Chapter 1 Flashcards
MONEY LAUNDERING
What is money laundering?
Money laundering is the taking of criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal acts.
THREE STAGES IN THE MONEY LAUNDERING CYCLE
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; and converting the cash placed into the system into monetary instruments.
THREE STAGES IN THE MONEY LAUNDERING CYCLE
Give an example of the third stage of money laundering.
Purchasing luxury assets like property, artwork, jewelry or high-end automobiles; and investing in business enterprises.
THREE STAGES IN THE MONEY LAUNDERING CYCLE
Give an example of the first stage of money laundering.
Commingling illegitimate funds with legitimate ones; making foreign exchange transactions with illegal funds; and depositing small amounts of cash into various accounts
INDIVIDUAL ACCOUNTABILITY
What does the Yates memo say?
The Yates memo, issued by then-Deputy Attorney General Sally Yates of the Department of Justice, reminds prosecutors that criminal and civil investigations into corporate misconduct should also focus on individuals who perpetrated the wrongdoing.
ELECTRONIC TRANSFERS OF MONEY
What are some indicators of money laundering using electronic transfers of funds?
Funds transfers to or from a financial secrecy haven; large, incoming fund transfers from a foreign client with little or no explanation or apparent reason; and fund transfers that have no apparent link to legitimate business.
REMOTE DEPOSIT CAPTURE
What is remote deposit capture and what risk is associated with it?
Remote deposit capture is a product offered by banks that allows customers to scan a check and transmit an electronic image to the bank for deposit. The risk associated with it is that it enables a money launderer to deposit checks without having to visit the bank and risk detection.
PAYABLE THROUGH ACCOUNTS
What are some of the money laundering risks pertaining to the use of payable through accounts (PTAs)?
PTAs with foreign institutions licensed in offshore centers with weak bank supervision; PTAs where the respondent bank (the foreign bank) fails to conduct adequate customer due diligence; and PTAs where the sub-account holders have currency deposit and withdrawal privileges.
CONCENTRATION ACCOUNTS
What is a money laundering risk pertaining to the use of concentration accounts?
The primary money laundering risk pertaining to the use of concentration accounts is the fact that the customer-identifying information may not be included, making the audit trail difficult or impossible to follow.
PEPS
What is a PEP and what is the primary risk in dealing with a PEP?
A PEP is a “politically exposed person,” meaning a person who has or has had a prominent government or quasi-public position in a country. The primary risk in dealing with a PEP is that the source of funds from a PEP may be from corruption.
STRUCTURING
What is structuring?
Structuring involves taking a large cash deposit and breaking it into smaller amounts to be deposited into separate banks, separate accounts or on separate days in order to avoid currency transaction reports.
CREDIT CARDS
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 not likely to be used in the initial placement of money laundering. They are more likely to be used in the layering or integration stages of money laundering. One example of using credit cards for money laundering purposes is overpaying a credit card balance and then asking for a refund. Receiving a check from the reputable credit card company makes it look like the funds received are legitimate.
THIRD-PARTY PAYMENT PROCESSORS
What are some of the risks posed by Third-Party Payment Processors (TPPPs)?
Multiple financial institution relationships whereby the TPPP’s suspicious activity cannot be seen in its entirety by one institution; engaging in ACH transactions from overseas whereby the suspicious transactions get hidden by the large number of other transactions the TPPP engages in; and the possibility of the return rates stemming from unauthorized transactions are higher than average.
MONEY SERVICES BUSINESSES
What are some ways Money Services Businesses can be used for money laundering?
Cashing checks without obtaining adequate proof of identity; failing to file Currency Transaction Reports when required; and transmitting funds overseas without sufficient due diligence.
SECURITIES BROKER-DEALERS
What are some of the aspects associated with securities broker-dealers that increase the risk of money laundering?
Its international nature; the speed of their transactions; the ease of 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; and weak AML programs.
CASINOS
What are some 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; and purchasing chips with cash just under the reporting requirements.
DEALERS IN HIGH-VALUE ITEMS
What were two of the key findings by FATF in its report on “Money Laundering/Terrorist Financing Risks and Vulnerabilities Associated With Gold,” issued in July, 2015?
The fact that gold is an extremely attractive vehicle for laundering money due to the fact that it is relatively compact and easy to transport; and the fact that the gold market is a target for criminal activity because it is lucrative and holds its value regardless of the form it takes.
TRAVEL AGENCIES
List ways in which a travel agency could be used to launder money.
Purchasing an expensive airline ticket and then asking for a refund; paying for travel tours with multiple wires just under the reporting threshold; and creating false bookings through tour operator networks to justify significant payments from foreign travel groups.
GATEKEEPERS
Name various ways that a gatekeeper—an attorney, notary, accountant or 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; and setting up or managing a charity.
GATEKEEPERS
What is the primary concern with regard to the use of gatekeepers?
The primary concern with regard to the use of gatekeepers—attorneys, notaries, accountants and auditors—is the fact that they can be used to enhance secrecy and to keep hidden the beneficial owner of an account or transaction.
REAL ESTATE
List reasons why real estate can be an attractive method of money laundering, according to the 2015 report by the Australian Transaction Reports and Analysis Centre (AUSTRAC).
It can be purchased with cash; the ultimate beneficial owner can be disguised; it is a relatively stable and reliable investment; and the value can be increased through renovations and improvements.