervision (BCBS)

-primary global standard setter for the prudential regulation of banks and provides a forum for cooperation on banking supervisory matters -its mandate is to strengthen regulation, supervision, and practices of banks worldwide with the purpose of enhancing financial stability

First EU Directive

-required the members to enact legislation to prevent their domestic financial systems from being used for money laundering

What is a critical way to mitigate Money Laundering risk ?

-using transaction monitoring systems to conduct ongoing monitoring of customer activity, building on the info from risk assessments and customer profiles -AML risks require more than just appropriate policies and procedures, banks must have adequate and appropriate monitoring systems

5 examples of placement transactions used in money laundering

1. Blending of funds: commingling of illegitimate funds with legitimate funds 2. Foreign exchange: 3. Breaking up amounts: structuring 4. Currency Smuggling: -cross border physical movement of cash 5. Loans: repayment of legitimate loans using laundered cash -blend -forex -structuring -currency -loans

2 main reasons correspondent banking is vulnerable to money laundering other reasons

1. By their nature, indirect correspondent banking relationships means that the correspondent bank provides services for entities which it has not verified, thus it is more difficult to identify suspicious transactions because they typically don't have the info on the actual parties conducting the transactions 2.the volume of transactions is very large -determining the degree and effectiveness of the supervisory regime that governs the respondent bank might be hard, thus it will be difficult to determine risk -difficult to determine the effectiveness of the respondent banks anti money laundering (AML) controls . -Nesting: foreign financial institution gains access to the U.S. Financial system by operating through a U.S. correspondent account belonging to another foreign financial institution

What functions provided by lawyers, notaries, accountants and other professionals are the most useful to a potential money launderer?

1. Creating and managing corporate vehicles or other complex legal arrangements such as trusts. 2. Buying or selling property 3. Performing financial transactions 4. Providing financial and tax advice 5. Providing introductions to financial institutions 6. Undertaking certain litigation 7. Setting up and managing a charity

6 Examples of money services business (MSB) or money or value transfer services (MVTS)

1. Dealer in foreign exchange 2.Check casher 3.Issuer of traveler's checks or money orders 4.money transmitter 5.Provider and seller of prepaid access - open loop prepaid cards -closed loop prepaid cards 6. U.S. Postal Service - because the U.S. postal service sells its own money orders

What characteristics of charities or non-profit organizations make them particularly vulnerable to misuse for terrorist financing?

1. Enjoying the public trust 2. Having access to considerable sources of funds 3. Being cash-intensive 4.Frequently having a global presence, often in or next to those areas that are exposed to terrorist activity 5. Often being subject to little or no regulation and/or having few obstacles to their creation. -trust -source -cash -world -regulation

6 indicators of money laundering using electronic transfers of funds

1. Funds transfers occur - to or from a financial secrecy haven -to or from a high-risk geographic location without an apparent business reason or when the activity is inconsistent with the customers business or history 2. large incoming funds transfers are received on behalf of a foreign client , with no explanation 3. many smalls incoming transfers 4. funds activity is unexplained, repetitive or shows unusual patterns 5. payments or receipts are received that have no apparent link to legitimate contracts, goods or services 6. funds transfers are sent or received from the same person to or from different accounts - location - large - small - unexplained - no link -same

Vulnerabilities to the Insurance sector

1. Lack of oversight/controls over intermediaries -insurance brokers have alot of control and freedom regarding policies 2. decentralized oversight over aspects of the sales force -Insurance companies may have employees(i.e. captive agents) who are subject to the full control of the insurance company. Non captive agents offer an insurance company's products but are not employed by an insurance company i.e. they can fall through the cracks or find the insurance company with the weakest AML oversight. 3. sales-driven objectives

6 ways to execute trade-based money laundering

1. Overinvoicing or underinvoicing -invoicing goods or services at a price above or below the fair market price 2. Overshipping or short shipping 3. Ghost-shipping 4.Shell Companies 5.Multiple invoicing -Numerous invoices issued for the same shipment of goods 6.Black market trades -AKA Black Market Peso Exchange, a domestic transfer of funds is used to pay for goods by a foreign importer -letter of credit : credit instrument issued by a bank that guarantees payments on behalf of its customer to a third party when certain conditions are met, commonly used to finance exports

3 stages of money laundering cycle?

1. Placement: the physical disposal of cash or other assets derived from criminal activity. -during this phase, the money launderer introduces the illicit proceeds into the financial system. 2.Layering: the separation of illicit proceeds from their source by layers of financial transactions intended to conceal the origin of the proceeds 3. Integration: Supplying apparent legitimacy to illicit wealth through the reentry of the funds into the economy in what appears to be normal business or personal transactions.

3 ways money laundering occurs in travel agencies ?

1. Purchasing an expensive airline ticket for another person who then asks for a refund 2. Structuring wire transfers in small amounts to avoid record keeping requirements, especially when wires are from foreign countries 3. Establish tour operator networks with false bookings and documentation to justify significant payments from foreign travel groups

2 examples of integration transactions used in money laundering

1. Purchasing of luxury assets, such as property, artwork, jewelry or high end automobiles 2. getting into financial arrangements or other ventures where investments can be made in business enterprises

3 ways money laundering occur via vehicle sellers ?

1. Structuring cash deposits below the reporting threshold or purchasing vehicles with sequentially numbered checks or money orders 2.trading in vehicles and conducting successive transactions of buying and selling new and used vehicles to produce complex layers of transactions (layering) 3. accepting third party payments, particularly from jurisdictions with ineffective money laundering controls -structuring -transactions -3rd party

Trust and Company Service Providers (TCSPs) Industry Vulnerabilities

1. Unknown or inconsistent application of regulatory guidelines regarding identification and reporting requirements 2. limited market restriction on practitioners to ensure adequate skills, competence and integrity 3. Inconsistent record keeping across the industry 4.Potential for TCSPs to operate in unlicensed environment 5. Potential for TCSPs customer due diligence (CDD) to be performed by other financial institutions, depending on the jurisdictional requirements - Guidelines -market restriction -record -unlicensed -CDD

What are some red flags associated with real estate?

1. Various uses of cash to aggregate funds for property purchase or down payment or to repay loans. 2. Multiple purchases and sales in a short period of time, sometimes involving property over- or under-valuation or straw buyers -A straw buyer is used when the real buyer cannot complete the transaction for some reason. However, the act of using a straw purchaser is considered illegal where the transaction involves fraud or purchasing goods for someone who is legally barred from making the purchase themselves. 3. Use of off-shore lenders 4. Unknown sources of funds for purchase such as incoming foreign wires where the originator and beneficiary customer are the same 5. Ownership is the customer's only link to the country in which the real estate is being purchased. 1.aggregate 2.multiple 3. off-shore 4.unknown 5.ownership

what are the 4 key elements of a KYC program as highlighted by the 2001 Basel Committee paper?

1. customer identification 2.risk management 3.customer acceptance 4.monitoring

Third Directive notable amendments

1. defined money laundering and terrorist financing as separate crimes 2. Extending customer identification and suspicious activity reporting obligations to trusts and company service providers, life insurance intermediaries, dealers selling goods for cash payments over 15,000 Euros 3.detailing a risk-based approach to customer due diligence -performing due diligence based on how much risk they pose 4.protecting employees who report suspicious activity 5.requiring all financial institutions to identify and verify the beneficial owner of all accounts held by legal entities or persons -money laundering/terrorist financing -TCSPs, life insurance -risk-based -protection -beneficial owner

7 examples of layering transactions used in money laundering

1. electronically moving funds from one country to another and dividing them into advanced financial options and/or markets 2. Moving funds from one financial institution to another or within accounts at the same institution 3. converting the cash placed into monetary instruments 4. reselling high-value goods and prepaid access/stored value products 5. investing in real estate and other legitimate businesses 6. placing money in stocks, bonds or life insurance products 7. using shell companies to obscure the ultimate beneficial owner and assets -moving & dividing -moving &within -converting -reselling -investing -placing -shell companies

Criteria of FATF membership: Qualitative Indicators

1. impact on global financial system, including the degree of openness of the financial sector and its interaction with international markets 2. active participation in a FATF style regional body (FSRB) and regional prominence in AML/CFT efforts 3. Level of AML/CFT risks faced and efforts to combat those risks -impact -participation -level

Systemic Weaknesses of Free Trade Zones (FTZs)

1. inadequate AML/CFT safeguards 2.Minimal oversight by local authorities 3. weak procedures to inspect goods and legal entities, including appropriate record-keeping and information technology systems 4.Lack of cooperation between FTZs and local customs authorities -safeguards -oversight -procedures -cooperation

what are the 3 lines of defense as highlighted by the Basel Committee ?

1. line of business -responsible for creating, implementing and maintaining policies and procedures as well as communicating these to all personnel -Must also establish processes for screening employees to ensure high ethical and professional standards and deliver appropriate training on AML policies and procedures 2. AML compliance function -responsible for ongoing monitoring for AML compliance to enable the escalation of identified non compliance or other issues 3. audit function -independently evaluates the risk management and controls of the bank through periodic assessments, including the adequacy of the banks controls to mitigate the identified risks, the effectiveness of the bank staffs execution of the controls, the effectiveness of the compliance oversight and quality controls and the effectiveness of the training. 1.Policies 2.monitoring 3.evaluate

Money Laundering and Terrorist Financing Red Flags Unusual Activity Indicative of Human Smuggling

1. multiple wire transfers generally kept below the 3,000$ reporting threshold, sent from various locations across the united states to a common beneficiary located in a U.S. or a mexican city along the southwest border 2. multiple wire transfers conducted at different branches of a financial institution to or from the U.S. or Mexican cities along the southwest border on the same day or on consecutive days 3. Money flows that do not fit common remittance patterns -wire transfers that originate from countries with high migrant populations (ex mexico guatemala, el salvador, honduras) are directed to beneficiaries located in a U.S. or mexican city along the southwest border. -beneficiaries receiving wire transfers from countries with high migrant populations who are not nationals of those countries 4.Unusual currency deposits into U.S. financial institutions, followed by wire transfers to countries with high migrant populations in a manner that is inconsistent with expected customer activity. This may include -sudden increases in cash deposits -, rapid turnover of funds -and large volumes of cash deposits with unknown sources of funds. 5.Multiple, apparently unrelated, customers sending wire transfers to the same beneficiary, who may be located in the U.S. or mexican city along the southwest border. These wire senders may also use similar transactional info like -common amounts, -addresses -and phone numbers. when questioned to the extent circumstances allow, the wire senders may have no apparent relation to the recipient of the funds or know the purpose of the wire transfers. 6. A customer's account appears to function as a funnel account, whereby cash deposits (often kept below the $10,000 reporting threshold) occur in cities/states where the customer does not reside or conduct business. Frequently, in the case of funnel accounts, the funds are quickly withdrawn (same day) after the deposits are made. 7. Checks deposited from a possible funnel account appear pre-signed, bearing different handwriting in the signature and payee fields 8.Frequent exchange of small denomination for larger denomination bills by a customer who is not in a cash-intensive industry. This type of activity may occur as smugglers ready proceeds for bulk cash shipments. -structuring/common beneficiary -different branches -unusual money flows -inconsistent customer activity -same beneficiary -funnel account -unusual checks -small--->large bills

Criteria of FATF membership: Quantitative indicators Qualitative Indicators Additional Considerations

1. size of gross domestic product (GDP) 2. Size of the banking, insurance and securities sectors 3. population 1. impact on global financial system, including the degree of openness of the financial sector and its interaction with international markets 2. active participation in a FATF style regional body (FSRB) and regional prominence in AML/CFT efforts 3. Level of AML/CFT risks faced and efforts to combat those risks-impact-participation-level -level of adherence to financial sector standards-participation in other relevant international organizations 1. standards 2. participation

FATF main activities

1. standard setting, remains the ONLY standard setting body 2. ensuring effective compliance with the standards 3.identifying money laundering and terrorist financing threats

What unique characteristics of the EU as a community of states make it fundamentally different from other international organizations?

1. the EU can adopt measures that have the force of law even without approval of the national parliaments of the various member states 2.European law prevails over national law in the case of directives, Thus EU directives have far more weight than the voluntary standards issue by groups such as the Basel Committee or FATF, but the Directive applies only to EU States and not to other countries.

Potential indicators of money laundering in Trust and Company Service Providers (TCSPs) industry

1. transactions that require the use of complex and opaque legal entities and arrangements 2. The payment of consultancy fees to shell companies established in foreign jurisdictions or jurisdictions known to have a market in the formation of numerous shell companies 3.The use of TCSPs in jurisdictions that do not require TCSPs to capture, retain or submit to competent authorities information on the beneficial ownership of corporate structures formed by them. 4. The use of legal person and legal arrangements established in jurisdictions with weak or absent AML/CFT laws and/or poor record of supervision and Monitoring of TCSPs 5. The use of legal person or legal arrangements that operate in jurisdictions with secrecy laws 6. Multiple intercompany loan transactions or multijurisdictional wire transfers that have no apparent or legal purpose 1.legal entities 2. shell companies 3.beneficial owners 4. no laws 5. secrecy 6. intercompany/multijurisdictional

14 Microeconomic effects of money laundering

1. undermining the legitimate private sector -front companies have the competitive advantage over legitimate firms because they have access to substantial illicit funds, allowing them to subsidize products and services sold at below market rates. 2. Weakening financial institutions - criminal activity is associated with bank failures, think fines 3. Dampening effect on foreign investments -when a countrys commercial and financial sectors are perceived to be compromised and subject to the influence of organized crime. Increased risk and volatility 4. Loss of control, or mistakes in, decisions regarding economics policy -when illegal funds outweigh government funds, think the mexican cartels 5. Economic distortion and Instability - criminals invest in activities that are not economically beneficial to the country itself 6. Loss of tax revenue 7. risks to privatization efforts 8. Reputation risk for the country 9. Risk of international sanctions 10. Social costs 11. reputational risk 12. Operational risk -when institutions incur reduced or terminated inter-bank or corresponding banking services or increased cost for these services 13. legal risk 14. concentration risk -too much credit or loan exposure to a borrower

Prepaid card risk factors

1.Anonymous card holders 2.Anonymous funding 3.Anonymous access to funds 4. High value limits and no limits on the number of cards individuals can acquire 5.global access to cash through ATMs 6.Offshore card issuers that may not observe laws in all jurisdictions 7. Substitute for bulk-cash smuggling

Designated Non-Financial Businesses and Professions

1.Casinos 2.real estate agents 3. Dealers in precious metals and stones 4. Lawyers, notaries and independent legal professionals and accountants 5. Trust and Company Service Providers (TCSPs) -blackjack -house -precious -gang -trust

5 possible levels of technical compliance according to the FATF standard

1.Compliant 2.Largely Compliant 3.Partially Compliant 4.Noncompliant 5.Not applicable

Why is gold an extremely attractive vehicle for money laundering?

1.Gold has a high intrinsic value 2. relatively compact and easy to transport 3. It can be bought and sold easily in most areas of the world 4. Allows people to remain anonymous 5.More readily accepted than precious stones because it can be melted down into many forms without losing its value.

Why is real estate an attractive channel for money laundering?

1.It can be purchased with cash 2.the ultimate beneficial owner can be disguised 3. it is a relatively stable and reliable investment 4.the value can be increased through renovations and improvements.

Why is it important to focus on service providers rather than the company or trust when vetting for money laundering activities ?

A company or trust are merely tools through which money launderers operate. A company owned by criminals cannot protect itself but service providers can, which is why it is important for countries to regulate service providers

shell company

A company that at the time of incorporation has no significant assets or operations. - can be set up in onshore as well as offshore locations and their ownership structure can take several forms -Shares can be issued to a natural or legal person or in registered or bearer form

shelf company

A corporation that has had no activity. It has been created and put on the "shelf". This corporation is then later usually sold to someone who would prefer to have an existing corporation than a new one.

what are Trusts ? why are trusts established ? What are trusts useful for and why ?

A trust is a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary. -Trusts are established to 1. provide legal protection for the trustor's assets 2. to make sure those assets are distributed according to the wishes of the trustor 3. and to save time, reduce paperwork and, in some cases, avoid or reduce inheritance or estate taxes. -Trusts are often seen as separate legal entities from the grantor, as such, they are often useful for estate planning and asset protection purposes.

What are concentration accounts and what are they frequently used for ?

AKA special use, omnibus, settlement, suspense, intraday, sweep or collection accounts -internal accounts established to facilitate the processing and settlement of multiple or individual customer transactions within the bank, usually on the same day. -frequently used to facilitate transactions for private banking, trust and custody accounts, funds transfers and international affiliates

Group 1 - Recommendations 1-2

AML/CFT Policies and Coordination - assessing risks and applying a risk-based approach -National cooperation and coordination

open loop prepaid cards

An open loop card is a general-purpose charge card that can be used anywhere that brand of card is accepted. Network branded by American Express, Visa, or Mastercard .

In summary form, how does the black market peso exchange (BMPE) work in laundering money?

As an example, the drug trafficker sells drugs for US dollars in the US and - in order to avoid smuggling the US dollars back to Mexico - the trafficker gives the proceeds to a "peso broker." The broker finds businesses in Mexico that want to buy goods in the US. Then the broker buys the US goods with US dollars and has the goods shipped to Mexico. The business in Mexico pays the broker in Mexico in pesos and the broker then gives the pesos - minus a fee - to the drug traffickers.

APG

Asia/ Pacific Group on Money Laundering (APG) an autonomous regional anti-money laundering body -voluntary and cooperative by nature -determines its own policies and practices -not part of any international organization

What is the relationship between due diligence and risk from the banks perspective ?

Banks should apply basic due diligence to all customers and increase the due diligence as the risks increase.

Why are bearer bonds and bearer stock certificates prime vehicles for money laundering?

Bearer bonds and bearer stock certificates, or "bearer shares," are prime money laundering vehicles because they belong, on the surface, to the "bearer." When bearer securities are transferred, because there is no registry of owners, the transfer takes place by physically handing over the bonds or share certificates. Bearer shares offer lots of opportunities to disguise their legitimate ownership. -no registry of owners -transfer takes place by physical handoff -offer lots of opportunities to disguise their legitimate ownership

What is structuring? common structuring technique

Designing a transaction to evade triggering a reporting or record-keeping requirement. Smurfing involves taking a large cash deposit and breaking it into smaller amounts to be deposited into separate banks, separate accounts or on separate days in order to avoid currency transaction reports.

What is an Escrow account and why are they attractive to money launderers ?

Escrow is a legal concept describing a financial instrument whereby an asset or escrow money is held by a third party on behalf of two other parties that are in the process of completing a transaction. Escrow accounts might include escrow fees managed by agents who hold the funds or assets until receiving appropriate instructions or until the fulfillment of predetermined contractual obligations. Money, securities, funds, and other assets can all be held in escrow. They are attractive to money launderers because of the large number of diverse transactions that can pass through them in any deal -i.e. a money launderer could easily disguise illegal activity in the account while appearing to operate the account in a manner that is consistent with what would be expected.

What are free trade zones ?

FTZs are designated geographic areas with special regulatory and tax treatments for certain trade-related goods and services.

GAFILAT

Financial Action Task Force of Latin America

Group 4 - Recommendations 9-23

Financial and Non-financial institution preventative measures 1.financial institution secrecy laws 2. customer due diligence and record keeping 3. additional measures for specific customers and activities 4. reporting of suspicious transactions 5. designated non-financial businesses and professions

What is the Hawala System?

Hawala is a method of transferring money without any money actually moving. Interpol's definition of hawala is "money transfer without money movement." Another definition is simply "trust." Hawala is an alternative remittance channel that exists outside of traditional banking systems. Transactions between hawala brokers are made without promissory notes because the system is heavily based on trust and the balancing of hawala brokers' books

Why are hawalas attractive to terrorist financiers?

Hawalas are attractive to terrorist financiers because they, unlike formal financial institutions, are not subject to formal government oversight and do not keep detailed records in a standard form. Although some hawaladars do keep ledgers, their records are often written in idiosyncratic shorthand and are maintained only briefly.

GIABA

Intergovernmental Action Group against Money Laundering in West Africa

Group 7 - Recommendations 36-40

International Recommendation 1. international instruments 2. mutual legal assistance 3. mutual legal assistance regarding freezing and confiscation 4. extradition 5. other forms of international cooperation

Why is a Limited Liability Company (LLC) an attractive vehicle for money laundering?

LLCs can be owned or managed anonymously, almost anybody can manage a LLC including foreign persons and other business entities

MENAFATF

Middle East and North Africa Financial Action Task Force

Group 2 - Recommendations 3-4

Money Laundering and Confiscation 1. money laundering offenses 2. confiscation and provisional measures

What are Trust and Company Service Providers (TCSPs)?

Participate in the creation, administration or management of corporate vehicles. They refer to any person or business that provides any of the following services to third parties 1. Acting as a formation agent of legal persons 2.Acting as (or arranging for another person to act as) a director or secretary of a company, a partner of a partnership or a similar position in relation to other legal persons 3. Providing a registered office, business address or correspondence for a company, a partnership or any other legal person or arrangement. 4. Acting as (or arranging for another person to act as) a trustee of an express trust 5. Acting as (or arranging for another person to act as) a nominee shareholder for another person -agent -director or secretary -office -trust -share

Group 6 - Recommendations 26-35

Powers and responsibilities of competent authorities and other institutional measures 1. regulation and supervision 2. operational and law enforcement 3. general requirements 4. sanctions

What are some of the risks listed by FATF in its 2010 report titled "Guidance For A Risk-Based Approach Prepaid Cards, Mobile Payments And Internet-Based Payment Services"?

Some of the risks on new products and services, according to FATF 1.include anonymity; 2.geographic reach; 3. alternative to physical cross-border transportation 4.easy access to cash 5. and the fact that several entities are required to issue prepaid cards - the program manager, issuer, acquirer, payment network, distributor and agents - that may be hard to all supervise or monitor. -anon -reach -alternative -access -several

Process of FATF Membership

Step 1. Engaging with the country and granting observership Step 2. Carrying out a mutual evaluation, agreeing on an action plan and granting membership

TFTP

Terrorist Finance Tracking Program

Group 3 - Recommendations 5-8

Terrorist Financing and Financing of Proliferation 1.terrorist financing offenses 2. targeted financial sanctions related to terrorism and terrorist financing 3. target financial sanctions related to proliferation 4. non-profit organizations

Basel Committee

The Basel Committee on Banking Supervision (BCBS) -is the primary global standard setter for the prudential regulation of banks and provides a forum for regular cooperation on banking supervisory matters. -Its 45 members comprise central banks and bank supervisors from 28 jurisdictions.

CFATF

The Caribbean Financial Action Task Force is an organisation of twenty-five (25) states of the Caribbean Basin, Central and South America, which have agreed to implement common countermeasures to address money laundering

FATF

The Financial Action Task Force (FATF) is an inter-governmental body established in 1989 by the Ministers of its Member jurisdictions. -The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. -The FATF is therefore a "policy-making body" which works to generate the necessary political will to bring about national legislative and regulatory reforms in these areas.

What is FinCEN ? What do they do ?

The Financial Crimes Enforcement Network (FinCEN) - is a bureau of the United States Department of the Treasury -collects and analyzes information about financial transactions in order to combat domestic and international money laundering, terrorist financing, and other financial crimes. -the collectors

What is the most basic difference between terrorist financing and money laundering?

The most basic difference between terrorist financing and money laundering involves the origin of the funds. Terrorist financing uses funds for an illegal political purpose, but the money is not necessarily derived from illicit proceeds. On the other hand, money laundering always involves the proceeds of illegal activity. The purpose of laundering is to enable the money to be used legally.

closed loop prepaid cards

The opposite of an open loop card is a card that can only be used at a specific retailer, known as a closed loop card

What is the primary concern with regard to the use of gatekeepers?

The primary concern with regard to the use of gatekeepers - attorneys, notaries, accountants and auditors - is the fact that they can be used to enhance secrecy and to keep hidden the beneficial owner of an account or transaction.

correspondent banking

The provision of banking services by one bank (the "correspondent bank") to another bank (the "respondent bank"). -Large international banks typically act as correspondents for thousands of other banks around the world. -Respondent banks may be provided with a wide range of services, including cash management (e.g., interest-bearing accounts in a variety of currencies), international wire transfers of funds, check clearing services, payable-through accounts and foreign exchange services.

What is the significance of a trust account, whether offshore or onshore, in the context of money laundering?

The significance of a trust account — whether onshore or offshore — in the context of money laundering cannot be understated: -It can be used as part of the first step in converting illicit cash into less suspicious asset - it can help hide criminal ownership of funds or other assets - and it is often an essential link between different money laundering vehicles and techniques, such as real estate, shell and active companies, nominees and the deposit and transfer of criminal proceeds.

Group 5 - Recommendations 24-25

Transparency and beneficial ownership of legal persons and arrangements -transparency and beneficial ownership of legal persons and arrangements

What piece of legislation required certain dealers in covered and finished goods, including precious metals, stones, and jewels, to establish an anti-money laundering program?

USA PATRIOT act

Why did the FATF recognize that they could not use identical measures to fight money laundering and terrorist financing?

because countries have different legal and financial systems

centralized vs decentralized virtual currency

centralized have a centralized repository and a single administrator decentralized (Bitcoin) have no repositories or administrators but work as peer to peer media of exchange without need for an intermediary

In which type of countries is the real estate sector frequently used in money laundering activities ?

countries with political, economic and monetary stability

Technical Compliance Assessment

evaluates the specific requirements of the FATF recommendations, including how a member relates them to its relevant legal and institutional framework, and the powers and procedures of its competent authorities -The assessed country must provide information on the laws, regulations and any other legal instruments it has in place to combat money laundering and the financing of terrorism and proliferation. This used to be the main focus of FATF, and FATF still requires the legal framework to be in place. But experience has shown that having the laws in the books is not enough, the main focus is now on effectiveness.

how long should banks maintain all records of decisions related to investigations related to unusual activity as required by law ?

for at least 5 years after closure of the account

macroeconomic consequences of unchecked money laundering

increased exposure to organized crime and corruption

international business corporations (IBC) What are the benefits of an international business corporations (IBC)? Why are international business corporations (IBC) risky ?

international business corporation (IBC) is a variety of offshore corporate structures that are dedicated to business use outside the incorporating jurisdiction and feature rapid formation, secrecy, broad powers, low cost, low -to-zero taxation and minimal filing and reporting requirements benefits include asset protection, access to multiple investment markets, estate planning, legitimate tax benefits and serving as holding companies -risky because they are usually created in a tax haven and usually require incorporation with a local agent which can further reduce transparency

What is money laundering?

involves taking criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal activities -the process of making dirty money look clean

Recommendation 8

issued by FATF to ensure that Non profit Organizations (NPOs) are not abused by 1. terrorist organizations posing as legitimate entities 2.exploiting legitimate entities as conduits for terrorist financing 3. Concealing or obscuring the clandestine diversion of funds intended for legitimate purposes to terrorist organizations

What important prerequisite of money laundering is present in all three parts of the United Nations 2000 Convention Against Transnational Organized Crime (AKA Palermo Convention) definition of money laundering?

knowledge ...knowing that it is derived from a criminal offense

What Sectors of the insurance industry are most susceptible to money laundering?

life insurance and annuities -An annuity an investment, a contract between you and an insurance company that requires the insurer to make payments to you, either immediately or in the future in exchange for an up front sum of money. Has Cash value -Life insurance: substantial sums can be invested in widely available life insurance products and many feature a high degree of flexibility, whilst at the same time ensuring nonnegligible rates of return -Life insurance products such as WHOLE or PERMANENT life insurance have an investment value, which can create a cash value above the original investment if it is canceled by the policy holder.

FSRBs

nine FATF-style regional bodies (FSRBs) have been established for the purpose of disseminating the International standards on combating money laundering, financing of terrorism & proliferation (FATF Recommendations) throughout the world. -The main task of FSRBs is to set up systems for combating money laundering, financing of terrorism and proliferation in their respective regions. -The FSRBs conduct evaluations of the AML/CFT systems of the member states and make recommendations for their improvement. The regional bodies are also involved in the study of typologies - the most common schemes for money laundering and financing of terrorism and proliferation. Based on the results of typological researches, the best practices are disseminated to the private sector, supervisory and regulatory bodies, law enforcement and the scientific community.

Recommendations 30 and 31

outline the powers that the FIU and other competent authorities responsible for conducting investigations 1. responsibility for money laundering and terrorist financing investigations within the framework of national AML/CFT policies, at least in all cases related to major proceeds-generating offenses, developing a proactive parallel financial investigation when pursuing money laundering, associated predicate offenses and terrorist financing, including cases where the associate predicate offense occurs outside their jurisdictions 2.. expeditiously identifying, tracing, and initiating actions to freeze and seize property that is or may become subject to confiscation, or is suspected of being proceeds of crime 3. access to all necessary documents and info for use in those investigations and in prosecutions and related actions; 4. this should include powers to use compulsory measures for the production of records held by financial institutions, designated non financial businesses and professionals (DNFBPs) and other natural or legal persons for the search of people and premises, -for taking witness statements - and for the seizure and obtaining of evidence. 5. Using a wide range of investigative techniques suitable for investigation of money laundering, associated predicate offenses and terrorist financing. These investigative techniques include: undercover operations, intercepting communications, accessing computer systems and controlled delivery. -investigations -confiscation -access -compulsory -techniques

Two categories of trusts

revocable: the grantor/settlor can terminate the trust Irrevocable: the grantor cannot terminate the trust once created

What characteristic about Trust and Company Service Providers (TCSPs) conflict with AML reporting requirements ?

some TCSPs are required to afford confidentiality privileges to a client

What is willful blindness ? how does it relate to money laundering?

the deliberate avoidance of knowledge of the facts or purposeful indifference. -the courts have held that willful blindness is the equivalent of actual knowledge of the illegal source of funds or of the intentions of a customer in a money laundering transaction.

Trade-Based Money Laundering (TBML)

the process of disguising the proceeds of crime and moving value through the use of trade transactions in an attempt to legitimize their illicit origins.

What is the most common element in money laundering cases dealing with vehicle dealers ?

the unreported use of currency to pay for automobiles

What is the biggest misconception about the money services business (MSB) industry

there is minimal oversight

What is a money services business (MSB) or money or value transfer service (MVTS) ?

transmits or converts currencies - usually provide currency exchange -money transmission -check-cashing and money order services