Anti-money Laundering And Terrorist Financing

Anti-Money Laundering and Terrorist Financing

BY FAISAL KAMRAN

MONEY LAUNDERING IS ANY TRANSACTION WHICH SEEKS TO CONCEAL OR DISGUISE PROCEEDS FROM ILLEGAL ACTIVITIES

Another definition: • Any attempt to disguise the origin or purpose of funds derived from criminal activity, • to conceal the existence of such funds, or • to move the funds with the intent to commit a criminal act.

Money Laundering The process by which the proceeds of crime are converted into assets which appear to have a legitimate origin.

It’s no longer just drugs... • Drugs money • Terrorist financing • Tax evasion • All crimes

The Traditional Process • Dirty to clean – placement – layering – integration

• But often the aim is to make clean money dirty – e.g. support for a local terror group

Three 3 Stages of Money Laundering

•Placement •Layering •Integration

PLACEMENT • Placing the money into the financial system or retail economy i.e introduction of dirty money • Structuring or “smurfing” of deposits – Placing funds in amounts just under the legal reporting threshold

• Perhaps the most important stage for law enforcement, but it requires the full cooperation of all banks and non-bank financial institutions

Placement

• Getting dirty money into the system – often in emerging markets overseas – or use a “useful” business • • • • • • •

Bureaux de Change (exchange companies) car, art, antiques, boat precious metal dealers estate agents travel agents cash intensive businesses friends / relatives

LAYERING • Making the money trail as muddy and murky as possible, because if funds cannot be connected to criminal act, they cannot be seized • Usually involves separating and/or consolidating funds and transferring the funds through multiple accounts and financial instruments • Involves series of transactions, accounts, institutions and sometime countries.

Layering • Moving money around to confuse its origins – – – – – –

offshore banks, weak controls shell / brass plate banks company formation agents trusts professionals trade related activities

• Characterised by

– complexity – lack of commercial rationale – nominee accounts (benamee)

INTEGRATION • The final stage: turning the funds into a tangible asset, such as real estate, or reinvesting the funds into a business to give the appearance of legitimacy. • At this stage, it is almost impossible to trace the funds back to their original criminal source

Integration • Into legitimate economy – purchase of an income generating asset

• Dirty to clean – may be most difficult to spot

• Clean to dirty – may be the starting point

Common vehicles of laundering

Financial institutions Cash intensive businesses, Brokerage firms, Real estate agents Crooked LAWYERS and ACCOUNTANTS • (Not all the 3 stages of money laundering take place in every case) • • • • •

Elements of a well-designed AML regime

– Comprehensive anti-money laundering law – All financial institutions and other entities covered by AML law – Well functioning FIU – Monitoring and enforcement of laws and regulations – Adherence to international standards

(FATF 40 +9)

FATF 40 Recommendations • Recommendations for AML/CFT regime • AML requirements for financial institutions and non-financial businesses (now includes casinos, precious metal dealers, accountants, and lawyers, etc.)

– Customer due diligence and record keeping – Reporting of suspicious transactions (STRs)

FATF 40 Recommendations • Clear penalties for violations • Regulation and supervision of institutions • Establishment of an FIU • Recommended law enforcement strategies • Mutual legal assistance

Chasing the Money

Chasing the Money

Chasing the Money

Chasing the Money