Anti-Money Laundering Certificate

Suspicious Indicators within the global Securities Market

1. A customer with a significant history with the securities firm who abruptly liquidates all of his or her assets in order to remove wealth from the jurisdiction. 2. A customer who opens an account or purchases a product without regard to loss, commissions or other costs associated with that account or product, including with early cancellations of long-term securities. 3. The securities account is used for payments or outgoing wires with little or no securities activities (e.g., account appears to be used as a depository account or a conduit for transfers). 4. A customer's transactions include a pattern of sustained losses. This may be indicative of transferring value from one party to another. 5. Transactions where one party purchases securities at a high price and then sells them at a considerable loss to another party. This may be indicative of transferring value from one party to another. 6. A customer who is unfamiliar with a financial product's performance and specifications but wants to invest in it nonetheless. 7. A customer who is known to have friends or family who work for the securities issuer or a trading pattern suggests that he or she may have nonpublic information. 8. Two or more unrelated accounts at a securities firm trade an illiquid or low-priced security (penny stock) suddenly and simultaneously. 9. A customer who deposits physical securities that are: 1) in large quantities, 2) titled differently from the name of the account, 3) do not bear a restrictive legend even though the history suggests that it should, or 4) the method of acquiring the securities lacks sense.

Gatekeepers: Red Flag Indicators of "The Parties"

1. Are native or incorporated in high risk countries 2. Are connected without an apparent business reason 3. Are tied in a way that generates doubts as to the real nature of the transaction 4. Appear in multiple transactions over a short period of time 5. Are incapacitated or under legal age 6. Attempt to disguise the real owner or parties 7. Are not directing the transaction rather, the person directing the operation is not one of the formal parties to the transaction 8. Does not appear to be a suitable representative

Specific behaviors to watch on Casinos and Gaming Sector

1. Attempts to evade AML reporting or record-keepig requirements 2. Using the cage solely for its banking-like financial services 3. Minimal gaming activity without a reasonable explanation 4. Unusual gaming and transaction paterns

Placement techniques

1. Blending of funds 2. Foreign Exchange 3. Breaking up amounts 4. Currency smuggling 5. Loans

Correspondent Banking Vulnerability to ML

1. By its nature, correspondent banking relationships create a situation in which a financial institution carries out financial transactions on behalf of customers of another institution of which they have not verified the identities of nor obtained any first-hand knowledge. 2. The increase of money that flows through correspondent accounts can pose a significant threat as they process large volumes of transactions for their customers customers making it more difficult to identify suspect transactions as the financial institution generally does not have the information on the actual parties conducting the transaction to know whether they are unusual.

Credit Card Industry

1. Credit Card Associations 2. Issuing banks that issue credit cards 3. Acquiring banks which process transactions for merchants who accept credit cards 4. TPPs

Examples of Layering

1. Electronically moving funds from one country to another and dividing them into advanced financial options 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. Using shell companies to obscure the ultimate beneficial owner and assets.

Indicators the Electronic Transfers of Funds are related to money laundering

1. Funds transfers that occur to or from financial secrecy havens, geographical risk areas, or when activity is inconsistent with the customer's business history 2. Large, incoming funds transfers that are received on behalf of a foreign client with little or no explanation or apparent reason 3. Many small, incoming transfers that are made using checks and money orders. Upon credit to the account, all or most of the transfers or deposits are wired to another account in a different geographic location in a manner inconsistent with the customer's business or history. 4. Funds activity that 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 that are sent or received from the same person to or from different accounts.

ML Weaknesses in 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. 5. The lack of oversight.

Economic/Social Risks of Money Laundering

1. Increased exposure to Organized Crime and Corruption 2. Undermining the Legitimate private sector 3. Weakening financial institutions 4. Dampening Effect on Foreign Investments 5. Loss of control of, or mistakes, in decisions regarding economic policy 6. Economic distortion and instability 7. Loss of tax revenue 8. Risks to privatization efforts 9. Reputation Risk for the Country 10. Risk of International Sanctions 11. Social Costs 12. Reputation Risk 13. Operational Risk 14. Legal Risk 15. Concentration Risk

Gatekeepers: Red Flag Indicators of "The Lawyer"

1. Is at a significant distance from the client or transaction without a legitimate or economic reason 2. Does not have experience in providing the particular services needed 3. Is being paid substantially higher than usual fees without a legitimate reason 4. Is frequently changed by the client or the client has multiple legal advisers without legitimate reason 5. Is providing services previous refused by another professional

Gatekeepers: Red Flag Indicators of "The Source of the Funds"

1. Is provided using unusual payment arrangements 2. Is collateral located in a high-risk country 3. Represents a significant increase in capital for a recently incorporated company without a logical explanation 4. Represents unusually high capital in comparison with similar businesses 5. Stems from a security transferred with an excessively high or low price attached 6. Stems from large financial transactions that cannot be justified by the corporate purpose

Securities Risk to ML

1. Its international nature 2. The speed of the transactions 3. The ease of conversion of holdings to cash without significant loss of principal 4. The routine use of wire transfers to, form and through multiple jurisdictions 5. The competitive, commission-driven environment, which, like private banking, provides ample incentive to disregard the source of client funds 6. The practice of brokerage firms of maintaining securities accounts as nominees or trustees, thus permitting concealment of the identities of the true beneficiaries 7. Weak AML programs that do not have effective customer due diligence (CDD) , suspicious activity monitoring, or other controls

Ways to execute trade-based money laundering

1. Over-invoicing or Under-invoicing 2. Over-shipping or Short-shipping 3. Ghost Companies 4. Shell companies 5. Multiple Invoicing 6. Black Market Trades

Trade Based ML: Over-Invoicing and Under-Invoicing

1. Over-invoicing: By invoicing the goods or service at a price above the fair market price, the seller is able to receive value from the buyer (i.e., the payment for the goods or service will be higher than the value that the buyer receives when it is sold on the open market). 2. Under-invoicing: By invoicing the goods or service at a price below the fair market price, the seller is able to transfer value to the buyer (i.e., the payment for the goods or service is lower than the value that the buyer will receive when it is sold on the open market).

Gatekeepers: Red Flag Indicators of "The Client"

1. Overly secretive 2. Using agent to avoid personal contact w/o good reason 3. Reluctant to provide info required to enable transactions execution 4. Holds a senior public position or family of one 5. Known to have been subject of investigation for an acquisition crime 6. Ties to criminals 7. Unusual interest on the procedures for applying ordinary standards

Elements of PTA's that threaten the correspondent bank's money laundering defenses

1. PTAs with foreign institutions licensed in offshore financial service centers with weak or nascent bank supervision and licensing laws. 2. PTA arrangements where the correspondent bank regards the respondent bank as its sole customer and fails to apply its CDD policies and procedures to the customers of the respondent bank. 3. PTA arrangements in which sub-account holders have currency deposit and withdrawal privileges 4. PTAs used in conjunction with subsidiary representative or other office of the respondent bank, which may enable the respondent bank to offer the same services as a branch without being subject to supervision.

Travel Agencies - Common ML Schemes

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 3. Established tour operator networks with false bookings and documentation to justify significant payments from foreign travel groups

Examples of Integration

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

Art and Antique Dealers - Tips to Prevent ML

1. Require all art vendors to provide names and addresses. Ask that they sign and date a form that states that the item was not stolen and that they are authorized to sell it. 2. Verify the identities and addresses of new vendors and customers. Be suspicious of any item whose asking price is not commensurate with its market value. 3. If there is reason to believe an item might be stolen, immediately contact the Art Loss Register 4. Look critically when a customer asks to pay in cash. Avoid accepting cash payments unless there is a strong and reputable reason. Be aware of money laundering regulations. 5. Appoint a senior staff member to whom employees can report suspicious activities.

Implementation of what for Concentration Accounts?

1. Requiring dual signatures on general ledger tickets 2. Prohibiting direct customers access to concentration accounts. 3. Capturing customer transactions in the customer's accounts statements. 4. Prohibiting customers' knowledge of concentration accounts or their ability to direct employees to conduct transactions through the accounts. 5. Retaining appropriate transaction and customer identifying information. 6. Reconciling accounts frequently by an individual who is independent from the transactions. 7. Establishing a timely discrepancy resolution process. 8. Identifying and monitoring recurring customer names.

UN 2000 Convention Against Transnational Organized Crime - "Palermo Convention" def. of Money Laundering

1. The conversion of property for the concealment of its origin 2. The concealment of the true nature of the property 3. The acquisition/use of property All three need: KNOWING it was derived from a criminal offense

Methods of detecting Microstructuring

1. The use of counter deposit slips as opposed to preprinted deposit slips. 2. Frequent activity in an account immediately following the opening of the account with only preliminary and incomplete documentation. 3. Frequent visits to make cash deposits of nominal amounts that are inconsistent with typical business or personal banking activity. 4. Cash deposits followed by ATM withdrawals, particularly in higher risk countries. Cash deposits made into business accounts by third parties with no apparent connection to the company.

Gatekeepers: Red Flag Indicators if "the Retainer involves"

1. Transactions that are unusual with regards to the type of operation and the transaction's typical size, frequency or execution 2. Transactions that do not correspond to the client's normal business activities and shows that he does not have suitable knowledge of the nature, object or the purpose of the professional performance requested 3. The creation of complicated ownership structures or structures with involvement of multiple countries when there is no legitimate or economic reason 4. A client transaction history that does not have documentation to support company activities Inconsistencies and unexplained last minute changes to instructions 5. No sensible commercial/financial/tax reason for the transactions or increased complexity that unnecessarily result in higher taxes or fees 6. Exclusively keeping documents or other goods, holding large deposits, or otherwise using the client account without provision of legal services 7. Abandoned transactions without concern for fee level or after the receipt of funds 8. A power of attorney sought for the administration or disposal of assets under unusual circumstances without logical reason 9. Litigation that is settled too easily or quickly with little or no involvement of legal professional retained 10. Requests for payments to third parties without substantiating reason or corresponding transaction

Potential Indicators of ML for TCSP's

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 persons 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 persons 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.

Vulnerabilities and Red Flags for TCSP's

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. TCSPs may operate in an unlicensed environment. 5. Depending on the jurisdictional requirements, a TCSP's CDD may be performed by other financial Institutions.

ML Methods in Real Estate

1. Use of third party straw buyers described as "cleanskins." 2. Use of loans and mortgages as a cover for laundering, which may involve lump sum cash repayments to integrate illicit funds into the economy. 3. Manipulation of property values to disguise undisclosed cash payments through over- or under-valuing or "flipping" through successive sales to increase value. 4. Structuring cash deposits used for the purchase. 5. Generation of rental income to legitimize illicit funds. 6. Conducting criminal activity, such as the production of cannabis or synthetic drugs, at the purchased property. 7. Use of illicit cash to make property improvements to increase the value and profits at sale. 8. Use of front companies, shell companies, trust and other company structures to hide beneficial ownership and obvious links to criminals. 9. Use of gatekeepers such as real estate agents, conveyancers or solicitors to conceal criminal involvement, complicate the money laundering process and provide a veneer of legitimacy to the transaction. 10. Investment by overseas-based criminals to conceal assets and avoid confiscation from authorities in their home jurisdiction.

Red Flags of ML in 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 3. Use of offshore 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.

Why Investment and Commodity Advisers are susceptible to ML?

1. Withdrawal of assets through transfers to unrelated accounts or to high-risk countries. 2. Frequent additions to or withdrawals from accounts. 3. Checks drawn on, or wire transfers from, accounts of third parties with no relation to the client. 4. Clients who request custodial arrangements that allow them to remain anonymous. 5. Transfers of funds to the adviser for management followed by transfers to accounts at other institutions in a layering scheme. 6. Investing illegal proceeds for a client. 7. Movement of funds to disguise their origin.

ML Method in Real Estate - "The Loan Back"

A criminal provides an associate with a specific amount of illegitimate money. The associate then provides a "loan or mortgage" back to the trafficker for the same amount with all the necessary "loan and/or mortgage" documentation. This creates an illusion that the trafficker's funds are legitimate. The scheme is reinforced through legitimately scheduled payments made on the loan by the traffickers.

Vulnerabilities of Private Banking related to ML

A culture of secrecy and discretion and intense competition and perceived high profitability.

Junket Operators

A junket is a form of casino-based tourism. Junket operators are third parties that sometimes move the funds across borders and through multiple casinos creating layers of obscurity around the source of funds and ownership of the money and the identities of the players.

ML Method in Real Estate - "The Reverse Flip"

A money launderer might find a cooperative property seller who agrees to a reported purchase price well below the actual value of the property and then accepts the difference under the table. This way, the launderer can purchase a $2M property for $1M, secretly passing the balance to the cooperative seller. After holding the property for a time, the launderer sells it for its true value of $2M.

Smurfing

A type of structuring. This involves multiple individuals making multiple cash deposits or buying multiple monetary instruments or bank drafts in amounts under the reporting threshold in attempt to evade detection.

Omnibus Accounts

Accounts held by one futures commission merchant (FCM) for another. Transactions of multiple account holders are combined and their identities are unknown to the holding FCM

Annuities (Insurance) ML Risk

Annuities also are attractive. Annuity is an investment that provides a defined series of payments in the future in exchange for an up-front sum of money. Annuity contracts may allow criminals to exchange illicit funds for an immediate or deferred income stream

Casinos

Casinos, bookmaking, lotteries and horse racing, continue to be associated with ML because they provide a ready-made excuse for recently acquired wealth with no apparent legitimate source.

Insurance Companies in terms of AML

Certain sections of the insurance industry such as life insurance and annuities are primary target of criminals engaging in money laundering and/or terrorist financing. The vulnerability in insurance is similar to the threat of the securities sector. (life insurance policies are viewed as investment vehicles similar to securities).

Blending of funds

Co-mingling of illegitimate funds with legitimate funds such as placing the cash from illegal narcotics sales into cash-intensive locally owned restaurant.

Community Pool

Combines funds from various members and uses them to trade in futures or options contracts

Options/Options Contracts

Contracts that create the right, but not the obligations to buy or sell a set amount of something, such as a share or commodity, at a set price after a set expiration date.

Structuring

Designing a transaction to evade triggering a reporting or record-keeping requirement.

Free Trade Zones (FTZs)

FTZs are designated geographic areas with special regulatory and tax treatments for certain trade-related goods and services. FTZs are often located in developing countries near ports of entry. Most FTZs are also located in regional financial centers that link international trade hubs with access to global financial markets. Examples: Colon Free Trade Zone in Panama

Trade Based ML: Ghost Shipping

Fictitious trades where a buyer and seller collude to prepare all the documentation indicating goods were sold, shipped and payments were made, but no goods were actually shipped.

Escrow Accounts

Generally maintained by real estate agents and brokers and other fiduciaries, are designed to hold funds entrusted to someone for protection and proper disbursement. Attractive to money launderers because of the large number of diverse transactions that can pass through them in any deal. They can facilitate the movement of money by cashier's checks, wire transfers or company checks to seemingly legitimate individuals or companies.

Commodities

Goods traded in large amounts usually through futures contracts

Politically Exposed Persons (PEPs)

Iindividuals who are or have been entrusted with prominent public functions by a country 1. Foreign PEPs 2. Domestic PEPs

Payable Through Accounts (PTAs)

In some correspondent relationships, the respondent bank's customers are permitted to conduct their own transactions through the respondent's banks correspondent account without first clearing the transactions through the respondent bank. This is different in that the foreign bank's customers have the ability to directly control funds at the correspondent bank.

Securities Regulation Requirements

In the United States, the SEC and the Financial Industry Regulatory Authority (FINRA), as directed by the Bank Secrecy Act (BSA) regulatory rules, have implemented requirements for broker-dealers at both small and large firms to implement AML programs that include: an appointed BSA Officer, performing CDD, suspicious activity monitoring, training and an independent audit. These requirements also subject broker-dealers to oversight by either the SEC, FINRA, or both to monitor if and how they are complying with the AML program requirements.

Real Estate and ML

Investing illicit capital in real estate is a classic method of laundering dirty money, particularly in countries with political, economic and monetary stability. It is attractive because it can be purchased with cash, the ultimate beneficial ownership can be disguised, it is relatively stable and reliable investment, and value may be increased through renovations and improvements.

Securities Broker-Dealers

It is an industry that runs by electronic transfers and paper. Its use in the money laundering process is generally after launderers have placed their cash in the financial system through other methods.

Vehicle Sellers and ML Risks

ML risks in vehicle sellers include: 1. Structuring cash deposits below reporting thresholds 2. Trading vehicles and multiple transactions of buying/selling new/used vehicles (creation of complex layers) 3. Accepting third-party payments One common element in ML with vehicle sellers is Unreported use of currency to pay for the automobiles

Check Casher

MSB may cash checks for consumers and/or commercial business. In addition to check cashing, these MSBs may also provide other financial services so their customers can pay bills, purchase money orders or transmit funds domestically or internationally.

Money Servicing Business (MSB)

MSBs transmit or converts currencies. Such businesses usually provide currency exchange, money transmission, check-cashing, and money order services. MSBs are the following: dealer in foreign exchange, check cashier, issuer of traveler's checks or money orders, money transmitter, provider and seller of prepaid access US Postal Service.

ML in Securities

Money laundering can occur in the securities industry in customer accounts that are used only to hold funds and not for trading. This allows launderers to avoid banking channels where the launderer may believe there are more stringent money laundering controls. The many layers of intermediaries who may also cross borders, make standardizing controls difficult and further challenge overall compliance.

Dealers in High Value Items

Money laundering provides a common framework for including trade in gold, diamonds and other high-value items within anti-money laundering monitoring systems. Gold provides a way for criminals to convert their illicit cash into anonymous, transferable assets.

Risks Associated with Concentration Accounts

Money laundering risks arise if the customer-identifying information is separated from the financial transaction. If separation occurs, the audit trail is lost and accounts may be misused or administered improperly.

ML in Casinos

Money laundering through casinos generally occurs in the placement and layering stage (for example, converting the funds to be laundered from cash to checks and utilizing casino credit to add a layer of transactions before the funds are ultimately transferred out). A launderer can buy chips with cash generated from a crime and then request repayment by a check drawn on the casino's account. Often, rather than requesting repayment by check in the casino where the chips were purchased with cash, the gambler says that he will be traveling to another country in which the casino chain has an establishment, asks for his credit to be made available there and withdraws it in the form of a check in the other jurisdiction.

Private Investment Companies (PIC)

PICs are corporations established by individual bank customers and others in offshore jurisdictions to hold assets. They are "shell companies" formed to maintain client's confidentiality and for various tax or trust related reasons. Excellent money laundering vehicles.

Breaking up amounts

Placing cash in small amounts and depositing them into numerous bank accounts in an attempt to evade reporting requirements.

Private Bankingeduced transparency.

Private banking provides highly personalized and confidential products and services to wealthy clients at fees that are often based on "asset under management." Private banking often operates semi-autonomously from other parts of a bank.

Remote Deposit Capture (RDC)

RDC is a product offered by banks that allows customers to scan a check and transmit an electronic image to the bank for deposit.

Potential Abuse of RDC for ML

RDC leads itself to potential abuse by money launderers as he or she no longer needs to go into the bank and risk detection.

Provider and Seller of Prepaid Access

Referred to as stored value in the sense that providers arrange for access to funds that have been paid in advance and can be retrieved or transferred at some point in the future. They are two types

Loans used for Placement

Repayment of legitimate loans using laundered cash

High-Risk Securities

Securities that are not traded on regulated exchanges are typically sold over-the-counter with tiers as "pink Sheets" that require only minimal reporting, thus making it easy to obscure information such as beneficial owners Securities firms are required to not only identify securities that may cause risks but also develop processes to restrict trading of those securities, often on dozens of platforms.

Securities - Funds originating outside sector

Securities transactions for the creation of legal entities may be used for conceal or obscure the source of these funds (i.e. layering)

US Postal Service

Since the US Postal Service sells its own money orders, it is deemed to be an MSB

Placement

Stage one of money laundering. This is 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. Often, this is accomplished by placing the funds into circulation through formal financial institutions, casinos, and other legitimate businesses, both domestic and international.

Issuer of Traveler's Checks of Money Orders

T=The issuer of a money order or traveler's check is responsible for the payment of the item and often uses agents to sell the negotiable items

Trade Based ML: Over-Shipping or Short-Shipping

The difference in the invoiced quantity of goods and the quantity of goods that are shipped whereby the buyer or seller gains excess value based on the payment made.

Difference of ML and Terrorist Financing

The funds destined for money laundering are derived from criminal activities while the funds of terrorist financing may include funds from perfectly legitimate sources. Concealment of funds used for terrorism is primarily designed to hide the purpose for which these funds are used, rather than their source.

Life Insurance ML Risk

The life insurance products that feature payment of cash surrender value and the opportunity to nominate beneficiaries from the first day of the policy are the most attractive. Life insurance appears to be by far the area most attractive to money launderers. 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 non-negligible rates of return.

Trade-Based money Laundering Techniques

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. In practice, this can be achieved through the misrepresentation of the price, quantity or quality of imports or exports.

Money Laundering

The process of making dirty money look clean. Criminals disguise the source of funds, changing the form or moving the money to a place where it is less likely to attract attention. The process of money laundering can be broken down into three stages: Placement, Layering and Integration.

Layering

The separation of illicit proceeds from their source by layers of financial transactions intended to conceal the origin of the proceeds. This stage involves converting the proceeds of crime into another form and making it difficult to find the origin and beneficial owners.

Securities - Funds originating inside sector

The transactions or manipulations generate illegal funds that must then be laundered. Examples: embezzlement, insider trading, securities fraud, and market manipulation

Precious Metal Pool Accounts

These accounts are maintained by a small number of large and sophisticated precious metal companies and have worldwide scope. They receive and hold precious metal credits for a customer, which can be drawn on by that customer. The customer can request the return of the precious metals, the sale and return of monetary proceeds, or the delivery of precious metal to another person. Thus, a refining customer in one country can deliver gold scrap for refining, establish a gold credit in the refiner's pool account system, and subsequently have delivery made by the refiner to another person, based upon that credit.

Concentration Accounts

These are internal accounts established to facilitate the processing and settlement of multiple or individual customer transactions within the bank, usually on the same day. They do this by aggregating funds from several locations into one centralized account.

Closed Loop Prepaid Cards

These are typically limited to buying goods from the merchant issuing the card

Gatekeepers: Notaries, Accountants, Auditors, and Lawyers

These individuals have the ability to block or facilitate the entry of illegitimate money into the financial systems. The most useful functions that gatekeepers have are the following: 1. Creating and managing corporate vehicles or complex legal arrangements such as trusts to obscure the links of crime and the perpetrator 2. Buy or selling property - property transfers serve as cover of illegal funds 3. Performing financial transactions. Carrying out operations on behalf of the client 4. Providing financial and tax advice 5. Provide introductions to financial institutions 6. Setting up and managing charities 7. Undertaking certain litigation

Money Trasmitter

They accept currency or funds for the purpose of transferring those funds electronically through a financial agency. (i.e. PayPal or MoneyGram or Western Union)

Third-Party Payment Processors (TPPs)

They are generally bank customers that provide payment-processing services to merchants and other business entities and often use their commercial bank accounts to conduct payment processing for their merchant clients. (often not subject to any AML/CFT requirements. Traditionally TPPs contracted with US merchants that had physical locations in the United States in order to help collect monies owned by customers. These merchant transactions primarily included credit card payments and also Automated Clearing House (ACH) . Considering that a financial institution maintains a relationship with the TPPP and not the underlying merchant, it becomes difficult for the financial institution to know on whose behalf it is processing a transaction.

Credit Unions and Building Societies

They are not-for-profit member-owned and operated democratic financial co-operatives.

Open Loop Prepaid Cards

They can be used for purchases at any merchant that accepts cards issued for use on the payment network associated with the card. Usually these are branded with the network logo such as American Express, Visa, MasterCard

Commodity Trading Advisers

They engage in the business of advising others, either directly or indirectly, as to the value or advisability of trading futures contracts or commodity options, or issue analyses or reports concerning trading futures or commodity options. Positions with similar responsibilities are: Commodity Pool Operator; Futures Commission Merchant (FCM); Introducing Broker-Dealers in Commodities (IB-Cs); Guaranteed Introducing Broker; Investment Adviser

Trust and Company Service Providers (TCSP)

They participate in the creation, administration or management of corporate vehicles. They provide the following: 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.

Dealer in Foreign Exchange

They provide currency exchange services and typically operate along international borders, airports, or near communities with high populations of foreign individuals

Integration

Third stage of money laundering. This stage is the part where the money tries to become legitimate to illicit wealth through the re-entry of the funds into the economy in what appears to be normal business or personal transactions. This stage provides a launderer the opportunity to increase his wealth with the proceeds of crime.

Wash Trading or Offsetting Transactions

This involves the entry of matching buys and sells in particular securities, which creates the illusion of trading. Wash trading through multiple accounts generates offsetting profits and losses and transfers of positions between accounts that do not appear to be commonly controlled.

Banks - Electronic Transfers of Funds

This is a transfer of funds that is initiated by electronic means such as an ACH, ATM, electronic terminals, mobile telephones, or telephones or magnetic tapes.

Willful Blindness

This is the deliberate avoidance of knowledge of the facts or purposeful indifference and 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.

Correspondent Banking

This is the provision of banking services by one bank (The Correspondent Bank) to another bank (Respondent Bank). This is used sp banks can undertake international financial transactions for themselves and for their customers in jurisdictions where they have no physical presence.

Microstructuring

This is the same as structuring expect that it is done at a much smaller level. Instead of two deposits of $9000 each there would be 20 deposits of approximately $900.

Travel Agencies and ML

Travel agencies can be a way of making funds look legitimate by providing a reason to purchase high-priced airline tickets, hotels and other vacation related expenses

Trade Based ML: Shell Companies

Used to reduce the transparency of ownership in the transaction.

Importance of "KNOWING" in money laundering

You have to prove knowing in money laundering. The intent and knowledge required to prove the offense of money laundering includes the concept that such a mental state may inferred from "objective factual circumstances."

Currency smuggling

cross-border physical movement of cash or monetary instrucments

Agent MSBs

they are entities seeking to provide MSB-type services in addition to its existing products and services. For the agent to use such money transmission services, they must enter into an agent service agreement with a principal MSB. As an agent of a principal MSB, the agent is required to follow the same state and federal regulations as a principal MSB (e.g., AML procedures and suspicious activity monitoring).

Principal MSBs

they primarily provide MSB services and at as the issuers of money orders and traveler's checks or the providers of money transmission. Principals in the USA required to have written AML policies, procedures, and internal controls, appoint a Bank Secrecy Act (BSA) Officer, provide education and training, conduct independent reviews/audits, and monitor transactions for suspicious activity.