530 Ch 7

Steps in Money Laundering

1. Money is deposited in a bank or financial institution. 2. A set of complex transfers is made to disguise the original source for the money and to hide the audit trail. (This step is called layering the transactions.) 3. The money is integrated back into the legitimate money supply.

Audit Trail - laundering cycles

1.Illegal cash 2.Deposited into bank 3.Purchase asset 4.Sell asset 5.Documented legal cash

Accountant's Role as Gateway Keeper

AICPA Auditing Standards Governing Money Laundering. Lack of Reporting Requirement.

Individual due diligence.

Business associations. Employment.

Cash-Oriented Businesses

Currency exchanges Online auctions Casinos Purchasing departments

Possible Users of Money Laundering Practices

Grant recipients Criminals Political asylum seekers

Guarding Against Money Laundering

Individual due diligence. Company due diligence Trust due diligence.

Cybercash Creates New

Laundering Opportunities

Due Diligence Laws for Banks

Laws and regulations require that a bank perform due diligence in its relationships with other banks and important clients as well as continually monitor account transactions

Tools Banks Use to Identify Money Launderers

Monitoring software Currency Transaction Reports (CTRs) Suspicious Activity Reports (SARs) Know your customer (KYC)

Lack of Reporting Requirement.

No actual requirement if you find non material money laundering client confidentiality - who do you go to if you find it?

AICPA Auditing Standards Governing Money Laundering.

SAS No. 54, Illegal Acts by Clients. SAS No. 82, Consideration of Fraud in a Financial Statement Audit (now replaced by SAS No. 99).

Social Media

There is an explosion in personal information that is available about individuals on social media websites such as Twitter, Facebook, and LinkedIn Part of any due diligence investigation today

Trust due diligence.

Trust deeds. Beneficiaries.

Finding Money Laundering Schemes

Web logs (Tracing IP addresses HTTP common logfile format) Wire transfers Bank reports

shell banks have________, but are not likely to have_______

a banking license in a specific country, but they are not likely to have a staff and may be operated as part of another business/out of an individual's personal residence.

, cybercash transfers can be structured so that they originate in

a jurisdiction where such activities are not considered illegal.

Suspicious Activity Reports (SARs)

also required above 10,000 may find suspicious activity through monitoring software

Use of bitcoins can make the users' purchase completely

anonymous

¾ money launderers were discovered by

banks

______ makes bitcoin use possible

blockchain

REMEMBER BANK SECRECY ACT

casinos issue 1099 for winnings

Algorithms work to

determine their (Bitcoin's) exchange value and whether they have been previously used in an exchange.

Blockchain is a _________ system

digital ledger system on the Internet that uses algorithms

payable through accounts (generally)

do stuff with another country, they do it through this kind of account because its not in their licensed co of op

Bitcoins are

electronic encrypted currency and an alternative to national currencies. The value of the coins are online market

Shell Banks

high-risk banks that exist without any physical presence in any legal jurisdiction

Company due diligence

in verification procedures. Corporate ownership and governance.

due diligence must co-exist with the client's

need for privacy and the secrecy laws existing in many foreign jurisdictions that prevent access to bank documents.

Correspondent banking takes place when

one bank provides services to another bank to: move funds, exchange currencies, and access investment services (such as money market accounts, overnight investment accounts, CDs, trading accounts, and computer software for making wire transfers and *instant updates* on account balances)

Currency Transaction Reports (CTRs)

report any transaction over 10,000 pg 7-11 shows demonstrations of filings

Purchasing departments

smurfing - make it smaller than 10k, deposit to diff banks under amt tech - buy stuff and sell overseas for fraction and then when they buy it you legitimized money

'86 - money laundering act

specified now what money laundering is

The coins have value in themselves and do not require

the deposit of cash into an account.

A payable-through account enables

the respondent bank's clients within the country (where the bank is registered) to write checks that are *drawn directly on the respondent bank's correspondent account* in the United States.

cybercash transactions are beginning to take place without the need for

third parties and the consequential scrutiny that might otherwise exist

definition of money laundering

to take money that comes from one source, hide that source, and make the funds available in another setting so that the funds can be used without incurring legal restrictions or penalties. (legal and illegal contexts)

An *offshore banking license* prevents the organization from

transacting banking activities with any citizens of the licensing jurisdiction OR transacting business with the currency of the licensing jurisdiction.

Using the Internet, a person can

transfer large sums of money from one location to another without using a bank and with the transfers being totally anonymous.

Bank reports - vital in laundering process

why ppl pay a lot of money for shell banks that wont have records (supposedly paying for anonymity)

Online auctions

win the auction, pay 10x as much as you should for that item - money is now legit

offshore bank operations solely exist....

within international financial transactions

Bitcoin is a crypto-currency that exists

without control from national banks

Audit Trail - "churning"

"Churning" = term for laundering, make more layers so harder to find