AML CAMs

What is a hawala?

A funds exchange system in Indian and Chinese civilization used to facilitate the secure and convenient cross-border movement of funds. Hawala was born centuries before western financial systems. Merchant traders wishing to send funds to their homelands will deposit them with hawala brokers or a hawaladar who normally owned a trading business. For small fees, the banker would arrange for the funds to be available for withdrawal from another banker, normally also a trader, in another country. The two bankers would settle accounts through normal process of trade. Today the technique works much the same with business persons in various parts of the world using their corporate accounts to move money internationally for third parties. Deposits and withdrawals are made through hawadars rather than traditional financial institutions. The practice is vulnerable to terrorist financing and money laundering. Funds do not actually cross borders and transactions tend to be confidential, as records are not stringently kept. In Pakistan the system is called Hundi.

Describe willful blindness.

A legal principle that operates in money laundering cases in the US and is defined by courts as the deliberate avoidance of knowledge of the facts or purposeful indifference. Courts have held that willful blindness is the equivalent of actual knowledge of the illegal source of funds or the intentions of a customer in a money laundering transaction.

Identify three ways money laundering can occur through vehicle sellers.

"Vehicle sellers" include sellers and brokers of new vehicles, such as automobiles, trucks, motorcycles, new aircraft (including fixed-wing airplanes, helicopters, new boats, ships and used vehicles. Risks and ways laundering can occur through vehicle sellers: - Structuring cash deposits below the reporting threshold, or purchasing vehicles with sequentially numbered checkers or money orders - Trading in vehicles as conducting successive transactions of buying and selling new and used vehicles to produce complex layers of transactions - Accepting third-party payments, particularly from jurisdictions with ineffective money laundering controls

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

- "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

What is a PEP and what is the primary risk in dealing with one?

- A "politically exposed person," meaning a person who has it has had a prominent government or quasi-public position in a country. - The primary risk is that the source of funds from a PEP may be from corruption.

How can the early redemption method on the insurance policies be used to launder money?

- A potential money launderer may appear more interested in the cancellation terms of a policy than the benefits of the policy - The launderer buys a policy with illicit money and then tells the insurance company that he has changed his mind and does not need the policy and receives a clean check from a respected insurer.

Identify several situations that may require a financial institution to initiate an internal investigation.

- A report of examination from the regulators - Information from third parties, such as customers - Information derived from surveillance or monitoring systems - Information from employees or a company hotline - Receipt of a governmental subpoena or search warrant - Learning that government investigators are asking questions of institution employees, business associates, customers or even competitors - The filing of a civil lawsuit against the institution or a customer of the institution

What are the basic elements of financial institutions anti-money laundering program?

- A system of internal policies, procedures and controls - a designated compliance officer with day-to-day oversight over the AML program - an ongoing employee training program - an independent audit function to test the AML program

Identify the seven topics of international standards incorporated into the FATF 40 Recommendations (2012).

- AML/CFT policies and procedures (Rec. 1-2) - Money laundering and confiscation (Rec. 3-4) - Terrorist financing and financing if proliferation (Rec. 5-8) - Financial and non-financial institution preventative measures (Rec. 9-23) - Transparency and beneficial ownership of legal persons and arrangements (Rec. 24-25) - Powers and responsibilities of competent authorities and other institutional measures (Rec. 26-35) - International cooperation (Rec. 36-40)

Describe the elements that should be addressed in a global approach to KYC identified in the Basel Committee's October 2004 paper "Consolidated KYC Risk Management."

- Addresses the need for banks to adopt a global approach and to apply the elements necessary for a sound KYC program to both the parent bank or head office and all of its branches and subsidiaries. These elements consist of: - Risk management - Customer acceptance and identification policies - Ongoing monitoring of higher-risk accounts

Describe the FATF's Recommendation 1 (2012) on the risk-based approach.

- Allows countries to allocate their limited resources in a targeted manner to their own particular circumstances, thereby increasing the efficiency of the preventative measures. Financial institutions should also use the risk-based approach to identify and mitigate the risks they face.

How can the free-look period be used to launder money?

- Allows investors, for a short period of time after the policy is signed and the premium paid, to back out of a policy without penalty. - This process allows the money launderer to get an insurance check (cleaned funds) - Often readily detected and reported now as more insurance companies are subject to AML requirements

How is a private banking account defined under Section 312 of the US Patriot Act?

- An account with a minimum aggregate deposit of $1 million for one or more non-US persons and which is assigned to a bank employee acting as a liaison with the non-US person.

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?

- Anonymity - Geographic reach, - Alternative to physical cross-border transportation - Easy access to cash - 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

What are some of the risks pertaining to the use of prepaid bank cards or reasons why they are attractive to money launderers?

- Anonymous card holders - Anonymous funding - High value limits - Global access to cash through ATMs - Lax offshore jurisdictions issuing the cards - The cards being a substitute for bulk-cash smuggling

What are the nine FATF-Style Regional Bodies?

- Asia/Pacific Group on Money Laundering (APG) - Caribbean Financial Action Task Force (CFATF) - Council of Europe Committee of Experts in the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) formerly PC-R-EV - Eurasian Group (EAG) - Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) - Financial Action Task Force of Latin America (GAFILAT) (formally known as Financial Action Task Force in Money Laundering in South America (GAFISUD) - Middle East and North Africa Financial Action Task Force (MENAFATF) - Task Force on Money Laundering in Central Africa (GABAC) - Intergovernmental Action Group Against Money Laundering in West Africa (GIABA)

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

- Can be used as the first step in converting illicit cash into less suspicious assets - Can help hide criminal ownership of funds or other assets - 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

What are some ways Money Service Businesses (MSBs) can be used for money laundering?

- Cashing checks without obtaining proper or adequate customer identification - Failing to file currency transaction reports when required - Transmitting funds overseas without sufficient due diligence

What types of customers might be considered high risk for money laundering?

- Casinos - offshore corporations and banks located in tax/banking havens - MSBs, including currency exchange houses, money remitters, check cashers - car, boat and plane dealerships - used car and truck dealers and machine parts manufacturers - travel agencies - Brokers/dealers in securities - Jewel, gem and precious metals dealers - import/export companies - cash intensive businesses (restaurants, retail stores, parking)

Give an example of the first stage of money laundering.

- Co-mingling illegitimate funds with legitimate ones; - making foreign exchange transactions with illegal funds; - depositing small amounts of cash into various accounts;

Describe FATF's Recommendation 15 (2012) on new technologies.

- Countries and financial institutions should assess the risks associated with developments of new products, business practices, delivery mechanisms & technology. - Financial institutions should assess these risks prior to launching new products, they should also take appropriate measures to mitigate the risks identified.

Name various ways that a gatekeeper (an attorney, notary, accountant, auditor) could assist in a money laundering scheme.

- Creating and managing corporate vehicles or other complex legal arrangements - Buying or selling property as a cover for transfers of illegal funds - Performing financial transactions including making deposits, withdrawing funds, engaging in foreign exchange operations, buying or selling stock and sending international wires - Setting up it managing a charity

Which money laundering stage(s) are credit cards most likely to be used and what is an example of money laundering through the use of credit cards?

- Credit cards are most likely to be used during the layering/integration stage. - An example is overpaying a credit card and then asking for a refund. Receiving a check from the reputable credit card company makes it look like the funds received are legitimate.

What are the four key elements of Know Your Customer (KYC) as identified in the Basel Committee's October 2001 paper "Customer Due Diligence for Banks"?

- Customer identification - Risk management - Customer acceptance - Monitoring

What does FATF recommend considering when assessing risk?

- Customer risk factors such as non-resident customers, cash-intensive businesses, complex ownership, structure of a company and companies with bearer shares. - Country or geographic risks such as countries with inadequate AML/CFT systems, countries involved with funding or supporting of terrorist activities or those with significant levels of corruption. - Product, service, transaction or delivery channel risk factors such as private banking, anonymous transactions and payments received from unknown third parties.

What are some of the target audiences for training?

- Customer-facing staff - Operations personnel - AML/CFT compliance staff - Senior management and board of directors - Independent testing staff

Identify several types of internal reports financial institutions may use to discover money and laundering and terrorist financing.

- Daily cash activity in excess of the country's reporting threshold - daily cash activity just below the country's reporting threshold (to identify possible structuring) - cash activity aggregated over a period of time (e. g., Individual transactions over a certain amount, or totaling more than a certain amount over a 30 day period) to identify possible structuring - wire transfer reports/logs (with filters using amount and geographical factors) - Monetary instrument logs/reports - check kiting/drawing on uncollected funds (significant debit/credit flows) - Significant change reports - New account activity reports

According to Section 312 of the USA Patriot Act the due diligence program for foreign correspondent accounts must address which three measures?

- Determining whether enhanced due diligence is necessary - Assessing the money laundering risk presented by the correspondent account - Applying risk based procedures and controls reasonably designed to detect and report suspected money laundering laundering

Give an example of the second stage of money laundering.

- Electronically moving funds from one country to another; - moving funds from one financial institution to another; - converting the cash placed into the system into monetary instruments; - investing in real estate and other legitimate businesses; - placing money in stocks or bonds; using shell companies to obscure the ultimate beneficial owner and assets.

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

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

According to FATF, when should an institution conduct CDD?

- Establishing business relationships - Carrying out occasional transactions under certain circumstances - there is a suspicion of money laundering or terrorist financing - the financial institution has doubts about the veracity or adequacy of previously obtained customer identification data

What is the primary way in which the European Union's Second Directive on Prevention on the Use of the Financial System for the Purpose of Money Laundering (2001) expanded the scope of the First Directive?

- Extended the scope of the First Directive beyond drug-related crimes. The definition of "criminal activity" was expanded to cover not just drug trafficking but all serious crimes including corruption and fraud against the financial interests of the European community.

Why is the risk based approach more preferable than a prescriptive approach in the area of an anti-money laundering and counterterrorist financing?

- Flexible: as money laundering and terrorist financing risks very across a jurisdictions, customers, products and delivery channels, and over time. - Effective: As companies are better equipped than legislators to effectively assess and mitigate the particular money laundering and terrorist financing risks they face. - Proportionate: Because a risk based approach promotes a common sense and intelligent approach to fighting money laundering and terrorist financing as opposed to a check-the-box approach. It also allows firms to minimize the adverse impact of anti-money laundering procedures on their low risk customers.

What are the seven elements of a sound customer due diligence (CDD) program?

- Full identification of customer and business entities, including source of funds and wealth when appropriate - Development of transaction and activity profiles of each customers anticipated activity - Definition and acceptance of the customer in the context of specific products and services - assessment and grading of risks that the customer or the account present - Account and transaction monitoring based on the risks presented - Investigation and examination of unusual customer or account activity - documentation of findings

What were two of the key findings by FATF in its report on "Money Laundering/Terrorist Financing Risks & Vulnerabilities Associated with Gold," issued in July 2015?

- Gold is a extremely attractive vehicle for laundering money because it's relatively company and easy to transport - The gold market is a target for criminal activity because it is lucrative and holds its value regardless of the form it takes

According to the FATF 40 Recommendations, the complete set of countermeasures against money laundering and terrorist financing covers what five elements.

- Identification of risks and development of appropriate policies - The criminal justice system and law enforcement - The financial system and it's regulation - The transparency of legal persons and arrangements - International cooperation

What is a concentration account?

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

List reasons why real estate can be an attractive method of money laundering.

- It can be purchased with cash - The ultimate beneficial owner can be disguised - It is a relatively stable and reliable investment - The value can be increased through renovations and improvements

How does the scope of the European Unions Third Monet Laundering Directive differ from the Second Money Laundering Directive?

- It specifically includes the category of trust and company service providers - It covers all dealers trading in goods who trade in cash over 15,000 Euros - The definition of financial institution includes certain insurance intermediaries

What are the economic effects of money laundering?

- Loss of control of, or mistakes in, decisions regarding economic policy - Economic distortion and instability - Loss of tax revenue - Risks to privatization efforts - Reputational risk for the country - Social costs

What are some examples of internal controls, outside of policies and procedures?

- Management reports and other built-in safeguards that keep the program working. These internal controls should enable the compliance organization to recognize devotions from standard procedures and safety protocols. A matter as simple as requiring a corporate officer's approval or two signatures for transactions that exceed a prescribed amount could be critical internal control element that if ignored seriously weakens an institutions AML/CFT program and attracts unwanted attention from supervisory authorities.

What are some of the risks posed by third party payment processors (TPPPs)?

- Multiple financial institution relationships where the TPPPs suspicious activity can't be seen in it's entirety by one institution. - Engaging in ACH transactions from overseas where the suspicious transactions are hidden by the large number of other transactions the TPPP engages in - The possibility of the return rates stemming from unauthorized transactions are higher than usual

Why is it critical that the Compliance Officer have good communication skills?

- Must have the means to communicate at all levels of the organization - from front line associates all the way up to the CEO and Board of Directors. It is critical for a compliance officer to be capable of articulating matters of importance to senior and executive management, particularly significant such as a sudden or substantial increase in STRd or currency transaction reports (CTRs). Other items of concern that need to be escalated to management may include changes to laws or regulations that may require immediate action. A compliance officer must have the skills necessary to be able to analyze and interpret these ongoing changes, determine what effect they may have on the institution, and suggest an action plan when appropriate.

Identify the three gateways that assist with the AML cooperation between countries.

- Mutual legal assistance treaties - Financial and Intelligence units - The supervisory channel

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

- Origin of funds - - Terrorist financing uses funds for an illegal political purpose but the money is not necessarily derived from illicit proceeds - money laundering always involves the proceeds of illegal activity. The purpose of laundering is to enable the money to be used legally

What are some money laundering risks pertaining to the use of payable through accounts (PTAs)?

- PTAs with foreign institutions licensed in offshore centers with each bank supervision - PTAs where the respondent bank (the foreign one) fails to conduct adequate customer due diligence - PTAs where the sub-account holders have currency deposit and withdrawal privileges

What are some of the red flags associated with casinos and gambling?

- Paying off gambling debts in cash just under the reporting requirements; - Purchasing chips but engaging in minimal gambling and then cashing the chips back in; - Using the gambling house for banking-like financial services, including wiring funds overseas; - Betting on both "red" and "black" spaces in roulette; - Purchasing chips with cash just under the reporting requirements.

According to the 1999 US customs "trade advisory" titled, "The Black Market Peso Exchange," what are the three red flags as indicators of BMPE?

- Payment made in cash by a third-party with no connection to the underlying transaction - Payment made by wire transfers from third parties unconnected by the underlying transaction - Payment made with checks, bank drafts or money orders and not drawn on the account of the purchaser

What factors may contribute to the vulnerabilities of private banking with regard to money laundering?

- Perceived high profitability - Intense competition - The high level of confidentiality associated with private banking - The close relationship if trust developed between relationship managers and their clients. - Commission based compensation for relationship managers - A culture of secrecy and discretion developed by the relationship managers for their clients - The relationship managers becoming client advocates to protect their clients

Describe the three phases of money laundering.

- Placement is the physical disposal of cash or other assets derived from criminal activity - Layering is the separation of illicit proceeds from their source by layers of financial transactions intended to conceal the origin of the proceeds - Integration is supplying apparent legitimacy to illicit wealth through the re-entry of the funds into the economy in what appears to be normal business or personal transactions

What banking functions or products are considered high risk?

- Private banking - Offshore international activity - Deposit taking facilities - Wire transfer and cash management functions - transactions in which the primary beneficiary is undisclosed - Loan guarantee schemes - Travelers checks - Official bank checks - money orders - foreign exchange transactions - Trade Financing transactions with unusual pricing features - Payable Through Accounts (PTAs)

Describe a typical suspicious or unusual transaction reporting process within a financial institution.

- Procedures to identify potential suspicious transactions or activity - A formal evaluation of each instance, and continuation, of unusual transactions or activity - Documentation of the suspicious transaction reporting decision, whether or not filed with the authorities - Procedures to periodically notify senior management or the board of directors of suspicious transaction filings - Employee training or detecting suspicious transactions or activities

When categorizing risks, what are the four general levels of risk?

- Prohibited: The company will not tolerate any dealings of any kind given the risk. Countries subject to economic sanctions or designated as state sponsors of terrorism, such as Sudan or Iran, are prime candidates for prohibited transactions. Prohibited customers would not include shell banks. - High Risk: The risks here are significant, but are not necessarily prohibited. To mitigate the heightened risk presented, the firm should apply more stringent controls to reduce the risk, such as conducting enhanced due diligence and more rigorous transaction monitoring. Countries that are noted for corruption or drug trafficking are generally deemed high-risk. High-risk customers may include PEP's, high-risk products, and services may include correspondent banking and private banking. - Medium Risk: are more than a low or standard risk of money laundering and merit additional scrutiny, but do not rise to the level of high risk. - Low Risk or Standard: represents the baseline risk of money laundering; normal business rules apply

According to the Wolfsberg AML Principles for Private Banking (2002), what are the situations for private banking that require further due diligence?

- Public officials, including individuals holding, or having held, positions of public trust, as well as close associations - High-risk countries, including countries "identified" by credible sources as having inadequate AML standards or representing high-risk for crime and corruption. - High-risk activities, involving clients and beneficial owners whose source of wealth "emanates from activities known to be susceptible to money laundering"

List ways in which a travel agency could be used to launder money.

- Purchasing an expensive airline ticket and then requesting a refund - Paying for travel tours with multiple wires just under reporting threshold - Creating false bookings through tour operator networks to justify significant payments from foreign travel groups

Give an example of the third stage of money laundering.

- Purchasing luxury assets like property, artwork, jewelry or high-end automobiles; - investing in business enterprises.

What is remote deposit capture and what risk is associated with it?

- RDC is a product offered by banks that allows customers to scan a check and transmit an electronic image to the bank. - Associated risk is that it enables a money launderer to deposit checks without having to visit the bank or risk detection

What are three high-level principles that apply to both FATF and FATF-style Regional Bodies?

- ROLE - FSRBs play an essential role in identifying and addressing AML/CFT technical assistance needs for their individual members. In those FSRBs that carry out this co-ordination work, technical assistance necessarily complements mutual evaluation and follow-up processes by helping jurisdictions to implement FATF standards. - AUTONOMY - FATF and FSRBs are free-standing organizations that share the common goals of combating money laundering and the financing of terrorism and proliferation, and if fostering effective AML/CFT systems. - RECIPROCITY - FATF and FSRBs operate on the basis of (mutual, joint or common) recognition of their work, which implies that FSRBs and FATF out in place similar mechanisms for effective participation and involvement in each other's activities.

Describe four types of risk associated with money laundering faced by financial instruments.

- Reputational risk is the potential that adverse publicity regarding organizations business practices and associations (whether accurate or not) will cause a loss of public confidence in the integrity of the organization - Operational risk is the potential for loss resulting from inadequate internal processes, personnel it systems or from external events - Legal risk is the potential for lawsuits, adverse judgements, unenforceable contracts, fines and penalties generating losses, increased expenses for an organization, or even the closure of the organization - Concentration risk is the potential for loss resulting from too much credit or loan exposure to one borrower or group of borrowers

How can art and antique dealers and auctioneers mitigate their money laundering risks?

- Require all art vendors to provide names and addresses. Ask that they sign and date a form that states the item wasn't stolen and that they're authorized to sell it. - Verify the identities and addresses of new vendors and customers - If it's believed an item may be stolen, immediately contact the Art Loss Register - Look critically when a customer asks to pay cash - Be aware of money laundering regulations - Appoint a senior staff member to whom employees can report suspicious activity

What steps should the independent audit take to evaluate the bank's transaction monitoring software's ability to identify unusual activity?

- Reviewing Policies, procedures, and processes for suspicious activity monitoring - Evaluating the systems methodology for establishing and analyzing expected activity or filtering criteria - Evaluating the appropriateness of the monitoring reports - comparing the transaction monitoring typologies to the AML/CFT risk assessment for reasonableness

What are some emerging risks for terrorist-financing?

- Self-funding by foreign terrorist fighters - Terrorists raising funds through the use of social media, new payment products and services , and exploitation of natural resources

Identify the three important tasks that FATF focuses on.

- Spreading the anti-money laundering message worldwide - Monitoring implementation of the FATF recommendations among FATF members - Reviewing money laundering trends and countermeasures

What is structuring?

- Taking a large cash deposit and breaking it into smaller amounts to be deposited into separate banks or accounts, or on separate days in order to avoid CTR filing (currency transaction reports).

What are the three primary categories of economic sanctions?

- Targeted Sanctions: aimed at specifically named individuals such as key leaders in a country or territory, named terrorists, significant narcotics traffickers and proliferators of weapons of mass destruction. These sanctions often include the freezing of assets and travel bans where possible. - Sectorial Sanctions: aimed at key sectors of an economy to prohibit a very specific subset of financial dealings within those sectors to impede future growth. - Comprehensive Sanctions: generally prohibit all direct or indirect import export, trade brokering, financing or facilitating against most goods, technology, and services. These are often aimed at regimes responsible for gross human rights violations and nuclear proliferation.

What is the concept of willful blindness?

- The "deliberate avoidance of knowledge of the facts" or "purposeful indifference" and is the equivalent of actual knowledge

What are some sources of identifying countries that pose heightened geographic risk?

- The US State Department issues an annual "International Narcotics Control Strategy Report" rating more than 100 countries on their money laundering controls. - Transparency International publishes a yearly "Corruption Perceptions Index," which rates more than 100 countries on perceived corruption. - FATF identifies jurisdictions with weak AML/regimes and issues country-specific Mutual Evaluation Reports - In the US certain domestic jurisdictions are evaluated based on whether they fall within government-identified higher-risk geographic locations such as High Intensity Drug-Trafficking Areas (HIDTA) or High Intensity Financial Crime Areas (HIFCA).

Identify the factors a prosecutor may consider when determining whether or not to bring a case against an institution involving money laundering related charges.

- The institution has a criminal history - The institution has cooperated with the investigation - The institution discovered and self-reported the money laundering related issues - The institution has had a comprehensive and effective AML program - The institution has taken timely and effective remedial action - There are several remedies available that conserve as punishment - deterring wrongdoing by others is needed and will be served by a prosecution

What are some aspects associated with securities broker-dealers that increase the risk of money laundering?

- The international nature - The speed of the transactions - The ease if converting holdings into cash without significant loss of principal - The large volume of wires used - The competitive commission-driven environment - The practice of maintaining securities accounts in the name of nominees or trusts - Weak AML programs

The checking account for XYZ Trading LTD, a company registered in the British Virgin Islands, was identified on a government subpoena issued to International Bank. The bank has initiated an internal investigation on the account and it's beneficial owners. What factor should the bank consider on whether to close the account?

- The legal basis for closing an account - The institutions stated policies and procedures for closing an account - How serious is the underlying conduct. If the conduct of serious and a rises to the level where the account would ordinarily be closed, then the institution should consider closing the account - if law-enforcement requests the institution to keep the account open, the institution should request the investigator or prosecutor make that request in writing on proper government letterhead with the appropriate authorized signature.

Why are hawalas attractive to terrorist financiers?

- They are not subject to formal government oversight and do not keep detailed records in a standard form. Although some hawalas do keep ledgers, their records are often written in idiosyncratic shorthand and are maintained only briefly

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

- They can be used to enhance secrecy and to keep hidden the beneficial owner of an account or transaction.

What are the two main reasons correspondent banking is vulnerable to money laundering?

- They create a situation in which a financial institution carries out financial transactions on behalf of customers of another institution. - This indirect relationship means that the correspondent bank provides services for individuals or entities for which it has neither verified the identities nor obtained any first-hand knowledge - The amount of money that flows through can pose a significant threat to financial institutions as they process large volumes of transactions for their customers' customers. - This makes it more difficult to identify the suspect transactions as the financial institution generally does not have the information in the actual parties conducting the transaction to know whether they are unusual.

According to the Basel Committee on Banking Supervision's paper entitled "Customer Due Diligence for Banks," how are sound KYC procedures relevant to the safety and soundness of banks?

- They help to protect banks' reputation and the integrity of banking systems by reducing the likelihood of banks becoming a vehicle for or a victim of financial crime and suffering consequential reputational damage - they constitute an essential part of sound risk management (E.G. By providing the basis for identifying, limiting, and controlling risk exposures in assets and liabilities, including assets under management).

How should a global financial institution address the performance of CDD across its various operations?

- They should aim to apply their customer acceptance policy, procedures for customer identification, process for monitoring higher risk accounts and risk management framework on a global basis to all of their offices, branches and subsidiaries. - The firm should clearly communicate these policies and procedures through ongoing training and regular communications, as well as conduct monitoring and testing to ensure compliance with the policies and procedures.

When should an institution conduct training?

- Training should be ongoing and on a regular schedule. Existing employees should at least attend on annual training session. New employees should receive appropriate training with respect to their job function and within a reasonable period after joining or transferring to a new job. Situations may arise that demand an immediate session. For example an emergency training session may be necessary right after an examination or audit that uncovers serious money libertine control deficiencies. A news story that names the institution or recent regulatory action, such as a consent order, might also prompt quick-response training. Changes in software, systems, procedures or regulations are additional triggers for training sessions.

Identify the four ways that good technology can equip organizations with improved defenses in the fight against financial crime.

- Transaction monitoring: scanning and analyzing data for potential money laundering activity - Watchlist filtering: screening new accounts, existing customers, beneficiaries and transaction counter-parties against terrorist, criminal and other blocked persons watchlists - Automation of regulatory reporting: filing suspicious transaction reports (STRs), currency transaction reports (CTRs) or other regulatory reports with the government - detailed audit trail: demonstrates compliance efforts to regulators

Identify the seven specific customer identification issues as identified in the Basel Committee's October 2001 paper "Customer Due Diligence for Banks."

- Trust, nominee and fiduciary accounts - Corporate vehicles, particularly companies with nominee shareholders or entities with shares in bearer form - Introduced businesses - Client accounts opened by professional intermediaries on behalf of entities such as mutual funds, pension funds and money funds - Politically exposed persons - Non-face-to-face customers (ie: customers who do not present themselves for a personal interview - Correspondent banking

What are some factors an institution should consider when assessing the dynamic risk of its customers?

- Unusual activity, such as alerts, cases and suspicious transaction report (STR) filings. - Receipt of law enforcement inquiries, such as subpoenas - Transactions that violate economic sanctions programs - Other considerations, such as significant volumes of activity where it would not be expected, such as a domestic charity engaging in large international transactions or businesses engaged in other volumes of cash where this would normally not be expected.

Describe several ways commodity futures and options accounts may be susceptible to money laundering.

- Withdrawal of assets through transfers to unrelated accounts or high risk countries - Frequent additions to or withdrawals from accounts - Checks drawn on or wire transfers from, accounts of third parties with no relation to the client - Clients who request custodial arrangements that allow them to remain anonymous - Transfers of funds to the advisor for management followed by transfers to accounts at other institutions - Investing illegal proceeds for a client - Movement of funds to disguise their origin

What are some of the indicators of money laundering using electronic transfers of funds?

- funds transfers to it from a financial secrecy haven - large incoming fund transfers from a foreign client with little or no explanation or apparent reason - funds transfers that have no apparent link to legitimate business

What are some examples of enhanced due diligence for higher risk customers?

- source of funds and wealth - identifying of information on individuals with control over the account, such as signatures or guarantors - occupation or type of business - financial statements - banking references - domicile - proximity of the customer's residence, place of employment, or place of business to the bank - description of the customer's primary trade area and whether international transactions are expected to be routine - description of the business operations, the anticipated volume of currency and total sales, and a list of major customers and suppliers - explanation for changes in account activity

At a high level, what are the criteria for becoming a FATF member?

- the jurisdiction should be strategically important based on quantitative and qualitative indicators and additional considerations. - FATF's geographic balance should be enhanced by the jurisdiction becoming a member. - The country should provide a written commitment at the political/ministerial level. - Within a maximum of 3 years after being invited to participate in FATF as an observer the mutual evaluation process for the country should be launched. - Membership is granted if the mutual evaluation is satisfactory.

Identify the basic elements behind the development of an effective anti-money laundering compliance training program.

- who to train - what to train on - how to train - when to train - where to train

ABC bank was served with a search warrant. What next steps should the bank consider?

1. Call the financial institutions in-house or outside counsel 2. Review the warrant to understand it's scope 3. Ask for and obtain a copy of the warrant 4. Ask for a copy of the affidavit that supports the search warrant (the agents are not obligated to provide a copy of the affidavit, but, if a financial institution is allowed to see the affidavit, the financial institution can learn more about the purpose of the investigation), 5. Remain present while the agents record an inventory of all items they sees and removed from the premises keep track of the records taken by agents 6. Ask for a copy of law-enforcement's inventory of what they have seized 7. Write down the names an agency affiliations of the agents who conducts the search

What are the steps commonly taken to obtain mutual legal assistance?

1. The central authority of the requesting country sends a commission rogatoire (letter rogatory, or letter of request) to the central authority of the other country. The letter includes the information sought, the nature of the request, the criminal charges in the requesting country and the legal provision under which the request is made. 2. The central authority that received the request sends it to a local Financial investigator to find out if the information is available. 3. An investigator from the requesting country then visits the country where the information is sought, and accompanies the local investigator during visits or when statements are taken. 4. The investigator asks the central authority for permission to remove the evidence to the requesting country. 5. The central authority send the evidence to the requesting central authority, thereby satisfying the request for mutual legal assistance. 6. Local witnesses may need to attend court hearings in the requesting country.

Describe a sound Know Your Employee program.

A Know Your Employee (KYE) program means that the institution has a program in place that allows it to understand an employee's background, conflicts of interest and susceptibility to money laundering complicity. Policies, procedures, internal controls, job descriptions, code of conduct/ethics, levels of authority, compliance with personal laws and regulations, accountability, monitoring, dual control, and other deterrents should be firmly in place.

According to FATF, when should the identity of a customer be verified?

A bank should not establish a banking relationship, or carry out any transactions, until the identity of the customer has been satisfactorily established and verified in accordance with FATF Recommendation 10.

Describe a front Company.

A business that commingles funds (illicit) with revenue generated from the sale of legitimate products or services. Criminals use front companies to launder illicit money by giving the funds the appearance of legitimate origin. Organized crime has used pizza parlors to mask proceeds from heroin trafficking. Front companies may have access to substantial illicit funds, allowing them to subsidize front company products and services at levels well below market rates or even below manufacturing costs. Front companies have a competitive advantage over legitimate firms that must borrow from financial markets, making it difficult for a legitimate businesses to compete with front companies.

Describe a Financial Intelligence Unit (FIU).

A central governmental office that obtains information from financial reports, processes it and then discloses it to an appropriate government authority in support of a national anti-money laundering effort. The activities performed by an FIU include receiving, analyzing and disseminating information and, sometimes, investigating violations and prosecuting individuals indicated in the disclosures

Define Smurfing.

A commonly used money laundering method, smurfing involves the use of multiple individuals and/or multiple transactions for making cash deposits, buying monetary instruments or bank drafts in amounts under the reporting threshold.

Describe a Ponzi scheme.

A money laundering system named after Charles Ponzi, an Italian immigrant who spent 10 years in jail in the US for a scheme that defrauded 40,000 people out of $15 million. Ponzi's name became synonymous with the use of new investors money to pay off prior investors money. Ponzi schemes involve fake, nonexistent investments schemes in which the investors are tricked into investing on the promise of unusually attractive returns. The operator of the scheme can keep the operation going by paying off early investors with the money from new investors until this scheme collapses under its own weight and/or the promoter vanishes with the remaining money. The scheme recently engaged in by Bernie Madoff is an example of a Ponzi scheme. The prime bank guaranty, roll program, bank debenture program and high-yield promises are frequently used to entice investors into participating in Ponzi scheme

Define a search warrant and describe how it is issued.

A search warrant is a grant of permission from a court for a law-enforcement agency to search certain designated premises and to seize specific categories of items or documents. Generally, the requesting agency is required to establish that probable cause exists to believe that evidence of a crime will be located. The warrant is authorized based on information contained in an affidavit submitted by a law-enforcement officer.

Describe a trustee.

A trustee may be a paid professional or a company or unpaid person that holds the assets in a trust fund separate from the trustees own assets. The trustee invests and disposes of the assets in accordance with the settlor's trust deed, taking into consideration any letter of wishes.

What is an international business company (IBC)?

A variety of offshore corporate structures, alternatively called "exempt companies", which are dedicated to business use outside the incorporating jurisdiction, rapid formation, secrecy, broad powers, low cost, low to zero taxation, and minimal filing and reporting requirements.

Define a red flag.

A warning signal that should bring attention to a potentially suspicious situation, transaction or activity.

What is a commission rogatoire?

Also known as letter rogatory, commission rogatoire - Is a written request for legal or judicial assistance sent by the central authority of one country to the central authority of another when seeking evidence from the foreign jurisdiction. The letter typically specifies the nature of the request, the relevant criminal charges in the request and country, the legal provision under which the request is made, and the information sought.

What is a mutual legal assistance treaty (MLAT)?

And agreement among countries allowing for mutual assistance in legal proceedings and access to documents and witnesses and other legal and judicial resources in the respective countries, in private and public sector's, for use in official investigations and prosecutions.

In its "AML Principles for Correspondent Banking," what does the Wolfsberg Group indicate should be done for approval and ongoing review of higher risk correspondent bank relationships?

Approval of higher risk Correspondent Banking relationships at the time of on-boarding and periodic review shall be subject to a higher level of approvals by business and Compliance, or relevant control function. Periodic reviews shall be conducted of all high risk Correspondent Banking relationships at minimum on an annual basis.

What type of documents would a financial institution have that could assist a financial institution in tracking money movements?

Banks maintain signature cards, which are collected at the opening of an account, account statements, deposit tickets, checks and withdrawal items and credit and debit memorandums. Banks also keep records on loans, cashiers checks, certified checks, travelers checks and money orders. They exchange currency, cash third-party checks, and conduct wire transfers, as do most money service businesses. Banks also keep safe-deposit boxes and issue credit cards.

When should institutions conduct economic sanctions screening?

Before a financial institution starts doing business with a new customer or engaging in certain transactions (e.g., International wire payments), it should review the various country sanction program requirements as well as published lists of known or suspected terrorists, narcotics traffickers, and other criminal actors for potential matches.

What is one of the primary concerns with regard to the use of virtual currencies?

Beneficial ownership information may be difficult to obtain

Describe a tax haven.

Countries that offer special tax incentives or tax avoidance to foreign investors and depositors.

Describe microstructuring.

Designing a transaction to evade triggering a reporting or record keeping requirement is "structuring"; microstructuring breaks transactions down into smaller deposits to make it very difficult to detect

What must EU member countries do with the EU Directives?

EU members must transpose the Directives into law.

If the bank is under investigation by a governmental agency for possible money laundering, what steps should the bank have for its employees to follow?

Employees should be informed of the investigation and should be instructed not to produce corporate documents directly, but, rather, should inform senior management or counsel of all request for documentation and should be provided documents to them for production. In that way the institution will know what has been requested and what has been produced. In addition, the institution can determine what, if any, request should be contested. The same procedure should be followed with regard to requests for employee interviews.

What is one of the most important aspects of due diligence for a bank when establishing a relationship with a money remitter?

Ensuring the money remitter is properly licensed.

How does the black market peso exchange (BMPE) work in money laundering?

Ex: 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 funds businesses in Mexico that want to buy goods in the US. 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.

According to FATF's Recommendations (2012), what are the designated thresholds for transactions under Recommendations 10, 22 and 23?

FATF designated specific thresholds that trigger AML scrutiny. For example, the threshold that financial institutions should monitor for occasional customers is 15,000# (Recommendation 10) for casinos including internet casinos, it is 3,000# (Recommendation 22); and got dealers in precious metals, when engaged in any cash transaction, it is 15,000# (Recommendation 22-23)

What general characteristics of terrorist financing can a financial institution look at to avoid becoming conduits for terrorist financing?

FATF's report (Guidance for Financial Institutions in Detecting Terrorist Financing) published 4/24/02 describes general characteristics of terrorist financing: - use of an account as a front for a person with suspected terrorist links - appearance of an account holder's name on a list of suspected terrorists - frequent large cash deposits in accounts of non-profit organizations - high volume of transactions in the account - lack of a clear relationship between the banking activity and the nature of the account holder's business

What steps should the institution take to ensure a written report on the internal investigation retains the attorney-client privilege?

If counsel for the institution prepares a written report of an investigation, the institution should take steps to not inadvertently waive the attorney-client privilege by distributing the report to persons who should not receive it. Every page of the report should contain a statement that it is confidential and is subject to the attorney-client privilege and work-product privilege. Copies of the report should be numbered, and a list of persons who are given copies to read should be maintained. After a set period of time, all copies should be returned. Persons obtaining the report should be instructed not to make notes on their copies. All copies should be maintained in a file separate from regular institution files in a further effort to maintain the highest level of protection.

What are six principles set forth in the Basel Committee's Statement of Principles called "Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering"?

In 1988 the Basel Committee issued the aforementioned statement in recognition of the vulnerability of the financial sector to misuse by criminals. This was a step toward preventing the use of the banking sector for money laundering and it set out principles with respect to: - Customer identification - Compliance with laws - Conformity with high ethical standards & local laws & regulations - Full cooperation of national law enforcement to the extent permitted without breaching customer confidentiality - Staff training - Record keeping and audits

What is a Memorandum of Understanding (MOU)?

In agreement between two parties establishing a set of principles that govern their relationship on a particular matter. An MOU is often used by countries to govern their sharing of assets in international asset forfeiture cases or to set out their respective duties in anti-money laundering initiatives. Financial Intelligence Units (FIUs), with the task of receiving and analyzing suspicious transaction reports on an ongoing basis and maintaining close links with the police and customs authorities, share information among themselves informally in the context of investigations, usually on the basis of an MOU. The Egmont Group of FIUs has establish a model for such MOUs. Unlike the mutual legal assistance treaty, this gateway is ordinarily used not for obtaining evidence, but for obtaining intelligence that might lead to evidence.

What factors should be considered when determining the sophistication of a compliance function within an institution?

It should be based upon the institution's nature, size, complexity, regulatory environment, and the specific risk associated with the products, services and clientele. No two institutions will have exactly the same compliance structure because the risk facing each institution is going to be different, as identified in their respective risk assessments.

Describe how the independent audit should review suspicious transaction reporting (STR) systems.

It should include an evaluation of the research and referral of unusual transactions. Testing should include a review of policies, procedures, and processes for referring unusual or suspicious activity from all business lines (e.g., legal, private Banking, Foreign Correspondent Banking) to the personnel or department responsible for evaluating unusual activity.

Describe Know Your Customer (KYC).

Know Your Customer (KYC) refers to anti-money laundering policies and procedures used to determine the true identity of a customer and the type of activity that is normal and expected, and to detect activity that is unusual for a particular customer. Many experts believe that a sound KYC program is one of the best tools in an effective anti-money laundering program.

How does having a lawyer as a trustee on an account at a financial institution create vulnerabilities to money laundering at an institution?

Lawyers often serve as trustees by holding money or assets "in trust" for clients. This enables lawyers to conduct transactions and to administer the affairs of a client. Sometimes the illicit money is placed in a law firm's general trust account in a file set up in the name of the client, a nominee, or a company controlled by the client.

What are bearer negotiable instruments?

Monetary instruments in bearer form such as: negotiable instruments (including checks, promissory notes and money orders) that are either in bearer form, or endorsed without restriction, are made out to a fictitious payee, or are otherwise in such form that the title there to passes upon delivery

Does the Basel Committee prohibit the use of numbered accounts?

No, but they should be subjected to the same KYC procedures as other customer accounts. KYC tests mat be carried out by selected staff but the identity of the customers must be known to an adequate number of staff if the bank is to be sufficiently diligent. "Such accounts should in no circumstances be used to hide the customer identity from a bank's compliance function or from the supervisions."

It's an institution decides to file an STR, what should they do as soon as possible?

Notify the investigators or prosecutors

What is OFAC?

OFAC, the Office of Foreign Assets Control is the division of the US Department of Treasury that administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorists, international narcotic traffickers and those engaged in activities related to the proliferation of weapons of mass destruction. OFAC acts under presidential wartime and national emergency powers, as well as authority granted by specific legislation to impose controls on transactions and to freeze foreign assets under US jurisdictions. Many of the sanctions are based on United Nations and other international mandates that are multilateral in scope and involve close cooperation with allied governments. OFAC sanctions programs prohibit transactions and require the blocking of assets of persons and organizations that appear on one of a series of lists that OFAC issues periodically. OFAC has the powers to impose significant penalties for those who are found to be in violation of the blocking orders within each of the sanctions programs.

What are two of the most common money laundering techniques involved with trade-based money laundering?

Over and under invoicing

Recommendations 36-40 from FATF'S 40 Recommendations pertain specifically to the international aspects of money laundering and terrorist financing investigations. What are Recommendations 36 - 40

Recommendations 36 - 40 deal with mutual legal assistance treaties, extradition, confiscation of assets and mechanisms to exchange information internationally.

What does the Yates memo say?

Reminds prosecutors that criminal and civil investigations into corporate misconduct should also focus on individuals who perpetrated the wrongdoing.

What are remittance services?

Remittance services are also referred to as Giro houses or Casa de Cambio, remittance services are businesses that receive cash or other funds that they transfer through the banking system to another account. The account is held by an associated company in a foreign jurisdiction where the money is made available to the ultimate recipient.

Why is it important to continue to update and revisit risk assessments?

Risk is dynamic and needs to be continuously managed. It should be noted that the environment in which each organization operates is subject to continual change. Externally, the political changes of a jurisdiction or whether economic sanctions are imposed or removed may impact a country risk rating. Internally, organizations respond to market and customer demands by introducing new products and services, and implementing new delivery systems. The combination of these changes makes it critical that the AML/the risk model is subject to regular review. In some countries, there is a legislative obligation for such reviews to be undertaken on a regular basis - usually annually or when new products, delivery channels or customer types are introduced.

What is a safe harbor for reporting suspicious activity?

Safe harbor is defined as legal protection for financial institutions, their directors, officers and employees from criminal and civil liability for breach of any restriction on disclosing information imposed by contract or by any legislative, regulatory or administrative prohibition if they report their suspicions in good faith to the financial investigation unit (FIU), even if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred.

Identify and describe the three sections of the US Patriot Act concerning the due diligence US financial institutions need to perform for relationships with foreign correspondent banking customers.

Section 312: requires institution to set up risk based due diligence to mitigate the money laundering risks posed by foreign financial institutions. Section 313: prohibits US financial institutions from opening or maintaining correspondent accounts for foreign shell banks and requires them to take "reasonable steps" to ensure that a correspondent account of a foreign bank is not being used indirectly to provide banking services to a shell bank Section 319(b): requires US financial institutions to maintain records of the identity of the owners of foreign banks for which they maintain correspondent accounts

How does the US Patriot Act impact non-US banks that have an account with a US Financial Institution?

Section 319(a) greatly strengthened the forfeiture powers over the funds of foreign persons and institutions. If the funds the US pursues are deposited in a foreign bank, that keeps an "interbank account," at a US bank the US may bring a case to forfeit the crime-tainted funds in the US account..

Why is it important to interview knowledgeable employees as soon as practical?

So that their memories are the freshest and so that they can direct management or counsel to relevant documents and people on a timely basis.

In 2009, FATF began to publicly identify high risk jurisdictions. What made the jurisdictions high risk?

Strategic deficiencies in their AML/CFT regimes

Why is it important to have a test at the end of a training session?

Tests should be considered as a means to evaluate how well the training is understood with a mandatory passing score.

What was considered a predicate offense for money laundering under the 1st EU Money Laundering Directive?

The 1st Direction of 1991 confined predicate offenses for ML to drug trafficking as defined in the 988 Vienna Convention; however, member states were encouraged to extend the predicate offenses to other crimes.

Which of the FATF-style Regional Bodies issued its own set of 19 recommendations, which were specific to the region?

The Caribbean Financial Action Task Force (CFATF) in 1990

What is the organization that provides a forum for Financial Intelligence Units around the world to improve the cooperation in the fight against money laundering and financing of terrorism?

The Egmont Group of Financial Intelligence Units

What international organization developed the first model legislation specifically designed to combat money laundering?

The Organization of American States (OAS) via the Inter-American Drug Abuse Control Commission, an OAS entity that goes by the acronym CICAD (Comision Interamericana para el Control del Abuso de Drogas)

What is the Office of Foreign Assets Control's (OFAC) list of sanctions persons known as?

The Specially Designated Nationals and Blocked Persons (SDN) list.

According to the Basel Committee's on Banking Supervision's paper entitled "Compliance and the Compliance Function in Banks," What are the responsibilities of the Board of Directors for compliance?

The bank's Board of Directors is responsible for overseeing the management of the bank's compliance risk. The board should approve the bank's compliance policy, including a formal document establishing a permanent and effective compliance function. At least once a year the board or a committee of the board should assess the extent to which the bank is managing it's compliance risk effectively.

Who does the ultimate responsibility for the AML compliance program rest with?

The board of directors. Members must set the tone from the top by openly voicing their commitment to the program, ensuring that their commitment flows through all service areas and lines of business, and hold him responsible parties accountable for compliance.

What controls should a compliance officer consider over an AML duty that has been delegated?

The compliance function may establish risk-based quality assurance reviews and monitoring and testing activities to ensure the functions are being performed and appropriately. This may include a review of the CDD collected to ensure completeness, monitoring reports of CDD completeness or defects to ensure the systems are working as expected, and performing testing to assess whether the monitoring and the business performance are satisfactorily measuring and ensuring compliance.

What is a money laundering risk pertaining to the use of concentration accounts?

The customer identifying information may not be included making the audit trail difficult or impossible to follow.

What is a countries extraterritorial reach?

The extension of one countries policies and laws to the citizens and institutions of another. US money laundering laws contain several provisions that extend it's prohibitions and sanctions into other countries. For example, the "extraterritorial jurisdiction" of the principle US anti-money laundering law can apply to a non-US citizen if the conduct occurs in part in the US (title 18, USC section 1956(f)).

What is tipping off?

The improper or illegal act of notifying a suspect that he or she is the subject of a suspicious transaction report or is otherwise being investigated or pursued by the authorities.

What are some of the limitations on screening customers against lists of politically exposed persons?

The information contained in them - and the ability to positively match your customer with a PEP on a database - can be a challenge. These lists do not always provide all relevant information related to PEPs that would assist in identifying them. For instance, there is no unique identifier, such as a date of birth or address.

How should financial institutions monitor the receipt of a subpoena, summons, or other government request?

The institution should do more than just produce the records or information being sought. Financial institutions should ensure that all grand jury subpoenas, as well as other information requests from the government agencies, are reviewed by senior management, an investigations group or counsel to determine how best to respond to the inquiry and to determine if the inquiry or the underlying activity might pose a risk to the institution. In addition the institution should maintain a centralized control over all requests and responses in order to ensure that the requests are responded to on a complete and timely basis and to establish a complete record of what is provided. This centralized record will also assist with regard to the institutions own internal investigation.

ABC bank was served with a subpoena compelling the production of certain documents on a personal checking account. Describe the steps the bank should consider taking upon receipt of the subpoena.

The institution should have it's senior management and/or counsel review the summons or subpoena, the institution should take all the appropriate measures to comply with the summons or subpoena on a timely and complete basis. Failure to do so can result in adverse action and penalties for the institution. Also, the financial institution should not notify the customer who is being investigated. If the government asked the bank to keep certain accounts open, such a request should be obtained in writing under proper letterhead and authority from the government.

Define physical cross-border transportation of currency.

The physical cross-border transportation of currency is defined as any inbound or outbound transportation of currency or bearer negotiable instrument from one country to another. The term includes: 1. Physical transportation by a natural person, or in that person's accompanying luggage or vehicle 2. Shipment of currency through cargo containers 3. The mailing of currency or bearer negotiable instruments

Describe FATF's Recommendations 20-21 (2012) on suspicious transaction reporting and liability.

The recommendations say that financial institutions must report to the Financial Intelligence Unit where they suspect it have reasonable grounds to suspect that funds are the proceeds if a criminal activity or are related to terrorist financing. The financial institutions and the employees reporting such suspicions should be protected from liability for reporting and should be prohibited from disclosing that they have reported such activity.

What is the extraterritorial aspect of Section 319(b) of the Patriot Act?

The section allows the Secretary of the Treasury or the Attorney General to subpoena records of a foreign bank that maintains a correspondent account in the US. The subpoena can request any records relating to the account including records located outside the US. If the foreign bank fails to comply with or fails to contest the subpoenas, the secretary or the attorney general can order the US financial institution to close the correspondent account within 10 days of receipt of such an order. Additionally the section also requires foreign banks to designate a registered agent in the US to accept service of subpoenas pursuant to the section. Furthermore, US banks and securities brokers and dealers that maintain correspondent accounts for foreign banks must keep records of the identity of the 25% owners of the foreign bank unless it is publicly traded as well as the name of the correspondent bank's registered agent in the US.

What is money laundering?

The taking of criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal acts.

What is the revised threshold for reporting suspicious transactions under the 4th EU ML Directive?

The threshold for entities obliged to report suspicious transactions (i.e. persons trading in goods or carrying out transactions) decreased from EUR 15,000 to EUR 10,000

What are some of the characteristics of a successful anti-money laundering compliance training program?

The training program should meet the standards set out in the laws and regulations that apply to an institution, but should also satisfy internal policies and procedures, and should mitigate the risk of getting caught up in a money laundering scandal. Training is one of the most important ways to stress the importance of anti-money laundering efforts, as well as educating employees about what to do if they encounter potential money laundering.

Identify the responsibilities of the anti-money laundering compliance officer.

They should be responsible for designing and implementing the program, making changes and disseminating information about the programs successes and failures to key staff members, constructing anti-money laundering related content for staff training programs and staying current on legal and regulatory developments in the field.

What is the purpose of conducting an internal investigation?

To learn the nature and extent of any potential wrongdoing to develop information sufficient to report - when necessary - to the authorities, to enable the institution to minimize its liability, and to stop any potential money laundering.

Describe the type of services to third parties that any person or business provides on a professional basis to participate in the creation, administration, or management of corporate vehicles.

Trust and company service providers (TCSP) include those persons and entities that in a professional basis, 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: - Acting as a formation agent of legal persons - 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 - Providing a registered office, business address or correspondence for a company, partnership, or any other legal person or arrangement. - Acting as (or arranging for another person to act as) a trustee of an express trust - Acting as (or arranging for another person to act as) a nominee shareholder for another person

According to FATF, when should an institution conduct enhanced due diligence on a customer?

When there are circumstances where the risk of money laundering or terrorist financing is higher, enhanced EDD measures should be taken.